Am I losing the right to collect spousal Social Security benefits before I collect my own?
The short answer is yes, if you didn't reach age 62 by December 31, 2015.
The Bipartisan Budget Act of 2015 disrupted two strategies previously approved by the Social Security Administration (SSA) that allowed couples to maximize their benefits, including allowing one spouse to collect spousal Social Security benefits before collecting his/her own benefits.
The first strategy is known as a "restricted application" and requires that your spouse has already filed for Social Security benefits and that both of you have reached full retirement age. In this case, you can file only for spousal Social Security benefits, waiting until 70 to file for your own (larger) benefits.
Starting May 1, 2016, the bill also eliminates a strategy known as "file and suspend," in which one worker in a married couple who has reached full retirement age (FRA), but not age 70, can file for Social Security benefits, but then suspend them.
Neither option is permitted until the worker who wants to exercise the benefit has reached full retirement age.
Here's how it had worked: The main beneficiary had to claim benefits before the spouse could claim a spousal benefit. If the main beneficiary was not ready to file for benefits, he or she could file – and immediately suspend – any receipt of those benefits until some later date. The spouse could then claim a restricted application that allowed him or her to collect half of the main beneficiary's benefit amount. Subsequently, the spouse could collect his or her own benefit at a later date. Using this strategy, both spouses could let their benefits grow until they reach the age of 70. The benefit currently grows at approximately 8%. It did not matter which spouse files and suspends – and which spouse files a restricted application – as long as both spouses are between full retirement age and 70 years old.
An example is a married couple, Sharon and John, who have both reached full retirement age. John's benefit at FRA would be $2000. John can file and immediately suspend benefits until a later date when his benefit will grow approximately 8% a year. Meanwhile, Sharon, who has also reached FRA, can file a restricted application for her spousal benefit. She will receive half of her husband's benefit, or, in this example, $1000 a month. Her benefit will also continue to grow. She, too, can file for her own benefit at a later date and receive a higher benefit than she would have at FRA.
[Note: A spouse can start collecting benefits as young as 62, once his/her spouse has either filed for Social Security benefits or (until May 1, 2016) filed-and-suspended. But in that case, the spouse will get a reduced benefit based on either his/her own benefit or on the spousal benefit, whichever is higher. Having done this, the spouse no longer qualifies to file a restricted application at full retirement age.]
Starting on May 1, 2016, file-and-suspend filings are no longer permitted.
In addition, anyone who had not reached age 62 by December 31, 2015, will not be able to file a restricted application upon reaching full retirement age if he or she is married and meets the requirements described above. He or she will no longer be able to first receive spousal benefits, then his/her own. Older workers who qualify can still employ this strategy.
Social Security maximization strategies are very confusing. To answer your question, I would really need to know your age, your spouses age, whether you have been married before and a few other points.
To better answer your question, let me give you a little more detail. I recently participated in a recent webinar presented by Laurence Kotlikoff, an economics profession at Boston University, in which he offered several pointers to the audience on Tips to consider when filing for Social Security.
Both in writing and on my radio show, have been talking for years about how best to maximize your Social Security Benefits – see:
- Claiming Social Security Early
- Social Security – When to Start Them
- Social Security Claiming Strategies for Couples
- Planning for Social Security
- Why it Pays to Delay Taking Social Security
- A recent interview on the STA Money Hour with Andrew Hardwick
As a financial planner, my team and I must keep abreast of and have a broad understanding of how to advise our clients on maximizing their Social Security benefits – and the answer varies depending on each of our clients own personal circumstances.
Per Mr. Kotlikoff (as mentioned above), this had become even more difficult due to recent changes to the file-and-suspend benefit rules of Social Security, which take effect this year and restrict that benefit to a limited number of couples. (The spouse who files and suspends must be 66 years old as of May 1, 2016, and submit his or her request to file and suspend by April 29. The other spouse, who will receive that spouse’s benefit, must be 62 years old as of Jan. 1 of this year.) It’s also because Social Security is complicated, and even the workers at the Social Security Administration may not fully understand it.
