You are now ready to claim. You’ve done your research, decided your “when” but now what about strategies? Social Security employees do their best, but sometimes they get it wrong. Your recourse? The Social Security Program Operations Manual System (POMS). This is the bible that rules the claiming process. The voluminous resource linked here is the public version: https://secure.ssa.gov/poms.nsf/home!readform.
The Bipartisan Budget Act of 2015 ended most Social Security claiming strategies. Today, a single person is left with only the option of when to file. There are, however, still some strategies available for couples. If Social Security will comprise a significant portion of your retirement income, it is vital to plan your claiming strategy.
The “Restricted Application” strategy is still applicable to select married claimants. If you are married, your spouse is receiving benefits, and you were born before January 2, 1954, you can restrict your application for just a spousal benefit. In doing so, you allow your own benefit grow and collect the 8% per year premium. At age 70, you can switch to the higher benefit.
If you are divorced after being married for at least ten years, you gain further advantage since you don’t have to wait for your ex-spouse to file. You can receive up to a 50% spousal benefit and can then switch to your own benefits at a later date when it may prove more beneficial.
This “Restricted Application” window is rapidly closing, so if you are of this age and have not yet claimed, make sure you consider this. When you contact the Social Security office, remind them you are in the protected age class. Anyone born after this date, upon filing, is deemed to claim his or her own benefit.
For couples born on or after January 2, 1954, your analysis will be simpler. Depending upon your cash flow and health situation, you may want to consider collecting the lower earner’s benefit first to allow for some cash flow and wait as long as possible to claim the higher earner’s benefit. In addition to increasing cash flow in later retirement years, this also protects the highest benefit upon the death of a spouse. Without a strategy, the survivor can be left with significantly less income.
If a spouse has no earning record, he or she can still claim a benefit of up to 50% of the earner’s record with two codicils. To explain, the earning spouse must have claimed, and if the earner is below Full Retirement Age (FRA), both that benefit and the spousal benefit will be reduced.
A divorced spouse, after ten years of marriage, may also collect up to 50% of his/her ex-spouse’s record even if the ex has not claimed but can qualify for benefits, and you have been divorced for at least two years. Remember, if you are claiming based upon your ex’s record, you will lose the benefit upon remarriage. Additionally, if your earned benefit is higher, upon filing, you will receive your own benefit.
Widow’s benefits have not been impacted by the 2015 Act, and here the Social Security Administration often gets it wrong. Widow’s benefits can begin as early as age 60 based upon the deceased spouse’s record only. If you do not need the cash flow, it is best to wait until age 62 when you then have a choice. At that age, a widow or widower can claim on either his/her own record or that of the deceased spouse. They may then switch to the higher benefit at a later date. The deceased spouse’s benefit will not grow beyond FRA and should be claimed by then. If you are delaying your own benefit, it can grow to age 70. Refer to POMS NL 00711.040 for the exact citation.
Your local Social Security office should be able to help you with the analysis or any of the situations outlined above, but as mentioned, they sometimes do not know their own rules. If you need additional help, refer to POMS. The Social Security Administration also has a wealth of useful information on their website sss.gov.
Other articles in the series:
Social Security Claiming
Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.
