“If you take the wrong benefit at the wrong time, it’s always smaller and it’s forever.”
Don’t confuse “Restricted Application” with the “Claim and Suspend” strategy. Many people confuse the two, according to an article appearing in Forbes titled “Put Thousands In Your Pocket By Taking Advantage Of the Social Security ‘Restricted Application’.” One thing these tactics do have in common: you’ll need to be at your Full Retirement Age, or FRA, to use them.
However, that’s history. Let’s examine what you might be able to do: the ‘Restricted Application.’
To use this strategy, you need to have been born before Jan. 2, 1954 and have reached FRA. The restricted application is similar to claim and suspend, with one big difference: Spouse #1 needs to be receiving their Social Security benefit, in order for Spouse #2 to collect a spousal benefit. As of this writing, for one spouse to receive a spousal benefit, the other spouse must be receiving their benefit. Both spouses cannot receive spousal benefits at the same time.
Here’s what the Social Security Program Operations Manual says:
When a claimant is eligible for more than one benefit at the time of filing, he or she may, for any reason, choose to limit or restrict the scope of the application to exclude a class of benefits unless there is an exception. The reason may be to receive higher current benefits or to maximize the amount of benefits over a period-of-time, including the effect of delayed retirement credits (DRC). For additional information on DRCs, see RS 00615.690.
Using the restricted application works best, if the lower earning spouse claims their Social Security benefits, when the higher earning spouse reaches their FRA.
Here’s an example:
The husband’s primary benefit is $2,650 and his birthday is June 15, 1953.
The wife’s primary benefit is $1,000 and her birthday is June 15, 1955.
Because he was born before January 2, 1954, he can use the restricted application, when he reaches full retirement age. She can never use the restricted application because she was born after that date.
She begins taking her own benefits based on her earnings record at age 64, when he reaches his FRA. She only gets $855, because she is filing before her FRA.
He then files a restricted application for spousal benefits only in the amount of $500 in June 2019, when he is at his FRA of 66 years of age. He gets one half of her FRA benefit.
He then switches to his own benefit based on his earnings record in the amount of $3,498 in June 2023 at age 70. His benefit is 32% higher, because of earning delayed retirement credits.
She adds $325 in spousal benefits to her own benefit of $855, for a total of $1,180 in June 2023, when she is 68.
Now that he has filed for his own worker benefit, she can file for her spousal benefit. When he dies in June 2038, she switches to survivor benefits for $3,498, which is the amount he was receiving when he passed away. Her benefit of $1,180 goes away.
This strategy does three things:
Maximizes the higher earner’s benefit,
Coordinates benefits between the spouses, and
Maximizes the survivor benefits.
It takes advance planning and attention to detail, but this strategy could have a big difference in the total benefits that the couple receives. Is it worth doing the math? Definitely!
Reference: Forbes (Jan. 21, 2019) “Put Thousands In Your Pocket By Taking Advantage Of the Social Security ‘Restricted Application’”