For weeks now, we have been covering considerations when deciding how and when to claim benefits under Social Security (SS) and Medicare. Today we take a deeper dive into the Social Security claiming decision for couples. While their decisions are more complicated than singles’ choices, the objective remains the same; maximize lifetime benefits.
Last week we discussed the situation when a married couple are of similar age, and both are qualified to receive individual benefits from Social Security. The strategy is called “File and Suspend,” and is (was) very lucrative for people fitting the profile we described.
Here's the rub. This option is available only to recipients whose higher-earning participant was born before 1954. For those who qualify, the secret is to file only a “Restricted Application for Spousal Benefits.”
Note that the remaining days of the “File and Suspend” option are numbered, as the youngest qualified recipients will turn 67 this year. In three years, these people, having been born in 1953, will all be 70, and there is no value to waiting past age 70.
Today we look at married spouses, both qualified for SS benefits, who can no longer “File and Suspend,” due to their ages. People born after 1953 are faced with a new set of rules, all of which took effect April 30, 2016. The new rules are not as beneficial to the recipients. Nonetheless, there remain options available to assist our goal of maximizing lifetime benefits from Social Security.
Some recipients file early in order to receive spousal or children’s benefits based off his or her account. Spousal and children’s benefits (called “dependent benefits”) are paid only when the primary recipient is collecting benefits. During this period, the primary claimant cannot suspend without losing dependent’s benefits. After exhausting dependent’s benefits, the primary claimant can again suspend and receive 8% annual benefit increases before restarting.
The largest determinant in the claiming process for most folks is the overall cash flow of the couple. For those who are OK with their current income, waiting to at least Full Retirement Age (FRA) for each of them is a compromise between longevity issues and the potential of a post-FRA benefit increase. However, each case must be taken separately to see what procedure maximizes income over the expected longevity of the couple. A knowledgeable financial advisor will guide you through the complexity, and assist your quest for maximum benefits.
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