Despite what you may have heard, Social Security filing strategies are far from dead. In fact, if you were born before 1954, there’s a very beneficial strategy you can take advantage of: the Social Security restricted application. This allows you to file for and receive a spousal benefit while delaying your own benefit, which then grows at a rate of 8% until you reach age 70.
Filing a restricted application can help you and your spouse maximize the total benefits you will receive over your lifetime, as well as provide additional income in the years where your spouse is taking their benefit and you are delaying yours until age 70. This means that if your spouse has filed and is receiving a benefit of $2,500 a month, you can file the restricted application and begin receiving one-half of their amount — $1,250 a month — until you turn 70, when you would begin collecting your own benefit (which has continued to grow at an annualized rate of 8%) instead.
How Do You Qualify?
Other than being born before January 2, 1954, the biggest requirement is that to file the restricted application, you have to be at or older than full retirement age (FRA). Since everyone born in 1953 (the last eligible year) has an FRA of 66 and will be turning 66 in 2019, this makes the restricted application a benefit you can take advantage of immediately after this year’s birthday.
Other restrictions include:
– You can’t have already filed for your own Social Security.
– You can’t be actively receiving disability benefits.
– Your spouse must file for their benefit in order for you to file the restricted application.1
Your spouse does not have to be at FRA to file for their benefit. Only you have to be at FRA to file the restricted application and receive a spousal benefit. However, if your spouse does file before their own FRA, they will receive a reduced benefit because they filed early, which means your spousal benefit of one-half their amount will also be reduced.2
What If You’re Divorced?
The good news is, if you’re divorced, you can still file a restricted application and receive a spousal benefit while delaying your own benefit. The requirements are:
– Your ex-spouse is at least 62 years old.
– Your divorce was finalized more than two years ago.
– You were born before January 2, 1954.
– You’ve reached FRA.3
If you haven’t reached FRA, it is likely worth waiting until your birthday this year and then filing the restricted application. But if you don’t want to wait, or if you’re still reading this blog even though you were born after January 1, 1954, you can still receive a spousal benefit if you’re divorced without the restricted application; you just are unable to delay your own benefit to age 70 while doing so. The requirements for this are:
– The spousal benefit amount is higher than your own benefit amount.
– You’re age 62 or older.
– Your marriage lasted 10 years or longer.
– You’re currently unmarried.
– Your ex-spouse is entitled to their benefit (or disability benefits).4
If your ex-spouse has not applied for their benefit but is qualified to, you can receive a spousal benefit if you’ve been divorced for at least two years. Also note that while you can be 62 years old to receive the spousal benefit, you will not receive the full amount you’re entitled to unless you file at your FRA.5
The Importance of a Financial Advisor
Any decision on Social Security needs to be made with careful thought and deliberation. Having trusted resources like a financial planner and a tax advisor on your side is going to help ensure you’re maximizing your Social Security benefit — hearing from the Social Security Administration itself that you’re eligible for the restricted application is just not going to happen.
But meeting with trusted advisors allows you to explain your individual situation, evaluate what your income needs will be in retirement and what your income sources are, and learn how strategies such as restricted application may apply. Planning is the key to a successful retirement that keeps your standard of living at or near the level it was when you were working.
Contact Wipfli Financial Advisors to learn more about Social Security strategies and retirement planning.