An innovative strategy called "file and suspend" can help you get more Social Security benefits for your family and give you the chance to increase those benefits down the line.
The strategy takes advantage of two aspects of the Social Security system to get your family more benefits than you'd otherwise be entitled to receive. It allows you to get spousal benefits for your spouse early in retirement, but it also allows you to let your own benefits based on your work history grow, providing some key long-term advantages.
As background, married couples are entitled to receive either regular retirement benefits based on their own work history or spousal benefits based on the work history of their spouse. In general, one spouse can claim a spousal benefit equal to half of the regular retirement benefit of the other spouse. You're not entitled to both, so it's important to decide which will give you the better deal. For couples in which both spouses earn roughly the same amount, usually regular retirement benefits make the most sense. For single-earner families, spousal benefits play a much more vital role.
First You File; Then You Suspend
The problem is that you're not allowed to claim spousal benefits unless your spouse has filed for a regular retirement benefit. That's where the "file" part of the file and suspend strategy comes in: By having the higher-earning spouse file for benefits, it allows the other spouse to claim a spousal benefit.
Next, the "suspend" part of the strategy comes into play. If the higher-earning spouse simply files without suspending, then the family will receive two benefits: the regular benefit of the higher earner and the lower spousal benefit of the other spouse. In some cases, that works fine.
But in other cases, the higher-earning spouse might prefer to delay taking Social Security until later in retirement. From age 66 to 70, each year you wait adds 8 percent to your monthly benefit amount. Moreover, it also adds the same amount to what your spouse will receive in survivors benefits after you pass away. Those increases last for the rest of your joint lives, making it worth the delay for many couples.
As long as you're at full retirement age or above -- currently age 66 -- you can file for your benefit but immediately suspend it, allowing it to keep growing despite the fact that your spouse is receiving a spousal Social Security benefit. Later on -- but no later than age 70, because that's when the credits you get for delaying top out -- you can start receiving your benefit at its higher future amount.
Don't Get Greedy
One thing many people get confused about is why both spouses shouldn't file and suspend. On its face, you'd think you could get double benefits that way.
But Social Security doesn't let you double-dip. Only one spouse can use the file and suspend strategy, so figuring out which one does your family the most good is critical to getting the most from the strategy.
7 Best Places to Retire Worldwide If You're OK Going Full Expat
The Must-Know Tactic to Boost Your Social Security Benefits
Medellin has a notorious reputation among Americans who know it mostly for its drug-laden past, but that hasn't prevented a huge expat population from springing up within city limits. Medellin is an incredibly walkable city, and its El Poblado district has Japanese, French, seafood and Italian restaurants within a block of each other.
Its health care system ranks near the top this list, while the cost of everything from housing to entertainment are a great fit for a fixed income. The average rental on a one-bedroom apartment in the center of the city is $650, while the average cost of buying a place is $1,050 per square meter. A taxi will get you anywhere in town for $2.50, while buses and trains can be found for much less. Plus, with the average high temperature topping out at 73 degrees, the average low coming in at 54 and a couple of rainy seasons in spring and fall, it's cool and comfortable.
Four seasons, lots of English speakers, all the Western amenities, entertainment and dining options that couples honeymoon here for ... that socialist universal health care that folks back home kept wailing about. Is there anything Pau doesn't have going for it?
Well, just consider the fact that you still have to pay for it all. The average cost of living here comes in at little more than $1,900 a month. That's not terrible by western standards, but it's more than the $1,530 you'd pay in Medellin. A whole lot of that cost comes from the nearly $1,300-a-month average cost of an apartment, which is roughly double what you'd pay in Colombia. Pau is still one of the most affordable places to live in France and is one of only two European locations on our list. That said, on a global scale it isn't exactly cheap.
It's a bit rainy and the average high temperature is in the 90s, but you're on an island in the Pacific living in one of the cheapest cities an expat can ask for.
Located along a sheltered coast on the island of Negros, Dumaguete avoids many of the typhoons, floods, landslides and tsunamis that plague other areas of the Philippines. The cost of living there comes out to roughly $920 a month, making it one of the cheapest places to live on this list. The real estate values help out quite a bit, as even prime downtown apartments can be had for $350 a month, while real estate goes for roughly $1,200 per square meter.
For that, you live in a beachfront, tropical climate with excellent health care, lots of activities and one of the best residency programs in the world. If you're there, have roughly $800 a month in income and are over 50 years old, you can live there with no required residency period and with a bunch of discounts as a result of residency.
The good news is that you can live really well here on $920 a month. The bad news? You're doing it in a city where the average high temperature is 99 degrees year-round and the average humidity sits at 85 percent.
Oh, and the nearby farmers burn their fields at the end of harvest season, making the air in town practically unbreathable.
That said, hillside Chiang Mai offers a lot for the money. An apartment downtown goes for a ridiculously low $400 a month, while homes can be bought for $1,100 per square meter. The high-quality health care and health-related services are huge bonuses, as are Western amenities and jobs for foreign residents. Many Westerners are employed in Chiang Mai in language schools, universities, medical facilities and tourist-related industries.
The country's Malaysia My Second Home retirement benefits program for all foreigners is a great draw, but so is the quality Internet access, cellphone coverage and roads.
If you can prove $3,125 in monthly income and make an investment in a local CD, you're going to be living on the cheap for the foreseeable future. The average monthly cost of living comes out to $1,070, with apartments renting for just $500 and homes selling for $1,700 a square meter.
George Town's population of 740,000 isn't exactly tiny, but it's small enough so that it's easy to make friends and meet people in a city where English is spoken just about everywhere. The health care is outstanding, the infrastructure is just about Western and the population of expats is around 40,000 -- a city unto itself.
Ecuador is Florida or Arizona for the expat community.
The country's retirement benefits package includes 50% off transportation, utility bills, international round-trip flights originating in Ecuador and tickets for cultural and sporting events. Foreigners can also enroll in the Ecuador Social Security medical program for $57 a month. Those over 65 also pay lower income tax. Oh, and there's no required minimum stay for residency.
At $1,010 in average monthly costs, Cuenca is also insanely cheap. Apartments downtown rent for $300 a month, with homes selling for $1,100 a square foot. Your neighbor is also likely to have a few stories to swap, as there are roughly 4,000 to 5,000 North American expats living in this small city. There are lots of restaurants and nightlife and just enough English spoken to ease the transition.
This Old World region on the Atlantic Ocean, home to more than 100,000 resident expat retirees, medieval towns, fishing villages, open-air markets, local wine and some of Europe's best sandy beaches. Dotted with cobblestoned streets and whitewashed houses with lace-patterned chimneys, surrounded everywhere by fig, olive, almond, and carob trees, it's a European dream location.
It has four seasons, including one of Europe's most sought-after summers, nearly no crime, strong infrastructure and universal, international-standard health care. That said, it isn't exactly overrun with English speakers, so you may want to brush up on some Portuguese before hunting for homes here. Still, with 42 golf courses in less than 100 miles and a cost of living that averages out to between $1,500 and $2,000 a month -- including rent at around $615 a month -- there's a whole lot of motivation to learn the language and stick around a while.