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Social Security Claiming Strategies: What You Should Know Now About Restricted Application

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Many retired couples utilize a strategy that enables them to boost their combined Social Security income. Known as restricted application, this strategy involves the higher earning spouse choosing to receive spousal benefits while waiting until later to receive his or her own benefits.

However, this strategy will no longer be available after 2019. This makes now a good time to determine whether restricted application might be a beneficial strategy for you and your spouse and then take action if so.

Restricted Application Explained

To use the restricted application strategy, you or your spouse must have achieved full retirement age (FRA) for Social Security and been born before January 2, 1954. So if you or your spouse reaches 66 years of age this year, you still have time to adopt the strategy before the end of this year.

An example helps explain how the restricted application strategy works: John is 66 years old and qualifies for a $2,200 per month Social Security benefit, while his wife Sally qualifies for a monthly Social Security benefit of $1,400. John can apply for a restricted application and claim a spousal benefit of half of Sally’s benefit amount — or $700 a month — instead of his own $2,200 per month benefit. This would bring John and Sally’s total Social Security payment up to $2,100 per month ($1,400 + $700 = $2,100).

By waiting until age 70 to claim his own Social Security benefit, John will significantly increase the amount of money he eventually receives when he starts claiming benefits. His benefit amount will increase by 8% each year until he turns 70, which will boost his Social Security benefit from $2,200 to $2,904 per month — an increase of more than $700 per month.

When he turns 70, John can switch from a spousal benefit to his own Social Security benefit of $2,904. When added to Sally’s monthly benefit of $1,400, this brings the couple’s total monthly Social Security benefit up to $4,304 for the rest of their lives. In addition, they will receive annual cost-of-living adjustments (COLAs) each year. Also, the higher benefit is the amount the surviving spouse will keep after the first spouse dies.

Note that only the spouse applying for restricted application has to have reached FRA. The other spouse can be younger than FRA as long as he or she is claiming Social Security benefits.

Ex-spouses May Qualify, Too

Ex-spouses can also utilize the restricted application strategy in certain situations. If a couple was married for at least 10 years and has been divorced for at least two years, each person is considered independently entitled to Social Security benefits. In this scenario, an ex-spouse who remains unmarried can file a restricted application for spousal benefits regardless of whether his or her ex-spouse has claimed benefits.

The decisions you and your spouse make about claiming Social Security benefits could have a major impact on your retirement finances. Therefore, it’s important to understand all of your potential options, including the restricted application strategy.

Please give us a call if you have more questions about restricted application or other Social Security claiming strategies.

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