In my most recent installment of this series, I wrote about a few hard to believe nuances of Social Security benefits. In this final installment, we are going to meet Pat and Val, a married couple with gender-neutral names, and review some simple and more complex Social Security planning strategies available to them. In the following comparisons:

  • Val and Pat are the same age
  • Their “full retirement age” (FRA) is 66
  • Val’s benefit at FRA is $1,000
  • Pat’s benefit at FRA is $450
  • 0% COLA – just to keep it simple

The simple approach is for Pat and Val to file a normal application. They will receive Social Security benefits based on the greater of their own benefit or as much as 50% of their spouses benefit. To the right is a quick visual reminder of how claiming before FRA or delaying up to age 70 can permanently decrease or increase benefits.

Below is a brief description of two strategies that are gaining popularity – “restricted application.” and “file and suspend.” In both strategies, the age and benefits of each spouse relative to the other must be taken into consideration.

  • Restricted Application:
    Restricted application allows the account holder to apply only for the “spousal benefit” they would be due under dual entitlement rules. At any age beyond Full Retirement Age (FRA), they can switch, and receive benefits based on their own work history.
  • File and Suspend
    File and suspend allows one account holder to file for benefits then immediately suspend receipt of benefits to a future date. This allows their spouse to claim spousal benefits while the account holder’s benefits continue to increase through delayed retirement credits at approximately 8% per year up to age 70.
  • Combining the Two Strategies: A Study in Double Dipping
    Diagram 2 illustrates Val and Pat filing for benefits at age 66. Val chooses to “file and suspend” while Pat chooses to file a “restricted application.” As you can see, Val suspends receiving benefits until age 70 allowing his/her $1,000 benefit to grow to $1,320. Pat receives the spousal benefit (50% of Val’s) from age 66 – 69 and then switches to 100% of his/her own benefit that has grown from $450 to $594.

I have used very simple examples to illustrate the planning opportunities for these strategies. The key factors for each couple to consider are the earnings history, ages, and health issues for both spouses. The financial planning software we use along with other Social Security calculators can be useful tools in understanding the various options for your unique situation. Please give us a call if you have questions regarding Social Security benefits and the options available to you.

Although this information was obtained from the Social Security website and other reliable resources, we make no guarantee of its accuracy. We recommend that you seek professional advice to better understand your Social Security benefits and options.