The Economics of a Claim and Suspend Strategy For Social Security Benefits

The Center for Retirement Research at Boston College has issued a brief explaining the economics of a claim and suspend strategy.

Strange But True: Claim and Suspend Social Securityby Alicia H. Munnell, Alex Golub-Sass, and Nadia Karamcheva May 2009

Unlike past recessions, the labor force participation rate of older men has increased during this financial crisis. This pattern suggests that some people are re-entering the labor force as they find their retirement resources to be inadequate….

Those over the Full Retirement Age who go back to work have a much more flexible option. As a result of the Senior Citizens’ Freedom to Work Act of 2000, they are no longer subject to the annual earnings test but rather can voluntarily “claim and suspend.” That is, they can either work and receive full benefits or voluntarily suspend payments. If they choose to suspend, they forfeit current benefits but earn delayed retirement credits (DRCs) for a permanent increase in their future monthly benefits. This strategy is very helpful to those who earn enough to support themselves, because it allows them to increase the amount of future monthly Social Security benefits – a special kind of income that is fully inflation-adjusted and payable for life.