There’s a little-known provision in the Social Security code that could provide some long-term extra income for those who qualify and use the proper application strategy. However, it’s being phased out, so if you and your spouse qualify, now is the time to use it.
If you’re reaching full retirement age in 2019, you’re among the last group that will be able to make an application restricted to spousal benefits only, which could enable you to allow your own retirement benefits to continue growing at 8% per year until age 70. If you qualify, you’ll get some retirement income now and lock in extra monthly income after you start receiving your own retirement benefit in four years.
To qualify, you must:
• be reaching full retirement age (66) during 2019 (i.e., you must have been born prior to January 2, 1954), and;
• have a spouse who is already claiming or eligible to claim a Social Security benefit.
Here’s an example. Suppose a person is reaching age 66 during 2019 and qualifies for a $2,200 monthly benefit. This person’s spouse qualifies for a $1,400 monthly benefit. The higher-earning spouse can file a restricted application and claim only the spousal benefit, which would amount to about $700 per month. If the lower-earning spouse claims the $1,400 to which they are entitled, the couple will receive $2,100 per month in retirement income. Then, when the higher-earning spouse reaches age 70, they can claim their own retirement benefit of $2,900, which, in addition to the spouse’s $1,400, brings the couple’s total retirement benefit to $4,300 monthly. In addition, they will receive continuing cost-of-living adjustments based on this figure. Finally, the higher amount will be the benefit received by the surviving spouse in the event of the death of the other partner.
Remember, too, that ex-spouses can claim spousal benefits. If they were married for at least ten years, an ex-spouse who is still single can claim spousal benefits if they have been divorced for at least two years.
If you intend to utilize the restricted-claim strategy, be prepared for potential misdirection, as even some Social Security office personnel may not be aware of the strategy or may mistakenly believe it has already been eliminated for everyone. If this becomes a problem, an appeal to a supervisor will usually remove the obstacles.
Also, even if you don’t qualify for this particular strategy, you should keep in mind that your decision on claiming Social Security has an effect on your spouse. For example, high earners who elect to begin receiving benefits before full retirement age typically consign their spouses to a lifetime of lower monthly payments. On the other hand, a little forethought and strategizing can maximize Social Security income for both spouses. Usually, it’s best for the higher earner to delay benefits as long as possible—ideally, until age 70. But the lower earner may elect to receive benefits earlier, providing extra income while the higher earner’s benefit grows to its maximum level.
Stay Diversified, Stay Your Course!