I'd like to try to clear up some confusion about Social Security claiming strategies that was triggered by one of my recent columns.
In last week's column, I wrote that people who reach their full retirement age of 66 in 2019 are the last group of people eligible to file a restricted claim for spousal benefits, which allows their own retirement benefits to continue to grow by 8% per year up to age 70. This strategy is available to married couples and to eligible divorced spouses who were married at least 10 years, divorced and are currently single.
One reader posted in the online comments sections that he was "confused and bothered" by my article.
"I'm turning 66 in 2019 and plan to claim spousal benefits when my spouse turns 66 in 2020," the reader wrote. "I was born before the cutoff and she was born after the cutoff," he explained. "Can anyone clarify?"
I apologize for the confusion. I did not mean to suggest that 2019 is the last year that this strategy will be available. People who were born on or before Jan. 1, 1954, can exercise this valuable claiming strategy any time between the ages of 66 and 70, which means the spousal benefit strategy will be available to some people through 2023, depending on their personal situation.
This reader's situation is an excellent example of someone who is eligible to file a restricted claim for spousal benefits because he was born before the cutoff date. But he can't claim spousal benefits on his wife's earnings record until she files for her Social Security. And she apparently doesn't want to file for her Social Security benefits until she reaches her full retirement age next year.
So, yes, this reader can file a restricted claim for spousal benefits in 2020 when he is 67 years old and receive those benefits for three years, up to age 70. In the meantime, his own retirement benefits will continue to accrue delayed retirement benefits worth 8% per year between 66 and 70. At 70, he should file for his own maximum retirement benefits.
Millions of other people are also still eligible to use this claiming strategy.
Of the nearly 4 million people born in the United States in 1953, the final birth year for people eligible to use the spousal claiming strategy, about 80% are still alive, according to data from the Census Bureau and the Bureau of Economic Analysis compiled by 24/7 Wall St., a financial news site.
There are currently about 50 million Americans age 65 and older, according to the "2017 Profile of Older Americans" published by the U.S. Administration on Aging. As of 2017, about 70% of older men and 46% of older women were married. Widows account for about 33% of older women — about three times the rate of widowed men. Divorced and separated spouses represented about 15% of the older population — a threefold increase since 1980.
People who were born after the Jan. 1, 1954, cutoff date will never have the option of claiming spousal benefits only while their own retirement benefits continue to grow. Whenever they claim Social Security benefits, they will be paid the highest benefit to which they are entitled at that age, whether on their own record or as a spouse. They don't get to choose.
That's unfortunate for readers, like Ellen, who were born after the cutoff date. She is 63, divorced and was hoping to claim benefits on her ex's earnings record.
She could claim Social Security now — three years before her full retirement age — but the Social Security Administration must pay Ellen based on her own earnings record first, reduced for early claiming, and layer any excess spousal benefits on top of her own retirement benefits only if they are larger than her own — also reduced for early claiming. She can't claim only spousal benefits and defer claiming her own until they are worth more because she was born too late.
However, if her ex dies first, she is entitled to survivor benefits worth 100% of what her ex-husband was collecting or entitled to collect at the time of his death — even if he had remarried.
Other readers were confused by how much they would receive if they file a restricted claim for spousal benefits.
One adviser wrote to me about his clients and asked why the wife is receiving less half of her husband's benefit amount. The husband began collecting his maximum Social Security benefit of $3,733 per month at age 70. His wife applied for her spousal benefits at her full retirement age 66 last year and is receiving $1,414 per month.
I explained that the maximum spousal benefit is worth 50% of the worker's full retirement age amount, not half of his age 70 amount. However, if the husband dies first, the wife's survivor benefit would be worth 100% of what he was collecting at time of death, including any delayed retirement credits. At that point, her smaller benefit would disappear. One of the main reasons to delay claiming Social Security until 70 is to create the largest possible survivor benefit for a remaining spouse.