As you might already know, Congress recently closed a loophole in Social Security rules that once allowed couples to utilize a popular filing strategy called “file and suspend”. This strategy helped many couples maximize their Social Security benefits, and without it, some of you are now forced to revamp your retirement plans.
Luckily, there are other options that will help you potentially maximize your Social Security benefits. One such option is actually somewhat similar to file and suspend. It’s called “restricted application”, and while it’s not right for all couples, it’s worth considering as you plan for retirement.
Here’s how it works:
Jim and Maria, a married couple, are ages 66 and 62, respectively. Now that Maria is 62, she can file an early application for Social Security benefits, in exchange for a smaller payment. Jim has reached full retirement age, but instead of filing for his own benefit, he files a “restricted application” and claims spousal benefits on Maria’s work record instead.
Each month, Maria will receive her benefits, and Jim will receive a spousal benefits check for roughly half of that amount. Meanwhile, his own benefit amount, based on his work record, continues to grow by about 8 percent each year until he reaches age 70. Then, when he turns 70, Jim claims his own benefits. Maria then switches to a spousal benefit based on Jim’s work record, because his benefit amount is much higher than hers.
For a few years, Jim and Maria live on smaller Social Security checks, but they reap the reward of much larger benefits later. This is often a good strategy for a couple who have other retirement income, or who haven’t actually retired yet.
Filing a restricted application isn’t right for everyone, and you should carefully analyze your situation before making such a serious decision. Remember, we’re here to help with all of your Social Security and retirement dilemmas. Schedule an appointment with us, and we can show you different retirement scenarios and help you make the choices that are appropriate for you.
Portions of this article have been excerpted from “A Social Security Strategy That Pays Off Big, Especially for Couples” by Marilyn Lewis, www.msn.com. Marilyn Lewis is not affiliated with LPL Financial.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.