Deciding when to begin collecting Social Security is complicated. The key variable – how long you will live – is generally unknown.
Suppose you decide to wait until age 70 to start receiving your Social Security benefits. This will result in an increase of 8% plus cost of living adjustments (COLAs) for each year that you defer your start date after your full retirement age (FRA). FRA is based on year of birth and currently ranges from 66 for those born in 1954 to 67 for anyone born in 1960 and later.
If you were born before January 2, 1954, are married, and your spouse has filed, or is willing to file, for his benefits, you can apply to receive 50% of your spouse’s benefit and file for your higher benefit up until age 70. This is referred to as the restricted application strategy.
File and Suspend Strategy Discontinued
Some of you may be wondering how you can receive 50% of your spouse’s benefit while waiting to collect on your own benefit. Wasn’t this strategy discontinued several years ago?
There was a different strategy, called file and suspend, that was repealed by the Bipartisan Budget Act of 2015 (BBA). The file and suspend strategy was used by high wage earners as a way to trigger a benefit for a spouse while waiting to collect a higher benefit.
The high wage earner would file for, and immediately suspend, his benefit once reaching FRA. This enabled his wife to collect a spousal benefit which was as much as 50% of his benefit depending on the wife’s age. The high wage earner’s benefit would increase by 8% per year plus COLAs until his benefits began which could be as late as age 70.
The Restricted Application Strategy Window of Opportunity
As previously stated, you can use the restricted application strategy if you were born before January 2, 1954. This means that you need to be at least 66. It’s possible that you could receive 50% of your spouse’s benefit for up to four years depending upon when you were born by employing this strategy.
What happens if you’re 68 and married, are waiting to start your Social Security benefit at age 70, your spouse is collecting Social Security, and you didn’t know about this option? You should immediately file a restricted application and consider requesting six months of retroactive spousal benefits which is the maximum amount that will be paid.
Don’t Forget Your Ex
Can you use the restricted application strategy if you’re divorced? The answer is yes provided that you meet the following four criteria:
- You were married for at least ten years.
- You are currently unmarried.
- Your former spouse is collecting his/her benefit or is entitled to collect it.
- The divorce occurred at least two years prior to your claim for ex-spousal benefits.
If you meet the criteria and receive spousal benefits using the restricted application strategy, this will have no affect on your former spouse’s benefits.
Post-January 1, 1954 Birth Social Security Applications
Anyone born after January 1, 1954 is ineligible to file a restricted application for spousal benefits. These individuals fall under the “deemed” filing category.
Anyone in the deemed filing category who files for a retirement benefit or a spousal or ex-spousal benefit is presumed to also file for the other benefit. Only the higher benefit will be paid.
As an example, suppose that you were born in 1958, you’ve been divorced for five years from your spouse to whom you were married for 15 years, and you haven’t remarried. Let’s assume that you plan to file for benefits, your monthly benefit is $2,000, and your ex’s benefit is $3,000.
Since your benefit of $2,000 is greater than 50% of your ex’s benefit of $3,000, or $1,500, you will automatically receive your higher benefit. In this situation, you wouldn’t be able to collect benefits under your former spouse’s record.
Don’t Leave Money on the Table
If you (a) were born before January 2, 1954, (b) haven’t turned 70, (c) haven’t begun collecting your Social Security benefits, and (d) are married and your spouse has filed or is willing to file for his/her benefits, you should immediately file a restricted application to receive 50% of your spouse’s benefit if you haven’t done so already. Remember to also consider requesting up to six months of retroactive spousal benefits.
Don’t leave 50% of your spouse or ex-spouse’s Social Security benefits on the table!
Robert Klein, CPA, PFS, CFP®, RICP®, CLTC® is the founder and president of Retirement Income Center in Newport Beach, California. Bob is also the sole proprietor of Robert Klein, CPA. Bob applies his unique background, experience, expertise, and specialization in tax-sensitive retirement income planning strategies to optimize the longevity of his clients’ after-tax retirement income and assets. He does this as an independent financial advisor using customized holistic planning solutions based on each client’s needs and personality.