In 1939, Social Security benefits became available to the “wives” of covered workers. We laugh today at the use of the term “wife” in early Social Security documents, but back then it was nearly always the husband who was the breadwinner and the wife who did not have enough earnings to qualify for her own Social Security benefit. The “spouse” benefit, as it’s now called, was set at 50% of the working spouse’s benefit. (We generally call it a “spousal” benefit to distinguish it from a spouse’s own retirement benefit.)
Unlike the previous generation, most baby boomer women have worked enough to qualify for benefits on their own record. Ordinarily, when a person files an application for Social Security benefits, it is presumed that they are filing for their own retirement benefit. If they are also entitled to a spousal benefit—that is, they have been married more than one year and the spouse also earned enough to qualify for Social Security—and if the spousal benefit is higher than their own benefit, they will be paid the difference so that the total equals the amount of the spousal benefit (reduced if claimed before full retirement age).
There is one exception to this “deemed” filing rule (as in a person is “deemed” to be filing for both retirement and spousal benefits). That’s when a person who has turned full retirement age restricts the scope of their application to their spousal benefit. This is called “filing a restricted application.” In this case they can receive 50% of the other spouse’s primary insurance amount (PIA) without touching their own benefit. Because they have not yet opened their record, their own benefit will build 8% annual delayed credits to age 70. This is sometimes called the “claim now, claim more later” strategy.
It was outlawed with the Budget Act of 2015. But people who were 62 or older at the end of 2015 (meaning they were born in 1953 or earlier) were grandfathered. This year, 2019, the last grandfathered cohort turns full retirement age. Now is the time to get the word out to all baby boomers who have been grandfathered under the Budget Act who have not yet filed for Social Security benefits that they can take advantage of a strategy that was so good it was outlawed. By filing a restricted application, a high-earning client can receive 50% of his spouse’s primary insurance amount (PIA) between the ages of 66 and 70 while his own benefit grows. At 70, he switches to his own maximum benefit, which includes four years of delayed credits.
Let’s say John is 66 now and his PIA is $2,800. His wife Jane is also 66 and just filed for her benefit of $1,600. John can file a restricted application for his spousal benefit and receive $800 per month for the next 48 months. When he turns 70, he switches to his own benefit, which has grown to $3,696 (including four years of 8% annual delayed credits, not counting annual cost-of-living adjustments or COLAs). If he was going to delay his benefit to age 70 anyway, this strategy gives him an additional $38,400 in spousal benefits. If he otherwise would have claimed his own benefit at 66, the delayed credits give him an additional $37,632 in retirement benefits over his lifetime (to age 86) in addition to the spousal benefits for a total of $75,032 in additional benefits, again not counting COLAs.
Not everyone can do this. The Bipartisan Budget Act of 2015 changed the rules to disallow restricted applications for spousal benefits if you had not attained age 62 by the end of 2015. This means anyone born after January 1, 1954 will be required to file for their own benefit and may receive a spousal benefit only if it is higher than their own retirement benefit.
But those who are grandfathered have a unique opportunity and should definitely take advantage of it. All of the following conditions must exist:
- The applicant must have been born on or before January 1, 1954
- The applicant’s spouse must have previously filed for his or her benefit, thus entitling the applicant to a spousal benefit
- The applicant must be full retirement age (FRA) or older
- The applicant must not have previously filed for Social Security benefits
We’ve seen cases where the client is grandfathered for restricted app, but his wife is too young for him to take advantage of it—by the time she turns 62 he will already be over 70 and receiving his own benefit. Or perhaps the wife also has a high PIA and wants to maximize it by delaying her benefit to age 70; the calculator shows that her delayed credits are worth more than four years of spousal benefits for him. If there is some reason why the spouse can’t or won’t have filed for his or her own benefit during that four-year period from age 66 to 70, the strategy cannot work.
We’ve seen other cases where the client is grandfathered, the spouse has filed for her benefit, but the client is not yet 66. Since it is not possible to file a restricted application prior to full retirement age, he has no choice but to wait. Note that the age of the spouse is not relevant, providing she has filed for her benefit. If she has taken a reduced retirement benefit at age 62, this will entitle the client to his spousal benefit; as soon as he turns 66 he can file a restricted app. It is not necessary to wait for the spouse to turn 66 (unless she wants to wait until then to file in order not to take a reduced benefit). Also note that the client’s spousal benefit will be 50% of the spouse’s PIA, not 50% of her actual benefit. So if she files at 62 and is receiving 75% of her PIA, the spouse will get 50% of the PIA, not 50% of the 75%.
We’ve seen other cases where a new client comes in who has already filed for benefits. He hears about spousal benefits and now wonders if he can suspend his benefit in order to file for the spousal benefit. The answer is no. Once a person has filed an application for benefits, including disability benefits, it is not possible to file a restricted application. Even if he suspends his benefit, his application is still open. The only exception is if it’s been less than 12 months since he filed. In this case he can withdraw his application and repay all the benefits he has received. Then he would be free to refile, this time restricting the application to the spousal benefit.
