Maximizing your Social Security benefits can be challenging, but the extra money is worth the effort. One strategy called file-and-suspend is a smart way to make the most of your benefits, but you have to be aware of one nuance in order to use the strategy effectively.

In the following video, Dan Caplinger, The Motley Fool’s director of investment planning, discusses how the file-and-suspend strategy works. In essence, one spouse — typically the higher-wage earner — files for benefits but immediately suspends them. This has the effect of allowing the other spouse to claim spousal benefits. But Dan notes that the strategy works best when the spouses have reached full retirement age. For the higher-wage earner, waiting until full retirement age is necessary, as suspending benefits doesn’t earn additional delayed retirement credits before reaching full retirement age. Meanwhile, the other spouse can’t do a restricted application for spousal benefits only before full retirement age. Dan concludes that the strategy can sound complicated, but it can nevertheless leave you in a much better position than you would be only using your own regular benefits.

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Social Security is a critical part of the retirement income for millions of Americans. For many, it is the foundation of their retirement plan. However, navigating the complexities of Social Security benefits can be daunting, especially when trying to maximize your benefits.

One strategy that can help boost your Social Security benefits is known as “File and Suspend.” This strategy allows married couples to maximize their benefits by taking advantage of spousal benefits and delayed retirement credits.

Here’s how File and Suspend works: when you reach full retirement age (currently 66 or 67, depending on your birth year), you can file for Social Security benefits and then immediately suspend them. By doing this, your spouse can then claim spousal benefits based on your earnings record, while your own benefits continue to grow by 8% per year until age 70.

For example, let’s say John and Jane are both 66 years old and eligible for Social Security. John files for his benefits and then suspends them, allowing Jane to claim spousal benefits based on John’s earnings record. Meanwhile, John’s benefits continue to grow by 8% per year until he reaches age 70, at which point he can claim his benefits at their maximum level.

By using the File and Suspend strategy, John and Jane are able to maximize their Social Security benefits and ensure a more secure retirement for themselves.

It’s important to note that the File and Suspend strategy is only available to those who have reached full retirement age. It may not be the best option for everyone, so it’s crucial to consult with a financial planner or Social Security expert to determine if this strategy is right for you.

In conclusion, Social Security is a key component of your retirement income, and maximizing your benefits is crucial to securing a comfortable retirement. The File and Suspend strategy can be a powerful tool in boosting your benefits and ensuring financial security in your later years. Be sure to do your research and consult with a professional to make the most of this strategy.