If born before Jan. 1, 1954, there is a claiming strategy you can possibly utilize to improve your benefits income stream. This strategy is called a Restricted Application.
People born after Jan. 1, 1954 cannot do this. Whenever they file for Social Security, they will be paid the highest benefit to which they are entitled at that age, whether on their own earnings record or as a spouse or ex-spouse. This is called Deemed Filing. There are ways to improve your income stream with Deemed Filing as well, but that is not the purpose of this article.
The Restricted Application is a particularly powerful tool for working couples as seen in this example:
This example is what the referenced couple filed at Full Retirement Age.
John and Susie both work and are eligible for their own Social Security retirement payments. They both were born before Jan. 1, 1954. John’s full payment amount at FRA was $1,000, and Susie’s was $2,200. John filed for his own benefit at Full Retirement age, and Susie restricts her application to spousal benefits only. She will receive $500 per month as an auxiliary benefit from John. So together, they were able to draw a combined benefit of $1,500 per month.
At age 70, Susie files for her benefit, which has increased substantially with Delayed Retirement Credits. Her new payment is now $2,904. Her spousal benefit will no longer be available and when she files for her benefit, John will be able to file a Restricted Application on Susie’s benefit, which increased his benefit by $100 per month.
His increase is based on 50 percent of her benefit at Full Retirement Age, not at age 70. They have also increased the Survivor Benefit for whichever spouse lives the longest to $2,904 vs. $2,200 had Susie not waited to draw. This is a $700 per month increase for life for the remaining spouse.
Unfortunately, many couples think because they are still working that waiting until age 70 is the best choice for them. If they were born before Jan. 1, 1954, chances are this is not correct – they are leaving money on the table that they are entitled to draw.
• You must be Full Retirement Age or older to implement.
• You must be born before Jan. 1, 1954.
• Not only will the auxiliary benefit grow with Delayed Retirement Credits, but also Cost of Living increases will be added to benefit amount.
• If Susie were to die before age 70, John would still enjoy the increase in her benefit amount through the rest of his life.
So many of Pillars LLC clients have used this strategy in the past. If you qualify, please don’t let this pass you by.