How to file
When all of the above conditions have been met and a client is ready to file a restricted application for spousal benefits, he should go online to do it. We are still hearing of occasional pushback in local offices (“You can’t do that anymore,” etc.). The online application process is very easy. There’s even a short video that explains how to do it. Note: Divorced-spouse benefits must be applied for in person at a local office.
The only slightly tricky part is the restricted part. They don’t ask if you want to file a restricted application. Rather, on the bottom of page 15 the following question appears:
By checking “yes” the applicant is saying he is applying for his spousal benefit now and wants to delay his own retirement benefit. This is essentially how you file a restricted application. We recommend that in the comments section on the last page the client add this note: “I am restricting the scope of this application to my spousal benefit. I wish to delay my own retirement benefit in order to maximize delayed credits.”
Page 15 also asks for an effective date. This would be the first of the month that the client turns 66. For example, if the client turns 66 on September 15, 2019, he would indicate an effective date of 9/1/19. If the client doesn’t become entitled to the spousal benefit until a later date—say the client turned 66 in May but the spouse will not become eligible for her benefit until October, the effective date would be 10/1/19. SSA will take applications up to three months prior to the effective date. But you want to make sure the spouse’s application has been processed so it is clear that the client is entitled to the spousal benefit. So in this case the spouse could file as early as July 1, specifying an effective date of October 1. Once the application has been processed and the spouse has received her award letter, the client can file the restricted application, also specifying an effective date of October 1.
There would be no retroactive benefits payable in this case because the spouse did not become eligible for benefits until October 1. Even though the client turned FRA in May, he was not entitled to a spousal benefit at that time because his spouse hadn’t filed. But you may run into cases where the spouse has already filed. Say the spouse filed for her benefit in February, the client turned 66 in May, and he now learns from you that he can file a restricted application for his spousal benefit. He would specify an effective date of May 1 and get benefits back to that date. SSA will pay up to six months of retroactive benefits or back to FRA, whichever is shorter (i.e., they will not pay retroactive benefits to a period prior to FRA).
Is this the best strategy for the couple?
Note that both spouses cannot file a restricted application on the other at the same time. The reason is that one of the spouses must file a regular application for his or her own retirement benefit, and this precludes filing a restricted application.
Also, file and suspend was disallowed as of April 30, 2016. Prior to that date, one spouse could file for his retirement benefit and suspend it. The filing entitled the other spouse to a spousal benefit; the suspension allowed delayed credits to accrue. So it was possible for two high-earning spouses to delay their own respective benefits to age 70 while one spouse received a spousal benefit from age 66 to 70. Now, if a client suspends his benefit, no spousal benefits can be paid while that benefit is in suspension.
So it becomes necessary to coordinate the two spouses’ benefits. If one spouse must file for—and take—his or her benefit in order for the other spouse to take a spousal benefit, you should confirm that this is the best strategy. As noted above, a high-earning spouse may want to maximize her own benefit by delaying it to age 70, and in the long run those delayed credits may be more valuable than the spousal benefit. You also have to look at their respective ages and PIAs and determine which spouse should file for the retirement benefit and which spouse should file for the spousal benefit. (This is not always apparent and is where the Spousal Planning Calculator, part of our Savvy Social Security program, comes in handy.)
What happens at 70
It will be necessary to refile a regular application for retirement benefits at age 70. I went through this myself. I had been receiving a divorced-spouse benefit starting at age 66, which automatically converted to a divorced-spouse survivor benefit when my ex-husband’s death was reported one year later. About a month before I turned 70 I went online and filed a regular application for benefits. As of my June 1 effective date, the survivor benefit stopped and my own retirement benefit started.
Get the word out
After the Budget Act put the kibosh on file-and-suspend and started phasing out restricted applications, spousal strategies have been getting less attention in the media. And rightly so. Why play up a strategy that fewer and fewer people can take advantage of?
This is why you need to be vigilant in identifying clients and prospects who can still take advantage of it. Finding tens of thousands of dollars in additional benefits for people is one of the most satisfying parts of our job. But it won’t last. By the end of 2019 everyone who was 62 at the end of 2015 will be 66 or older. Those who could have filed a restricted application will presumably have already done so—although you may encounter a few stragglers who are grandfathered and over FRA but haven’t done it yet (maybe waiting for a spouse to file).
And that’s worth noting too. There have been rumors that you won’t be able to file a restricted application after 2019. That’s not true. You might consider the real deadline to be 2023. By then everyone who was 62 at the end of 2015 will be over 70 and already receiving their own benefit.
Further reading
How To Get Extra Social Security Benefits if You’re Married and of a Certain Age
7 of Your Most Burning Questions on Social Security (with Answers)