With that in Mind, Mr. Kotlikoff has these five pointers to consider before you file for your Social Security Benefits:
1. Social Security Workers Can Get it Wrong (although most are well intentioned):
Therefore, you need to know the rules yourself. “People in Social Security offices don’t seem to understand the new law,” said Kotlikoff, who’s also author of “Get What’s Yours — the Secrets to Maxing Out Your Social Security Benefits.” He then recounted stories of several retirees who were given erroneous information by their Social Security office. We have seen the same issues with our clients here at STA Wealth. So before you apply for benefits have your game plan on how best to maximize your Social Security given your needs and situation:
- Age (of you and your spouse if married),
- Tax and Work/Employment situation,
- Longevity (how long do you think you will live), and
- Cash Flow Needs.
At STA Wealth, we have software to help you maximize your benefits and there are also online tools at www.ssa.gov.
2. Retirees Should Tell Social Security What They Want to Do – Don’t Just Ask
As discussed above, Retirees need to have the right information about their benefits — which we can provide at STA Wealth — and then tell Social Security what they want to do, preferably in writing. They should not ask Social Security workers questions about their benefits and expect to get the right answer, says Kotlikoff.
Mr. Kotlikoff recommends that retirees specify in writing in the remarks section of their application what they want to do, such as claim spousal benefits, and be definitive and clear. “The application form can be misleading,” said Kotlikoff. It says on top that you’re filing for all available benefits even when you’re not always doing that. You can’t undo that statement. The only place to specify … [what you want to do] is in the remarks section.
If someone wants a spousal benefit and the spouse has already applied to file and suspend and won’t take benefits sooner than his or her 70th birthday, “that has to be in writing … definitive and clear,” said Kotlikoff.
3. File Social Security Applications Online Rather Than by Phone or in Person
For most of my career, I have recommended that clients should schedule an appointment in their local Social Security Office – I have had few problems with that. Perhaps that is because my clients have a plan.
However, Mr. Kotlikoff believes thatit may be safer to file for retirement benefits and spousal benefits online. In that case, he believes that retirees can state exactly what they want to do, and specify in the remarks section of the application form. “You can’t write what you want by phone,” said Kotlikoff. Filing online can also avoid the problem of a worker at a Social Security office writing down the wrong information. Widow and child benefits, however, cannot be applied for online, said Kotlikoff.
4. Specify When You Want to Take Social Security Benefits
If you are beginning your Social Security benefits at Full Retirement Age, for those currently filing, it would be age 66, you will need to specify the exact date they want to begin taking benefits in the remarks section of their social Security application. Otherwise Social Security will provide six months’ worth of retroactive benefits in a lump sum, which will have the effect of slightly reducing future monthly Social Security payments.
5. Keep Track of Ex-Spouses if You’re Collecting Their Spousal Benefits
During the webinar, Mr. Kotlikoff recounted the example of an ex-wife who’s 63 and made the grandfather cutoff to collect under file and suspend. She can file for full spousal benefits of an ex-spouse when she reaches full retirement age at 66, then collect those for four years until the larger retirement benefit kicks in at age 70. At that point, if the ex has passed away she can take the larger of two benefits – the divorced widow or the divorced spouse. Per Mr. Kotlikoff, you should keep track whether your ex spouse is still alive.
Your Full Retirement Age (FRA) is the magic number. At FRA, you are able to file for a spousal benefit as long as your spouse is already collecting his/her own benefit. This is a good strategy because it allows your own Social Security benefit to grow to age 70, at which time you can switch to the higher benefit. Good planning. Good luck!!
The law change of the Social Security benefit in October, 2015 has caused so much confusion, not only to the general public, but also to financial advisors and even some of the Social Security administration’s own employees.
To avoid any confusion, I will answer your question based on the new law unless you turned 62 on Jan. 1, 2016 and your spouse has filed and suspended his/her benefit on or before April 29, 2016.
Under the new law, there will no longer be a spousal or one’s own benefit for a married couple. If you file for the benefit, but qualify for both (your benefit based on your own earning history and a spousal benefit), the SSA will give you the highest of the two. This is the so-called “Deemed Filing Rule.” For many married couples, that means that the spousal benefit, which is often smaller than a retirement benefit, will never be paid. The only exception to this rule is the surviving spouse, who can still choose one benefit first and switch to the other later if it results in a higher amount.
So, you’re “not losing the right to collect your spousal benefit;” it’s already determined for you by the SSA. Best!