Last Call

James McGlynn

WERE YOU BORN between 1950 and 1953, have been or are currently married, and haven’t yet filed for Social Security benefits? There’s a loophole you may want to take advantage of—before it disappears.

For couples, settling on the right strategy for claiming Social Security benefits is critically important, because it affects the size of each spouse’s benefit or spousal benefit, as well as the survivor benefit. But the payoff can be especially large for the group I’m discussing here—those born between 1950 and 1953.

In 2015, Congress changed some of the Social Security rules affecting couples, including eliminating so-called restricted applications for those born in 1954 and later. But if you were born before 1954, you were grandfathered and can—for a brief time—still take advantage of this filing option.

What’s a restricted application? It’s when a husband or wife files for spousal benefits only. They can do so at their full retirement age—66 for the group we’re discussing—or later. Result: They receive 50% of the other spouse’s full retirement age benefit. For a restricted application to work, the other spouse must have already filed for his or her own benefit.

Sound good? It gets even better: Once the spouse who filed the restricted application turns age 70, that spouse can upgrade from the spousal benefit to a benefit based on his or her own earnings record—and that benefit would have grown eight percentage points a year over the intervening four years, for a total of 32%, thanks to delayed retirement credits.

Whenever folks tell me they were born before 1954 and haven’t filed for their Social Security benefit, I start thinking about whether they should use this strategy. Take my sister and brother-in-law. My brother-in-law was born in December 1953, so he qualifies to file a restricted application, because he was born before 1954.

Here’s how the strategy will play out for them. First, my sister—who had the lower lifetime earnings—files for her benefit. This coming December, my brother-in-law will turn age 66 and can file a “restricted application for spousal benefits only,” allowing him to receive 50% of my sister’s full retirement age amount. Then, at age 70, my brother-in-law can file for his own benefit, which would have increased due to delayed retirement credits. He’ll receive this higher benefit for life. If he predeceases my sister, this higher amount will be available to her as a survivor benefit.   

The restricted application is good for married couples—but it can be even better for divorced couples. Take a divorced couple who had been married for 10 years or more—and neither have remarried. They were both born before 1954 and they’ve both reached their full retirement age of 66. They could each file for spousal benefits on the other ex-spouse’s earnings record. Since they’re divorced, neither needs to have first filed for benefits based on their own earnings record. They would each receive 50% of the other’s full retirement age amount. Upon reaching age 70, they then file for their own benefit, which would be 32% larger, due to delayed retirement credits.

Be warned: Social Security’s representatives won’t go out of their way to inform you of the intricacies of restricted applications, because they’re understaffed and, in any case, they aren’t really allowed or trained to give retirement advice. But don’t let that put you off—because a little persistence could be richly rewarded.

James McGlynn CFA, RICP, is chief executive of Next Quarter Century LLC in Fort Worth, Texas, a firm focused on helping clients make smarter decisions about long-term-care insurance, Social Security and other retirement planning issues. He was a mutual fund manager for 30 years. James is the author of Retirement Planning Tips for Baby Boomers.

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