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Note: with the passage of the Bipartisan Budget Act of 2015 into law, File & Suspend and Restricted Application have been effectively eliminated for anyone born in 1954 or later. If born before 1954 there are some options still available, but these are limited as well. Please see the article The Death of File & Suspend and Restricted Application for more details.
This particular situation was presented to me by a reader. Since the facts represent a fairly common situation that we haven’t addressed here in the past, I thought I’d present it here for discussion.
Here’s the original question (altered a bit for clarity):
My wife and I are age 65 & 67 respectively. We’re both still working part-time, and my wife has now 20 years of earnings on her Social Security record. At this point her PIA is approximately 45% of my PIA, and increasing with each additional year of earnings added to her record. We are in a position to delay retirement benefits to age 70 to increase our Delayed Retirement Credits (DRCs) to the maximum. What is a good strategy for us to maximize Social Security retirement and Spousal Benefits?
Given that the wife in this example has a PIA equal to something less than half of the husband’s PIA, once the wife reaches FRA she can begin receiving the Spousal Benefit alone, which would amount to 50% of the husband’s PIA. The husband will need to file and suspend in order for her to do this, but as we know, this will have no negative consequence to either of the retirement benefits in the future.
As the wife’s own benefit increases due to her additional work record and the Delayed Retirement Credits (DRCs), her own retirement benefit will continue to increase in value. Eventually there will be a crossover point when the Spousal Benefit is actually less than her retirement benefit. At that time she can choose to switch over to her retirement benefit (instead of the Spousal Benefit) or she could continue to receive the Spousal Benefit and earn DRCs.
As it turns out for this couple, the crossover point will occur when they reach the ages of 68 and 70. At that time, he will go ahead and file for his retirement benefit since it has maxed out the DRCs; she will probably continue to receive the Spousal Benefit and allow her own retirement benefit to continue accruing DRCs.
It should be noted that if she chooses to switch over to her own retirement benefit at some point, her husband could file solely for the Spousal Benefit based upon his wife’s record – if he is under age 70. Once he reaches age 70 there is no further increase to his retirement benefit from DRCs, so he may as well go ahead and take his retirement benefit.