Photo courtesy of Maja Petric via Unsplash.com.
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 business of filing for Spousal Benefits is complicated, as we’ve discussed in the past. The options available are difficult to understand, and the timing of the choices can make real dollar differences in benefits.
Recently I received a couple of messages from readers that illustrate very good examples of Spousal Benefit decisions in real life. I’ve changed a few of the facts to protect each reader’s identity, but otherwise these are real world examples.
I’m using these real cases because I often hear from readers (as in these cases) that their situations are just so unique that the examples provided can’t be applied. Hopefully these real-life situations will help you as well.
Restricted Application or just file for my own benefit?
This first email illustrates the great benefit of utilizing the Restricted Application instead of filing for (in this case the wife’s) own benefit. It might seem like you’re not getting much for the extra effort, but as illustrated, there’s a significant benefit to using the Restricted application:
I just finished reading your latest Social Security book, and have read your online articles about Social Security, in particular on the Restricted Application process. I think I understand, but my husband and I don’t fall neatly into one of your examples. Most of the scenarios are for people who have not yet made a choice, or are younger.
My husband is now 73, and began taking Social Security benefits at 65, about 8 months before his FRA. We don’t know his FRA benefit amount, and haven’t found it on the SSA website. At the time he retired we were unaware of the various SS maneuvers, so he just began receiving benefits. He currently receives $2,400/month. I will turn 65 in September, and would like to retire soon after that, and can probably wait until 66 to file a Restricted Application, but am not sure that would be the right thing for our situation. My FRA benefit amount will be $1,100, and the amount at 70 is projected to be $1,600. Since we don’t know his FRA benefit amount, it’s difficult to calculate whether or not it would be a good idea to use the Restricted App, or just start collecting.
Thanks, P
Here is my response:
Hello P –
Even though you don’t know for sure what your husband’s FRA benefit amount would be, you know that it’s at least $2,400 since that’s his reduced amount. So if you file a restricted application your spousal benefit would be $1,200 (and probably a bit more, but we’ll remain conservative).
This by itself should help you to make the decision: if your own benefit at age 66 is projected at $1,100, of course at that time if you filed you would also file for the spousal excess benefit, taking your total benefit up to our calculation of at least $1,200. So – why would you *not* file a restricted application, and take the exact same $1,200 for 4 years, and then when you reach age 70 give yourself a bonus of $400 per month?
I used your projected age 70 benefit of $1,600 minus the $1,200 to come up with $400. Your actual age 70 benefit might be a bit less since you’re retiring at age 65 and not earning any more on your Social Security record after that point. Remember that the projection at age 70 from SSA assumes you’ve worked up to that age.
I think this is a pretty clear example of how knowing what to do can really pay off – in this case to the tune of $4,800 per year once you reach age 70.
Which of us should file for Spousal Benefits?
The second email is another example of the confusion that reigns with regard to the concept of Spousal Benefits. As you’ll see, you may need to do some calculations to understand if it makes sense for one spouse or the other to file for Spousal Benefits, and the timing of those filings.
My wife is 4 years older and I am. She reached FRA (66) in June 2014 and had enough work credits so she filed for SS and began received benefits ($800/month). I reach FRA in June 2018 and at FRA my SS retirement benefit is projected to be $2600. I planned to delay receiving benefits until I turn 70. When I reach FRA the spousal benefit for my wife ($2,600 x 50%=$1,300) would be greater than the $800 she receives now based on her earned benefits. Can she switch from her benefits to spousal benefits when I reach FRA? If I defer my benefits until I turn 70 can I file for spousal benefits until I turn 70 and then switch to my own SS benefits?
Thanks for your help – L
And here is my response:
Dear L –
Yes, your wife can file for spousal benefits based on your SS record when you file for your own benefit. If you are at or older than FRA when you file you can suspend at that time as well, allowing your benefit to increase by the delay credits up to your age 70. That covers your first question.
With regard to your second question, if you file for your own benefit to enable your wife to receive the spousal benefit increase described above, you will not be eligible for a spousal benefit based upon her record. On the other hand, if you do not file for your own benefit, thereby delaying your wife’s receipt of the spousal benefit increase until you reach age 70, you could be eligible for a spousal benefit based on her record when you reach FRA.
In your case, it appears to make the most sense for you to file and suspend, allowing your wife to receive a total benefit of $1,300 (50% of your FRA benefit amount of $2,600).
If you went the other route, she would continue to receive $800, and you’d receive $400, which totals to $1,200. After you reach age 70 and file for your own benefit your wife would be eligible for the increased Spousal Benefit for a total benefit of $1,300.
The first option (for you to file and suspend) will result in $100 per month more in benefits over the 4 years between your age 66 and 70 versus the second option, a total of $4,800 that you’d leave on the table.