The topic of “restricted application” continues to be a popular one.
This article isn’t necessarily geared as to how you qualify to use the restricted application, but how to apply the tactic to your best advantage.
To start with, please do not confuse the “Restricted Application” with “Claim & Suspend”. Many of the questions I receive on this subject confuse the two. To take advantage of either of these tactics, you must have reached your full retirement age.
To be eligible to Claim & Suspend, you needed to be born before 5/1/1950. The ability to “Claim & Suspend” ended on 4/30/2016. What this tactic allowed you to do was to let Spouse #1 claim their worker benefit and immediately suspend that benefit allowing it to grow by 32% using delayed retirement credits. This allowed Spouse #2 to apply for and receive spousal benefits. In this case, Spouse #1 was not receiving a monthly benefit and Spouse #2 was.
Now let’s talk about the restricted application. To take advantage of this tactic you need to have been born before 1/2/1954 and reached full retirement age. The restricted application is basically the same as the Claim & Suspend with one big exception – Spouse #1 needs to be receiving their worker benefit in order for Spouse #2 to be collecting a spousal benefit. As of today, in order for one spouse to be receiving a spousal benefit, the other spouse must be receiving their worker benefit, unlike the Claim & Suspend. Also, both spouses cannot be receiving a spousal benefit at the same time.
Below is an excerpt from the Social Security Program Operations Manual System relative to this issue:
D. Policy for Restricting the Scope of the Application
When a claimant is eligible for more than one benefit at the time of filing, he or she may, for any reason, choose to limit or restrict the scope of the application to exclude a class of benefits unless there is an exception. The reason may be to receive higher current benefits or to maximize the amount of benefits over a period-of-time, including the effect of delayed retirement credits (DRC). For additional information on DRCs, see RS 00615.690.
Deemed Filing Rule
A claimant who is eligible for both a retirement income benefit (RIB) and spouse’s (AUXSPO) benefits must apply for both and cannot restrict his or her application to only one benefit when he or she:
- is born January 2, 1954 or later and eligibility for both benefits exists in any month, or
- is born before January 2, 1954, under full retirement age (FRA), and eligibility for both benefits exists in the first month of entitlement (MOET) to either benefit.
For more information on the rules for deemed filing, see GN 00204.035.
Using the restricted application works best if the low earning spouse claims their worker benefit when the high earning spouse reaches their full retirement age. Below is an example of this strategy. The “Mr.’s” Primary Insurance amount is $2,650 and his birthday is 6/15/1953. The “Mrs.’s” Primary Insurance Amount is $1,000 and her birthday is 6/15/1955. Because Mr. was born before 1/2/1954, he is eligible to use the restricted application when he reaches full retirement age. The Mrs. can never use the restricted application because she was born after 1/2/1954.
- The Mrs. begins her own worker benefits based on her earnings record in the amount of $855 in June 2019 at age 64 when Mr. reaches his full retirement age. Note: The Mrs. benefit is lower than her full retirement age benefit of $1,000 because Mrs. is filing before her full retirement age.
- The Mr. files a restricted application for spousal benefits only in the amount of $500 in June 2019 at his full retirement age of 66. Note: The Mr. receives one half of Mrs.’s full retirement age benefit.
- The Mr. switches to his own worker benefit based on his earnings record in the amount of $3,498 in June 2023 at age 70. Note: TheMr.’s benefit is 32% higher due to earning delayed retirement credits.
- The Mrs. adds $325 in spousal benefits to her own worker benefit of $855 for a total amount of $1,180 in June 2023 at age 68. Note: Now that the Mr. has filed for his own worker benefit, the Mrs. can apply for her spousal benefit. Mrs. does not need to use the restricted application as she has already filed for her own worker benefit. Spousal benefits are added to your own worker benefit. You are always paid your worker benefit if you have one.
- In June 2038, Mrs. switches to survivor benefits in the amount of $3,498. Note: The Mrs.’s switches to survivor benefits which is the amount Mr. was receiving when he passed away. Mrs.’s spousal benefit of $1,180 goes away.
This strategy accomplishes the 3 goals you want to address:
- Maximize the high earner benefit
- Coordinate the benefits between the spouses
- Maximize the survivor benefits
Total benefits received by using this strategy is $1,201,026. This assumes Mr. lives to 85 and Mrs. lives to 90 with no inflation factor. Does this amount surprise you?
Using this strategy increases overall Social Security benefits received by this couple by $132,070 as opposed to filing early, which about 50% of people do.
Using this strategy increases overall Social Security benefits by $106,576 as opposed to both Mr. & Mrs. filing at their respective full retirement age.
Now you know why it is so important to take the time to make sure you have explored all your filing options before making your decisions. Most couples will have an overall Social Security income stream of over $1,000,000. You can also see by this example that proper planning significantly increases your lifetime benefits.
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