While there are still many Social Security strategies that are available, one stands out as being exceptionally beneficial for most that are married or divorced.
It is called the Restricted Application strategy. Below we’ll highlight who can benefit from this strategy and why it is valuable as a way to maximize your Social Security Benefits.
What is the Restricted Application Strategy?
Filing a Restricted Application at Full Retirement Age (66 for most people) or later allows the filer to file only for spousal benefits (worth up to 50% of their spouse’s Full Retirement Age benefit) while letting their own benefits continue to grow and accumulate Delayed Retirement Credits at the rate of 8% per year until they claim their own benefits at a later date.
As an example, John and Mary are married and John is 66 and Mary is 62 and they have both worked and are entitled to benefits due to their work. Mary can file for benefits on her own record now and then John can file a Restricted Application strategy for spousal benefits.
This will allow Mary to receive her retirement benefits while John receives a spousal benefit based on Mary’s record but without having any negative impact on either Mary’s record or on John’s own retirement benefit.
So, if Mary has a Full Retirement Age benefit amount of $2,000 for instance and John has a Full Retirement Age benefit of $2,000 also, Mary can start receiving $1,500 now on her record (reduced due to claiming before Full Retirement Age) but John can also start receiving $1,000 now (50% of Mary’s Full Retirement Age amount) while letting his benefit continue to accrue Delayed Retirement Credits up until 70.
He Can then claim his maximize benefit at 70 which would be $2,640 in this example. So he’ll receive $48k in spousal benefits that he would have otherwise missed, plus his own benefit at 70 will be $640 higher than it would have been had he claimed at his Full Retirement Age.
Who Can Use the Restricted Application Strategy?
- Married Couples: All married couples with at least one spouse that was at least age 62 prior to December 31st, 2015 but is still under 70 and that has not already claimed benefits on their own record need to consider whether it would be beneficial to file a Restricted Application to help them maximize their benefits. Married couples have the most to lose by failing to consider these strategies. Failing to take advantage of this strategy can often cost couples $50k to $60k in lifetime benefits or more than $120k in lifetime benefits when combined with a File and Suspend strategy.
- Divorced: All divorced individuals born prior to 1954 that have not already claimed benefits on their own record should highly consider and evaluate filing a Restricted Application in order to preserve the option to receive spousal benefits while also obtaining Delayed Retirement Credits. This is often worth $50k to $60k in benefits.
The Bottom Line
Making the optimal Social Security claiming decision and maximizing your benefits is complicated. You should work with a Social Security advisor that is an expert in the myriad of strategies that are available to you.
Talk with a Social Security Advisor and obtain expert advice on who should file a Restricted Application and when.
Whether any of the strategies above are right for you requires careful analysis as each situation is different. If you think you may be eligible or have other questions and would like to schedule a Free Initial Consultation with an advisor, you can do so by clicking here.
Until next time,
Matthew Allen is the Co-Founder/CEO of Social Security Advisors and creator of the new course Maximizing Your Social Security produced in conjunction with Weiss Educational Services. Matthew has helped thousands of seniors maximize their Social Security benefits and avoid costly mistakes when filing. Matthew has been at the forefront of financial services for over a decade. In addition to co-founding Social Security Advisors, Matthew also founded The Universal Group of Companies, a private investment firm, in 2004. From 2000 to 2004, Matthew was a NYSE Market Maker with LaBranche & Co., a Fortune 500 New York Stock Exchange firm.