This post discusses yet another relatively unknown strategy for maximizing Social Security benefits. It’s often referred to as the “double dipping” Social Security strategy. Like the “file and suspend” strategy that was the subject of the previous two posts, this strategy is designed for married couples with both individuals eligible to receive retirement benefits, preferably both at their respective Full Retirement Age (“FRA”), i.e., age 65 to 67 depending upon year of birth.
Unlike the “file and suspend” strategy where both spouses are retired and the older spouse is the breadwinner, with the “double dipping” strategy, one spouse is retired and the other spouse continues working. In addition, even though the working spouse is eligible to receive Social Security retirement income based on his/her work record, he/she doesn’t do this. As a result, the working spouse’s benefit will continue to grow by as much as 32% if he/she works until age 70 compared to the benefit he/she would have received if he/she had chosen instead to retire at FRA.
Just because the working spouse has made a decision not to collect Social Security benefits based on his/her work record doesn’t mean that he/she isn’t entitled to receive any benefits. As a result of one spouse retiring, the working spouse, in addition to his/her employment income, is now eligible to receive another source of income. This additional income is known as a “spousal benefit.”
As a spouse, you qualify to receive a monthly payment equal to 50% of your spouse’s Social Security benefit – whether or not you’re retired. When the working spouse completes his/her application for Social Security benefits, he/she must clearly state on his/her application that it’s for a spousal benefit, otherwise Social Security Administration will begin paying the applicant’s benefit if it’s greater than his/her spousal benefit.
While a couple who receives a spousal benefit for the working spouse in addition to the retired spouse’s benefit is better off than a couple who is unaware of this strategy and simply receives the retired spouse’s benefit, the “double dipping” strategy isn’t without risk. Part 2 of Leverage Your Spousal Social Security Benefit will address this topic next week.
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.