Are you leaving Social Security benefits on the table?

It happens more often than you think. Without a good understanding of the rules, you might make a move that results in leaving Social Security benefits on the table.

There are a couple of ways this can happen. Let’s start out by identifying the types of benefit we’ll be covering in this article: 

• retirement benefits based on your own working record (RIB)
• spousal benefits based on your spouse’s or ex-spouse’s working record (SRIB)
• survivor benefits based on your late spouse’s or late ex-spouse’s working record (WIB)

Our first example of leaving Social Security benefits on the table relates to the interplay between the retirement benefit, which we’ll shorten to RIB, and the spousal benefit, which we’ll refer to as SRIB. (These acronyms stand for Retirement Insurance Benefit and Spousal Retirement Insurance Benefit, respectively.)

Ben and Anita are age 70 and 74 respectively. Anita has been collecting her RIB since she reached Full Retirement Age (FRA, age 66), but Ben has been delaying receipt of his benefit until he reaches age 70, which allows him to accrue the delayed retirement credits of 8% per year of delay.

The problem is that Ben and Anita didn’t know about the restricted application option available to folks born before 1954. Since Ben was born in 1949 (reaching 70 in 2019), he could have been collecting a SRIB (spousal benefit) from his FRA (also 66) while continuing to delay his own benefit to age 70. Because Anita had already filed for her own RIB at her age 66, when Ben reached age 66 he could have started collecting an SRIB equal to 50% of Anita’s benefit, with no affect on his future RIB.

Since they weren’t aware of this option, unfortunately it’s gone forever for them, now that Ben has reached age 70. It’s possible to retroactively file for the SRIB up to 6 months prior – which is something Ben should do ASAP. But that’s all the farther back he can go to correct this oversight. So he’s left 3 1/2 years’ worth of SRIB on the table.

If we go back in history to four or more years ago and educate Ben and Anita, we could ensure that Ben, having been born before 1954, files a restricted application for spousal benefits. Then he’ll begin to collect the SRIB, while still delaying his own RIB filing to age 70.

This same option is available to Ben if he and Anita were divorced, as long as their marriage lasted at least 10 years. 

Unfortunately, this type of restricted application is only available to folks who were born in 1954 or earlier – so if you (or your spouse) are not at least 65 in 2019, this example won’t apply to your situation.

The second example of leaving Social Security benefits on the table deals with the coordination of your own retirement benefit (RIB), with the survivor’s benefit, which we’ll refer to as WIB (WIB stands for Widow(er)’s Insurance Benefit).

Karen is a widow, her husband Leon died five years ago at the age of 63. Leon had not started collecting Social Security benefits at the time of his death. Karen will turn 62 in July of this year, and she’s planning to retire at that time. She called the local SSA office to set an appointment to find out about her benefits.

When Karen meets with the Social Security folks, they ask her about her marital status, and Karen provides Leon’s identifying information. It turns out that, if Karen was to file for the WIB (survivor benefit) based on Leon’s record, she could receive an additional $10 per month! Karen’s RIB at this point is $1,000, and the WIB is presently $1,010. Of course, Karen says yes, she’d like to receive that extra $10 (in the words of Geddy Lee, “Ten bucks is ten bucks!”).

The problem is that the Social Security folks didn’t tell Karen that she could have started receiving her own RIB at age 62, and then later, upon reaching Full Retirement Age she could switch over to the WIB, which would have increased by an additional $230 per month by that time! In the meantime, she’d be collecting the RIB (that was $10 less than the WIB at that point), but then later she could bump up her total monthly benefit by $230.

This is accomplished by another type of restricted application – an application restricted to retirement benefits only. In this case, Karen would tell the SSA folks that she only wants to file for her RIB, delaying filing for the WIB until later. 

This could also be deployed in the opposite manner – Karen could choose to restrict her application to only the WIB, and then later file for her own RIB. Assuming she waited until her FRA, using our fictitious example, her RIB would have increased to $1,333 by FRA. During the intervening four years, Karen would continue to receive the $1,010 WIB every month.

The critical point here is that Karen must know two things when she files for benefits: 1) which benefit will eventually be the larger, so that she can delay that one and collect on the other; and 2) that she must restrict her application at her present age to only the benefit she’s collecting at that point.

If Karen doesn’t take care to restrict her application, SSA will process the application as if she was applying for all available benefits at that point. You might think it’s a trivial thing, but the problem is that unless Karen restricts her application at that stage, she will be unable to apply for the other benefit later. In other words, upon reaching Full Retirement Age, Karen could not apply for the RIB (since she’s been collecting the larger WIB) if she did not restrict her application to only the WIB when she first applied. SSA will tell her that she cannot apply for RIB at this point because she applied for all available benefits back when she was 62. And there’s no “do-over” for this problem, much the same as in the first example.

SSA doesn’t tell you this – you have to know it on your own. SSA staff are famous for not providing advice when you are consulting with them. It seems that their primary objective is to get you the largest benefit possible at that given point in time – even if a greater benefit could be had later, by taking the time to restrict the application to only the benefit currently being received.

It’s up to you to know how this all works, and to be your own advocate as you go through the application process. Otherwise you may be leaving Social Security benefits on the table.