Restricted Application Social Security Strategy Is on Its Way Out

Baby boomers turning full retirement age in 2019 are the last class that can take advantage of a valuable Social Security strategy. The strategy lets a beneficiary restrict an application to spousal benefits only, giving the beneficiary some Social Security income now while allowing his or her own retirement benefit to grow 8% a year until age 70. If you are a boomer who qualifies, it behooves you to take a good look at when you and your spouse will claim benefits. “It is a way to get a little extra income for four years,” says Judith Ward, senior financial planner for T. Rowe Price.

To restrict an application to spousal benefits only, you must have been born before January 2, 1954. Anyone born on or after that date is out of luck when it comes to this particular strategy.

To use the claiming strategy, you must be at least full retirement age for Social Security. Those born in 1953 have a chance to use the strategy this year as they hit their full retirement age of 66. Say a 66-year-old qualifies for a $2,200 monthly benefit, while the spouse qualifies for a $1,400 benefit. The higher earner can file a restricted application to claim a $700 monthly spousal benefit. The couple will bring in $2,100 a month from Social Security, but when the higher earner hits age 70, he or she can switch to a benefit worth $2,904. The couple will then bring in a total of $4,304 a month for the rest of their lives, plus annual cost-of-living adjustments.

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Claiming the lower earner’s benefit and the spousal benefit can make it easier for the higher earner to delay and thus boost that more lucrative benefit. And that boosted benefit is the one that the surviving spouse will keep after the first spouse dies. “There’s not a lot of downside,” says Ward, to using the strategy.

For a beneficiary to use the restricted application strategy, the spouse must have already claimed his or her benefit. If you are age 66 but your spouse is 60, you’ll need to wait at least two years to use this maneuver. But if your spouse is, say, 68 and claiming a benefit, you can file a restricted application for a spousal benefit off his record and let your own grow to age 70.

Ex-spouses catch a break. If a couple has been divorced two or more years, the ex-spouses are considered to be independently entitled to Social Security benefits. As long as the couple was married at least ten years, an ex-spouse who is still single can file a restricted application for spousal benefits only regardless of whether his or her ex has claimed a benefit.

If you try to take advantage of this strategy before it disappears, be prepared if you run into confusion when claiming benefits. Some Social Security representatives may be unaware of the strategy or think it no longer applies to anyone. In most cases, asking for a supervisor resolves the issue.

Don’t Qualify for a Restricted Application? Still Strategize

If you can’t take advantage of this restricted application strategy, that doesn’t mean it’s every man or woman for themselves. A couple can still maximize Social Security benefits by coordinating their claims.

“Understand how you taking Social Security affects your partner,” says Sean Scaturro, a certified financial planner for USAA. If the high earner claims Social Security early, for instance, that could consign a spouse to a lifetime of reduced survivor benefits.

When strategizing, consider who has the highest benefit. Ideally, the higher earner will allow that benefit to grow until turning age 70. The lower earner could take his benefit earlier, filling an income gap while the higher benefit grows.

While dual income couples may find it easier to delay at least one benefit to age 70, single income couples may face a harder choice. A non-earner can’t claim a spousal benefit until the earner claims his benefit. If the couple can afford to go without Social Security income until 70, they may want to wait. If not, they should aim to delay claiming at least until full retirement age. No matter what the situation, carefully run the numbers before taking benefits.