Turning 66? Here’s How You Can Boost Your Income…
For couples to receive the largest monthly Social Security check possible, experts generally recommend that the higher wage earner holds off until age 70 to begin collecting retirement benefits.
But often people cannot afford that delay if they retire before then, which explains why about 50% of them file early.
Some though, have discovered a perfectly legal way to increase their Social Security benefits by tens of thousands of dollars without waiting those extra years…
When you file for Social Security, you are automatically applying for your own retirement benefit and for any spousal benefit that is available. You’ll receive the higher one. You can’t choose which benefit to take; Washington does that for you. And that decision can never be changed.
On top of that, your benefit may be reduced for the rest of your life if you are not yet 70, which could also affect survivor benefits.
But a restricted application allows the husband or wife to file for spousal benefits only.
You could do this at your full retirement age — 66 — or later.
You received 50% of your spouse’s full retirement age benefit for up to four years while your delayed benefit grows. To use this strategy, your spouse must have already filed for benefits.
In 2015, Washington killed that loophole as part of the Bipartisan Budget Act.
The reasoning according to the Social Security Administration:
“Historically, spousal benefits were designed to be paid only to the extent they exceeded any benefit the spouse earned based on his or her own work record. This change in the law preserves the fairness of the incentives to delay, but it means that you cannot receive one type of benefit while at the same time earning a bonus for delaying the other benefit.”
In other words … the change is meant to prevent you from collecting only spousal benefits while your retirement benefit earns delayed credits.
The opportunity to file a restricted application for spousal benefits ended on April 30, 2016.
However, there are exceptions for an estimated 13 million boomers, but they expire the end of this year.
To Qualify to be Paid Now and Even More Later …
- Have been born between 1950 and 1953
- Be married or divorced
- Have not yet have filed for Social Security benefits
And your spouse or ex-spouse must have filed for retirement benefits.
Here’s an example of how a restricted application could work:
Harry and Sally are married; both are 66. Harry qualifies for a $2,300 monthly Social Security benefit, while Sally can get $1,200.
Harry could file a restricted application for a $600 monthly spousal benefit.
This accomplishes four things:
- Harry will receive half of Sally’s benefit, or $600 per month, without filing for his own benefits. Over four years that’s an extra $28,800 of spousal benefits (plus cost of living increases). Their combined monthly Social Security income will be $1,800.
- Since Harry is not receiving benefits based on his earnings record, he earns an 8% delayed credit each year for four years until he turns 70 when he switches to his own benefit.
That’s a whopping 32% in additional benefits ($736 more) at age 70 for a monthly benefit of $3,036. Their combined benefit will then be $4,236 plus any cost of living adjustments.
- When Harry files for his own benefits, Sally could qualify for additional spousal benefits based on his record.
- If Harry predeceases Sally, she switches to survivor benefits based Harry’s higher retirement benefit at the time of his death.
Divorcées and Divorcés
If you are divorced, the exception rules vary a little:
- You must have been married at least 10 years
- If you were divorced within the last two years, your ex must have filed for benefits
- If you divorced more than two years ago, your ex must be at least age 62 and entitled to Social Security
- You are unmarried
Widows and Widowers
Widows and widowers don’t have to worry about the Jan. 1, 2020 deadline; they’re not affected by the new law. The only criteria are that you must have been married for at least nine months and be age 60-70 when using this strategy.
So you could file a restricted application for survivor benefits then switch to your own retirement benefit, assuming it’s larger, as late as age 70.
Take your time to understand your options when filing for Social Security. After all, there’s no point leaving a boatload of money on the table.
And if you qualify, filing a restricted application is a great way to maximize the higher earner’s benefit, coordinate benefits between you and your spouse, and maximize survivor benefits.
But time is running out. So look closely at the “be paid now and even more later” strategy before it vanishes.
To a richer life,
— Nilus Mattive
Editor, The Rich Life Roadmap