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Back in 2015 Congress eliminated a valuable Social Security claiming strategy for couples called file-and-suspend. No longer can you collect a benefit based on your spouse’s filed but suspended Social Security benefit.
The new rules further say that anyone who files for a spousal benefit is deemed to also be filing for his or her own benefit. So you can’t file for a spousal or retirement benefit alone.
However, anyone born before Jan. 2, 1954 was grandfathered in. If you fall into this group, you can file a restricted application for only your spousal benefit, while deferring your own retirement benefit. But to be eligible to file a restricted application in the first place, your spouse must claim his or her retirement benefit.
In this week’s reader question, columnist Phil Moeller, the author of Get What’s Yours for Medicare: Maximize Your Coverage, Minimize Your Costs and co-author of the updated edition of How to Get What’s Yours: The Revised Secrets to Maxing Out Your Social Security, helps a reader who’s in this camp weigh his options.
Should I file a restricted application for Social Security?
Douglas P.: I am 65 (born before 1954) and qualify for the “restricted application” benefit. My wife is 62. Both of us worked and have considerable dollars available in our Social Security funding.
I have gone through two different Social Security calculators that suggest I take advantage of the restricted application, which I can do this upcoming May when I turn 66 and my wife will be 63.
I appreciate the early dollars we will be accessing (four years for me and seven years for my wife) but am concerned about the scenario if we both live a long time and have her lifetime payout significantly reduced by her claiming at 63 (for my restricted application) rather than waiting until she turns 70, when her payout will also be maximized.
We are not reliant on Social Security to cover our living expenses. How often would you not recommend someone who qualifies for the restricted application not take it?
Phil Moeller: I can’t really provide a numerical answer to this question. But in Doug’s case, I would lean toward he and his wife not pursuing the strategy where she files early for her benefit and he files a restricted application. This advice is based on neither of them having a serious health problem or a family medical history suggesting that they might die at early ages.
Doug notes in his question that his wife will be entitled to considerable Social Security benefits based on her work history. For this reason, if she were to file at age 63 her benefit would be reduced substantially compared with what she’d get by waiting until age 70 to file.
In addition, her early filing would also sharply reduce the percentage of her benefit that Doug would receive as a spousal benefit if he then filed a restricted application. An example will make this a lot clearer.
Let’s assume that Doug’s wife would receive a monthly benefit of $2,500 if she waited to file until reaching her full retirement age (FRA), which would be 66 and a half for someone born in 1957. If she filed at the age of 62 and a half, for example, her benefit would be only 75% of that, or $1,875 a month. And due to her early filing, Doug would not get half of her FRA benefit but only 35% of it.
Further, if she waited until 70 to file, her monthly payments for the rest of her life would rise to $3,200—70% more than her benefit at 62 and a half!
Given that Doug says they would not need Social Security payments to cover their living expenses, I think it makes sense for them to take the longer-term view here and wait for higher benefits that they hopefully would continue receiving well into their 90s.
