Restricted application for Social Security doesn't work for all
Q: I turned 63 and my wife turned 61 in February of 2016, and I am unsure if there is a filing deadline for restricted application benefits? As I understand it, when my wife reaches FRA (66.4), I can claim one-half of her benefit (as a spouse), while I hold off on claiming my own benefit until age 70. Let me know if this is correct logic, and if I need to move quickly and file a form, as I don't know if there is a deadline. — Paul Ziegenhorn, Wood Dale, Ill.
A: There’s a good deal of confusion since the rules for file-and-suspend and filing a restricted application were changed with the signing of the Bipartisan Budget Act of 2015 (the new rules are in Section 831-Closure of Unintended Loopholes) by President Obama last November.
And the answer to your question is “yes, with a caveat,” says Stephen Stellhorn, author of Navigating the Maze of Social Security: Claiming Strategies for Fifty Shades of Grey and president of MSM Capital Management.
According to Stellhorn, since your birthday is February 1953, as of Jan. 2, 2016, you had already reached the age of 62. “Under the new rules you are grandfathered in and preserve your option to file a restricted application for spousal benefits upon reaching your full retirement age (FRA) of 66 in February 2019,” he says.
For those who turn 62 on or after Jan. 2, 2016, however, they are no longer eligible to file a restricted claim under the new rules,” says Stellhorn. “So under the new rules your spouse will no longer have an option to file a restricted claim on your work record,” he says. “However, your spouse will need to have filed an application for retirement benefits in order for you to receive spousal benefits.”
In her case, if she files when you reach your FRA, she will be 64 and subject to reduced benefits as she is claiming before her FRA, says Stellhorn, who notes that she would receive about 84.4% of her primary insurance amount (PIA). If she waits until reaching her FRA of 66.4 years to receive 100% of her PIA, you will now be 68.
Since you are not 66 by April 30, 2016, Stellhorn says the file-and-suspend strategy will no longer be an option for you. “By waiting to receive benefits you will receive delayed retirement credits worth 8% each year until you reach 70,” he says. “If there is a significant difference in both your retirement benefits, by delaying you are ensuring a greater eventual survivor benefit for your spouse.”
Q: I was born in May 1951 and have good earnings. I expect to receive $2,400 per month at 66, but I plan to wait to claim until age 70. My husband, age 78, has a short work history in the U.S. and has been collecting Social Security for about eight years. His monthly benefit is about $700.
I understand that I can no longer file and suspend under the new law. But can I file a restricted application and claim half his benefit? Would that be worth it? Or is there a way with restricted for me to do that till I am 66 and then file and have him claim half of mine —while I am still suspended and accumulating credits? — Marcia Hermansen, Chicago
A: File and suspend would never have been the strategy for you since your husband is already collecting Social Security, says Mark J. Orr, a certified financial planner and author of Social Security Income Planning: The Baby Boomer's Guide to Maximize Your Retirement Benefits.
“You are confusing parts of the new law like so many folks, even many who work at the Social Security Administration,” says Orr.
However, since you are older than 62 (born on or before Jan. 1, 2016) you can file a restricted
application for spousal benefits once you reach your full retirement age or FRA, says Orr. “At that
point you will get 50% of your husband’s primary insurance amount or PIA while your own benefits grow by 8% a year until you turn 70. At that point, you will switch to your own benefit.”
Robert Powell is editor of Retirement Weekly, contributes regularly to Paste BN, The Wall Street Journal and MarketWatch. Got questions about money? Email rpowell@allthingsretirement.com .