What You Need To Know About Social Security Benefits Claiming

James Mahaney
James Mahaney is a vice president with the Strategic Initiatives unit of Prudential.

The Bipartisan Budget Act of 2015, signed into law on November 2, brought with it changes that will likely impact the retirement plans of many married couples by eliminating two Social Security claiming strategies that had been gaining in popularity in recent years.

For those working in the private sector, the shift from traditional pension plans to 401(k) plans that began in the early 1980s has had two important repercussions. First, retiring workers no longer have a stream of guaranteed lifetime pension payments to look forward to. Second, the pension protection offered to surviving spouses (via a qualified joint and survivor annuity option) has largely disappeared.

As a result of these changes, advisors have begun to highlight Social Security claiming strategies to help married couples maximize the guaranteed lifetime income and survivor benefits that Social Security provides. Yet the 2015 legislation impacts two of the strategies that involve delaying a Social Security benefit beyond one’s Full Retirement Age, thereby providing a higher future initial benefit amount as well as a higher potential survivor benefit.

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The first strategy, known as “File and Suspend,” will no longer be available after April 29, 2016, under the new legislation. This strategy allowed an individual to file for a Social Security benefit based on his or her own work record (worker benefit) at Full Retirement Age or later, and then immediately suspend that benefit. The File step of this technique allowed the individual’s spouse to become entitled to a spousal benefit. The subsequent Suspend step only suspended the individual’s own worker benefit, allowing the monthly benefit to continue to grow without altering the spousal benefit. This delayed higher worker benefit could then translate into a higher survivor benefit to the spouse down the road.

To illustrate, suppose Jared has reached his Full Retirement Age of 66, and his non-working spouse, Mandy, is currently age 62. Jared is eligible for a $2,000 monthly worker benefit, but Mandy cannot file for a spousal benefit until Jared has filed for his worker benefit. Therefore, to qualify using the File and Suspend technique, Jared files for his worker benefit. Since Jared has filed for his benefit, Mandy becomes entitled to a $750 monthly spousal benefit (one half of Jared’s benefit, reduced by 25% for initiating benefits prior to her Full Retirement Age at age 62). Jared then immediately suspends his worker benefit, and he can then let his own initial monthly benefit amount grow to $2,640 (plus Cost-Of-Living-Adjustments, or COLAs) at age 70. Should Jared predecease Mandy, she would drop her $750 spousal benefit (plus COLAs) and step up to a survivor benefit of $2,640 (plus COLAs). But this approach is no longer available after April 29, 2016.

The second strategy, known as “File a Restricted Application for a Spousal Benefit,” has a longer sunset provision under the 2015 legislation. This strategy currently allows an individual who has reached Full Retirement Age to file for only a spousal benefit, and then to delay his or her own worker benefit. The new legislation limited this option to individuals who turned age 62 by December 31, 2015, and therefore only permits this technique to be used over the next eight years.

To illustrate, let’s assume Amy is age 63 and will be eligible for a $2,000 monthly worker benefit when she reaches her Full Retirement Age of 66. Her husband Dale is currently age 62 and will be eligible for a $1,800 monthly worker benefit when he reaches his Full Retirement Age of 66. In two years, Dale files for his benefit at age 64. When Amy reaches age 66, she can file a restricted application for a $900 monthly spousal benefit (50% of Dale’s $1,800 monthly benefit at Full Retirement Age) and delay her own worker benefit. She can then switch over, at age 70, to her own worker benefit which will have grown to $2,640 (plus COLAs). Notably, Amy would not normally qualify for a spousal benefit at all since her own benefit is greater than one half of Dale’s.

What may not be as well known is that divorced individuals can currently also use this technique if they were married for more than 10 years, are single when they file for spousal benefits, and turned 62 by the end of 2015.

A good thing about these strategies for married couples was that they encouraged the higher-earning spouse to delay claiming a worker Social Security benefit by bringing spousal benefit income into the household during the delay period. The result was not only a higher Social Security worker benefit for that individual, but also a higher potential survivor benefit down the road. Higher survivor benefits are especially important for elderly women who have longer average life expectancies than their husbands, and nearly one-third of widowed women rely on Social Security for 90% or more of their income.

Social Security’s promise of inflation-protected guaranteed lifetime income will continue to be a critical component of retirement security. And even without these two claiming strategies in the future, married couples should still think carefully about how to maximize the important benefits that will help carry them through retirement.


Please consult with your tax and legal advisors regarding your personal circumstances when electing a claiming strategy for Social Security benefits.

This piece was originally posted on March 21, 2016, on the Pension Research Council’s curated Forbes blog. To view the original posting, click here.
Views of our Guest Bloggers are theirs alone, and not of the Pension Research Council, the Wharton School, or the University of Pennsylvania.