In our previous post titled “Maximize Social Security with the File and Suspend Strategy,” we showed you a strategy that married couples might use to increase their social security retirement benefits. Not too many retirees are aware that strategies like this exist to increase social security income1, and it goes to show that with the right type of planning, people can get more out of retirement than they might think.
There is another strategy known as the Restricted Application for Spousal Benefits that married couples also may use to increase the size of their social security checks. This method allows for one spouse to start collecting spousal benefits, while simultaneously having their retirement benefits grow through the accumulation of delayed retirement credits. Below we’ll explain how this works.
Two Examples of the Restricted Application for Spousal Benefits
- Hypothetical Example #1: The Higher Earner is Older
Husband is 66 with a retirement benefit of $2000, and the wife is 62 with a retirement benefit of $1,000. The wife applies for her retirement benefit at age 62, so she receives a reduced benefit of $700 instead of $1,000. The husband at this point can file a restricted application for spousal benefits, which will allow him to claim his spousal benefit from the wife’s retirement benefit. In this case, the husband would start collecting $350 (one-half of $700) at age 66, and his retirement benefit would continue to grow at 8% per year. From age 66-70, the husband claims $350 per month, and then at age 70 he can switch back to his own retirement benefit, which would have grown to $2,640.2
- Hypothetical Example #2: The Higher Earner is Younger
The husband is age 66, and the wife is age 62. The wife has a higher retirement benefit of $1,800, and the husband has a retirement benefit of $800. The husband files for his benefit so starts receiving $800 per month. When the wife turns 66, she can file a restricted application for her spousal benefit, and could start receiving $400 per month. She can collect this amount from age 66-70, and then at age 70 she can switch to her own retirement benefit, which by then will have grown to $2,376 per month.1
An Important Note if You Decide to Use the Restricted Application for Spousal Benefits
Make sure it is clear when you complete the form that you are restricting the application to the spouse benefit and are not collecting your own retirement benefit.2
Does This Strategy Apply to You?
Using the Restricted Application for Spousal Benefits depends on your situation, and you should consult a financial professional to help you evaluate your options. Our Wealth Managers are here to discuss your retirement income options with you and help you build a comprehensive plan designed to address your goals in retirement.
Deciding when and how to take social security is an important decision, but there is much more that goes into building a strong retirement plan: how to manage your investments, projecting your cash flow needs throughout retirement, estate planning, and so on. Call one of our Wealth Managers today at 1-800-541-7774 to discuss how to design your plan specifically for your needs and goals.
Sources:
1 Forbes
2 AARP
Additional Disclosure: WrapManager, Inc. is not a tax advisory firm. We recommend you contact your tax attorney or CPA prior to utilizing any of the tax-related strategies mentioned or discussed.
