More Baby Boomers are hearing and reading about the SS claiming strategies of File-and-Suspend and Claim-Now-Claim-More-Later. By using some of these strategies, individuals have been able to increase their lifetime SS retirement benefits by as much as $200,000.
However mistakes are being made! Make sure you understand the nuances prior to going to your Social Security office to file. The first strategy of File and Suspend occurs when the higher earning spouse files for SS when he reaches full retirement age. This allows the spouse to collect her spousal benefit. The filing spouse then suspends his benefit until age 70 to allow his retirement benefits to continue to accrue.
The second strategy is called Claim-Now-Claim-More-Later. This strategy has the higher earnings spouse claim his spousal benefit off the lower earning spouse’s record from age 66 until age 70 allowing his benefit to build up delayed earnings credits in the interim.
Common Misunderstandings
A spousal benefit cannot be claimed until your spouse has filed for his or her benefit. Any strategy involving a spousal benefit requires that the spouse upon whose record the spousal benefit is based apply for his own benefit first. Example — If Tom is only age 63 when Susan wants to file for her spousal benefits, and Tom wants to delay filing for his benefits to be able to maximize his delayed benefits, Susan has no choice but to wait until Tom files for his benefits to collect her spousal benefits.
A spouse must be over Full Retirement Age to File and Suspend benefits. Anyone can file for SS benefits at age 62. However to file and suspend to allow your benefit to earn delay credits, you must be at SS’s Full Retirement Age which is somewhere between 66 and 67 depending on the year you were born. You cannot file and suspend prior to your Full Retirement Age.
You must be over full retirement age in order to receive a spousal benefit if your own benefit is higher. Many people think they can claim-now-claim-more-later as soon as they turn 62. If you apply for SS prior to full retirement age, you are deemed to be filing for both your earned benefit and your spousal benefit. You are not given a choice which one you can take. You must take the higher of the two benefits. However at full retirement age, you are allowed to make that choice. To receive a spousal benefit when your own benefit is higher, you must restrict the scope of your application to your spousal benefit. To correctly claim this strategy, you will need to tell the Social Security office staff, “I would like to restrict the scope of my application to my spousal benefit”
Both spouses cannot claim spousal benefit off the other’s records at the same time. A spouse cannot claim a spousal benefit unless the other spouse has filed for their own full benefit.
You should consult a professional advisor to review your eligible benefits in any scenario to determine which if any spousal benefit would generate the largest lifetime stream of income.
Maximizing spousal benefits through innovative claiming strategies can help Baby Boomers gain an edge in retirement planning. Just make sure you understand the rules!
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. The preceding are hypothetical examples and not representative of any specific scenarios. Your results may vary
Vincent J. Catania, CFP®, MBA is a Registered Representative with, and securites offered through, LPL Financial, Member FINRA/SIPC.
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