Changin’ the Rules

May 16th 2016, by Robert B. Miller

Back in the day, play time was no fun when my older sister would change the rules in the middle of the game we were playing in order to tilt the game in her favor.  (I hope she’s not reading this!) Well, it seems that Social Security has also changed the rules in the middle of the game.

No longer can one spouse employ the file and suspend strategy while the other spouse files for a spousal benefit. Congress has also limited the use of the restricted application. Consider the couple I met with yesterday, Jack and Jill. (Real people but, obviously, not their real names.)

Jack is 65 and will turn 66, his full retirement age, in December of this year. Jill is 64 and will turn 66, her full retirement age, in October of 2017. Here is the strategy they plan to use:

  • Jack will file for Social Security retirement benefits when he reaches full retirement age (66) in December of 2016 and begin to receive a benefit of $1,468 per month based on his work history.
  • Jill will file a restricted application in October of 2017 when she reaches full retirement age (66).  She will then receive a spousal benefit, ½ of Jack’s benefit ($734), for four years.
  • When Jill turns 70, she will begin to receive a Social Security benefit of $2,359 per month based on her own work history.  This amount is more than $650 per month higher than her benefit would have been had she taken it at full retirement age.

This strategy benefits both spouses if each lives a long life and can also benefit either surviving spouse after the first spouse dies. If Jack dies first, Jill receives $2,359 per month, the highest amount either spouse could collect alone. If Jill predeceases Jack, Jack collects a survivor benefit of $2,359 per month, higher than the benefit based on his work history.

Will this strategy work for you? You can file a restricted application only if you meet these three criteria:

  • You and your spouse are both eligible to receive Social Security benefits based on your own work histories, and you were age 62 or older on January 1, 2016.
  • You have reached full retirement age.
  • Your spouse is currently receiving his or her Social Security retirement benefit.
Congress can get away with telling the Social Security Administration to change the rules in the middle of the game. Sisters, don’t do that to your brothers.  It makes them “hoppin’ mad”!