Last Call
WERE YOU BORN between 1950 and 1953, have been or are currently married, and haven���t yet filed for Social Security benefits? There���s a loophole you may want to take advantage of���before it disappears.
For couples, settling on the right strategy for claiming Social Security benefits is critically important, because it affects the size of each spouse���s benefit or spousal benefit, as well as the survivor benefit. But the payoff can be especially large for the group I���m discussing here���those born between 1950 and 1953.
In 2015, Congress changed some of the Social Security rules affecting couples, including eliminating so-called restricted applications for those born in 1954 and later. But if you were born before 1954, you were grandfathered and can���for a brief time���still take advantage of this filing option.
What���s a restricted application? It���s when a husband or wife files for spousal benefits only. They can do so at their full retirement age���66 for the group we���re discussing���or later. Result: They receive 50% of the other spouse���s full retirement age benefit. For a restricted application to work, the other spouse must have already filed for his or her own benefit.
Sound good? It gets even better: Once the spouse who filed the restricted application turns age 70, that spouse can upgrade from the spousal benefit to a benefit based on his or her own earnings record���and that benefit would have grown eight percentage points a year over the intervening four years, for a total of 32%, thanks to delayed retirement credits.
Whenever folks tell me they were born before 1954 and haven���t filed for their Social Security benefit, I start thinking about whether they should use this strategy. Take my sister and brother-in-law. My brother-in-law was born in December 1953, so he qualifies to file a restricted application, because he was born before 1954.
Here���s how the strategy will play out for them. First, my sister���who had the lower lifetime earnings���files for her benefit. This coming December, my brother-in-law will turn age 66 and can file a ���restricted application for spousal benefits only,��� allowing him to receive 50% of my sister���s full retirement age amount. Then, at age 70, my brother-in-law can file for his own benefit, which would have increased due to delayed retirement credits. He���ll receive this higher benefit for life. If he predeceases my sister, this higher amount will be available to her as a survivor benefit.������
The restricted application is good for married couples���but it can be even better for divorced couples. Take a divorced couple who had been married for 10 years or more���and neither have remarried. They were both born before 1954 and they���ve both reached their full retirement age of 66. They could each file for spousal benefits on the other ex-spouse���s earnings record. Since they���re divorced, neither needs to have first filed for benefits based on their own earnings record. They would each receive 50% of the other���s full retirement age amount. Upon reaching age 70, they then file for their own benefit, which would be 32% larger, due to delayed retirement credits.
Be warned: Social Security���s representatives won���t go out of their way to inform you of the intricacies of restricted applications, because they���re understaffed and, in any case, they aren���t really allowed or trained to give retirement advice. But don���t let that put you off���because a little persistence could be richly rewarded.
James McGlynn CFA, RICP, is chief executive of Next Quarter Century LLC in Fort Worth, Texas, a firm focused on helping clients make smarter decisions about long-term-care insurance, Social Security and other retirement planning issues. He was a mutual fund manager for 30 years. James is the author of Retirement Planning Tips for Baby Boomers.
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