In my previous article, I outlined the “Foundation Questions” for Social Security. Let’s go a bit deeper into one of those questions:
Should you consider filing a “restricted application” for spousal benefits?
At your full retirement age, the Social Security restricted application provides the opportunity to claim spousal benefits only and defer your own personal retirement benefits to earn delayed retirement credits. This strategy effectively nullifies Social Security’s deemed filing rules, allowing you to increase your own personal benefit by 32%. Your spouse needs to be receiving his or her own personal benefit for you to receive a spousal benefit using the restricted application. Both spouses cannot be receiving a spousal benefit at the same time.
Why would you want to use the restricted application? Primarily to allow the higher earning spouse to receive spousal benefits from their full retirement age to age 70, thereby increasing their own monthly personal worker benefit by a maximum of 32% at age 70 and ultimately providing a much higher survivor benefit to the lower earning living spouse.
This is a time-sensitive issue! The restricted application applies to persons born before Jan. 2, 1954. The reason for the January 2 cutoff is that Social Security considers your birth month to be on the day prior to your actual birthday. So, if you were born January 1, Social Security considers your birth month to December. Another way to look at this, to be eligible to take advantage of the restricted application, you must have reached your full retirement age, 66, by the end of 2019. If you were born after Jan. 2, 1954, you cannot utilize the restricted application.
Many people are not aware of this opportunity. Their strategy is to delay filing for their own personal benefit until age 70, thereby earning the delayed retirement credits. This is not a bad strategy but why not collect spousal benefits for the four years between ages 66 and 70? Please note that the restricted application is essentially being phased out after Dec. 31, 2023, so the window of opportunity is closing.
It is important to understand, as well, that if your spouse who is receiving their own personal benefit decides to voluntarily suspend that benefit while you are collecting a spousal benefit through the restricted application, your spousal benefit will also be suspended.
Now let’s address ex-spouses. As a general rule, ex-spouses are eligible for the same benefits as a current spouse. Benefits paid to an ex-spouse do not in any way negatively affect benefits payable to the current spouse. As an ex-spouse, if you meet the criteria outlined above – born before Jan. 2, 1954 and have reached full retirement age – you are eligible to file a restricted application for ex-spousal benefits as long as you were married at least 10 years to your former spouse and are currently single. For ex-spouses who have been divorced less than two years, your former spouse must be receiving their own personal benefit for you to be able to receive ex-spousal benefits using the restricted application. If you have been divorced more than 2 years, as long as your former spouse is at least 62, you may file for ex-spousal benefits using the restricted application and receive the ex-spousal benefit even if your former spouse is not collecting their own personal benefit.
I will end with my Social Security axiom:
If you take the WRONG benefit at the WRONG time, it’s always SMALLER, and it is FOREVER.
You basically get one shot to get this right. Let’s make a plan!