There must be something in the air. I have received a slew of questions from financial advisers lately asking if a client who files for Social Security benefits before full retirement age can collect only spousal benefits while allowing their own benefit to grow to the maximum amount up to 70.
The short answer is no.
If you prefer the official answer from the Social Security Handbook, here it is: “If you are eligible for both reduced retirement insurance benefits and reduced spouse's insurance benefits beginning with the same month, you cannot restrict an application to just one of these types of benefits. By filing for either benefit, you are deemed by law to have filed for both types of benefits.”
That's why the strategy of filing a restricted claim for spousal benefits is so powerful. If you wait until your full retirement age to claim benefits, you can request that you receive spousal benefits only while your own retirement benefits continue to earn delayed retirement benefits worth 8% per year for every year you postpone collecting up until age 70. The result is your retirement benefit would be worth 132% of your full retirement age benefit at 70.
But you can only restrict your claim to spousal benefits if you wait until your full retirement age to file for benefits.
Here's an example of what happens to someone who is entitled to both retirement and spousal benefits who files before her full retirement age.
Let's say the husband's full retirement age benefit, also known as his primary insurance amount, or PIA, is $2,400 per month. The maximum spousal benefit his wife can collect is $1,200 per month — 50% of the husband's PIA — if his wife claims benefits at her full retirement age. But if she claims benefits as the earliest age of 62, her spousal benefit would be worth just 35% of her husband's PIA — $840 per month.
Let's also assume the wife's own retirement benefit at her full retirement age of 66 is $1,000 per month. The difference between the maximum spousal benefit of $1,200 per month and her retirement benefit of $1,000 is $200 per month. That's the spousal differential.
If she claims benefits at 62, her own benefit will be reduced by 25% to $750 per month. That’s smaller than her spousal benefit of $840. So she will receive the higher amount of $840 per month but it will actually be comprised of $750 of her own benefit and topped off by $90 of her spousal benefit.
Now let’s add a twist. Let’s assume the wife collects her own reduced retirement benefit of $750 per month at 62 but her husband has not yet filed for Social Security, so there is no spousal benefit to claim. And let’s also assume that when he does claim benefits, she is at least 66 years old. At that point, she will step up to a larger benefit, but it will be worth less than 50% of his PIA because she claimed her own benefits early.
The math works like this: At 66, her new benefit will be worth $950 per month comprised of her $750 per month retirement benefits, topped off by the $200 spousal differential.
Now let's imagine how she might maximize her Social Security benefits.
If she waits until her full retirement age of 66 to claim benefits, she could file a restricted claim for spousal benefits, and collect $1,200 per month while her own benefits continue to grow. At 70, she could switch to her own retirement benefit, which would then be worth $1,320 per month. The amount would actually be higher as cost-of-living adjustments during the intervening four years would also be applied.
So the bottom line is, if you claim benefits before your full retirement age, you must collect the highest benefit to which you are entitled, reduced for early claiming. You can't choose which benefit to claim. But for some married couples, that may be a sound strategy, boosting overall household income by allowing one spouse to collect a reduced benefit early and the other spouse to hold out for a bigger benefit later.
The added bonus for married couples is the survivor benefit. When one spouse dies, the largest Social Security benefits continue and the smaller one disappears. Therefore, the main goal of most married couples should be to maximize the survivor benefit by having the higher-earning spouse delay collecting Social Security benefits as long as possible.
(Questions about Social Security? Find the answers in my e-book.)
