Retirement 2.0blog

Don't get greedy with Social Security strategies

Beneficiaries are entitled to only one claim per person

Feb 10, 2014 @ 12:01 am

By Mary Beth Franklin

A lot of readers are excited about the prospect of using the file-and-suspend strategy as an insurance policy in case they later decide to request a lump sum payout of benefits.

To refresh your memory, I recently discovered that if you wait until your full retirement age to file and suspend your Social Security benefits with the intention of collecting a larger benefit later, you can change your mind at any time prior to receiving monthly benefits and request a lump sum payout beginning with the date of your suspension. That could come in handy if you suddenly encounter health or financial problems.

Normally, lump sum payouts are restricted to a maximum of six months of retroactive benefits, but that is not the case when you file and suspend. Technically, you have already filed for benefits and merely suspended them. By asking the Social Security Administration to lift the voluntary suspension, you can request that they pay you a lump sum dating back to your original filing date.

Of course, if you receive a lump sum payout you would forfeit any delayed retirement credits earned during that same period. Delayed retirement credits are worth 8% per year for every year you postpone collecting benefits beyond your full retirement age up to 70.

But some readers seem to be getting greedy.

Ian, who works for a small financial planning firm, said he urged his mother to file a restricted claim for spousal benefits only on her ex-husband's earnings record when she turned 66, allowing her own retirement benefits to accrue delayed retirement credits. At age 70, she could switch to her own retirement benefits, which would be worth 132% of her full retirement age amount.

Great advice, Ian. Your mother should be proud.

But after reading one of my recent columns about filing and suspending, Ian asked me if his mother could also file and suspend her retirement benefit as a way to preserve a lump sum payout option while she continues to collect her spousal benefit on her ex.

No. Ian's mother already made her claiming election. She chose to file a restricted claim for spousal benefits only, which in her situation is probably the right choice. But she can't also file and suspend her benefits.

As the SSA representative told Ian on the phone, if his mother were to file and suspend now, her spousal benefit would go away completely.

Suspending her Social Security benefits now would undo her claim for spousal benefits only. That would defeat the purpose of collecting some income now as an ex-spouse and more income later on her own earnings record when she turns 70.

This is a great example of why it is important to weigh various Social Security options before making a final claiming decision. The goal is not to game the system, but to choose the appropriate claiming strategy to suit your client's — or your mother's — situation.

At full retirement age or later, you can choose to restrict your claim to spousal benefits only while your own retirement benefits continue to grow. Or, you can file and suspend your benefits, which can trigger benefits for a spouse or create a placeholder for yourself in case you decide to collect a lump sum payout later. But you can't do both.

This one-to-a-customer rule applies in many situations. For example, while I was preaching the gospel of savvy Social Security claiming strategies to financial advisers attending the Sammons Securities Co.'s national conference in Las Vegas last week, several attendees asked if a client, who filed and suspended benefits in order to trigger spousal benefits for a mate, could turn around and restrict his claim to spousal benefits only.

No. It's one Social Security claim per beneficiary. Don't be greedy.


What do you think?

View comments

Recommended for you

Sponsored financial news

Upcoming Event

Apr 30


Retirement Income Summit

Join InvestmentNews at the 12th annual Retirement Income Summit - the industry's premier retirement planning conference.Much has changed - and much remains to be learned. Attend and discuss how the future is full of opportunity for ... Learn more

Featured video


Diversity & Inclusion Awards: 2018 nominations are open

Editor Fred Gabriel and special projects editor Liz Skinner discuss the nomination process for InvestmentNews' inaugural Diversity & Inclusion awards.

Latest news & opinion

Broker protocol: Indecision over recruiting agreement is rampant

Ruckus over recruiting agreement has even wirehouse lifers wondering if it's time

Cetera reportedly exploring $1.5 billion sale

The company confirmed it's talking to investment bankers to 'explore how to best optimize [its] capital structure at lower costs.'

SEC Chairman Jay Clayton outlines goals for a new fiduciary standard

Rule should provide clarity on role of adviser, enhanced investor protection and regulatory coordination.

Advisers bemoan LPL's technology platform change

Those in a private LinkedIn chat room were sounding off about fears the independent broker-dealer will require a move to ClientWorks before it is fully ready.

Speculation mounts on whether others will follow UBS' latest move to prevent brokers from leaving

UBS brokers must sign a 12-month non-solicit agreement if they want their 2017 bonuses.


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print