How Can Couples Max Out Social Security Benefits?

Key Points

  • While new Social Security rules have eliminated some options for couples, there are still workable strategies to maximize benefits.

  • If you were born before January 1, 1954, you can still use the “restricted application” to file for a spousal benefit.

  • Other strategies for maximizing overall benefits, including spousal and survivor benefits, vary based on relative age and earning records but are worth exploring.

Dear Carrie,

My husband and I are both 64 and still working. He makes more money than I do and had been planning to ‘file and suspend’ his Social Security benefit in two years so I could collect a spousal benefit while his continued to grow. Since that’s no longer allowed, is there a new strategy we can use to maximize our benefits?

—A Reader

Dear Reader,

The 2015 Budget Act dramatically shifted the landscape for couples attempting to maximize their Social Security benefits. As you’ve discovered, just when many of us had our plans in place, we’ve been forced to reevaluate. Fortunately, there are some strategies that still work. But before I get into those, let’s review what’s changed.

No more ‘file and suspend’

First, as you indicate, the old ‘file and suspend’ strategy is no longer available to new filers. In the past, one spouse could file for benefits—which allowed the other spouse to file for a spousal benefit—then suspend their own benefit to let it grow. No more. Now when a person suspends their own benefit, they also suspend spousal benefits. This effectively prevents one spouse from collecting benefits on their husband's or wife's record while the other spouse holds off in order to accrue delayed retirement credits. It was great while it lasted.

Further restrictions on a 'restricted application’

The second related, but different, change impacts what is known as a ‘restricted application.’ For many years, this provision allowed a married person to collect a benefit based on their spouse’s work record rather their own record as long as their spouse had already filed. In this way, at Full Retirement Age (66 for those born between 1943 and 1954), a spouse could file for a spousal benefit only (a restricted application) and then switch to their own increased benefit at a later date.

This possibility hasn't been completely eliminated, but whether or not you can use it depends on your age. If you were born before January 1, 1954, you’re in luck. The provision is still available to you. Anyone younger isn’t eligible.

Couple strategies that still work

So where does this leave you—and the millions of other couples who are grappling with the new rules? Unfortunately, there's no one-size-fits-all recommendation. Each couple’s financial situation, birth dates, relative ages, anticipated longevity, and earnings records factor in.

Because of this complexity, it generally makes sense to consult with an advisor who specializes in Social Security benefits before deciding. In the meantime, here are a few guidelines to consider:

  • A primary breadwinner should consider delaying filing to age 70. Assuming good health and the prospect for a long life, this makes sense for two reasons. First, it can eventually add up to a larger lifetime benefit. And second, it will mean an increased benefit for a surviving spouse.
  • It may make sense for the lower earning spouse to file for their own benefit at Full Retirement Age (FRA). The tactics will vary, however, depending on birthdate. Here are a couple of examples:
    • Let’s say, as the lower earner, you file for benefits at your FRA. Since your husband turned 62 before the end of 2015, at his FRA he could file a restricted application for spousal benefits. He could then switch to his own higher benefit at age 70. Plus, since you waited until FRA to file for your own benefit, your benefit could increase if the spousal benefit were higher than your own benefit.
    • If, on the other hand, your husband had not turned 62 by the end of 2015, and wasn’t eligible to file a restricted application, it would still likely make sense for you to wait until at least your FRA to file for your own benefit and your husband to wait until age 70 to file. Your benefit could still increase to a potentially higher spousal benefit of 50% of his FRA benefit.
    • Should your husband pre-decease you, you would receive a higher survivor benefit by his delaying to age 70 in either case.
  • If both partners have equivalent earnings records, it may make sense for both to delay filing until age 70. Provided that both anticipate a long life and can afford to postpone benefits, this would maximize both retirement benefits for themselves and survivor benefits for each other.
  • Married couples with a single income face a different set of issues. Although health and anticipated longevity certainly come into play, it often makes sense for the breadwinner to postpone benefits until age 70. While the couple will forego spousal benefits until the earner files, it will allow for the largest possible retirement and survivor benefits. Other couples, however, may want the earner to file once the spouse reaches FRA, which is when the spousal benefit maxes out (the spouse would need to be at their FRA to be eligible to claim the maximum spousal benefit). In this case, though, they are forfeiting the highest survivor benefit.

No easy answers

While the new law in some ways simplified things, it’s still a complex and important decision. So I can certainly appreciate that many people may take one look at all this and want to run for cover. But I strongly advise every person approaching retirement age to stop and carefully assess their Social Security choices. Timing is important and there are still strategies—especially for couples—that can result in a higher overall benefit. Sit down with your advisor to help you make the best decision based on your situation.

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