The other strategy addressed1 by the budget is known as the Restricted Application and has commonly worked this way:
Wife is currently receiving Social Security benefits based on her earnings history. Husband chooses to let his benefits continue to grow until his age 70. At husband’s Full Retirement Age, he decides to file for benefits but to restrict his application to spousal benefits only, meaning his unclaimed benefits would continue to grow at 8% per year, but in the meantime, he would receive benefits equal to one half of his wife’s benefits. And this would not impact her benefits in any manner. If husband hadn’t claimed these spousal benefits, they would simply never be received and gone forever. The new rule now states that anyone filing for benefits is deemed to also have filed for his own.
In this example, the husband at Full Retirement Age would automatically receive the higher of his own benefit or the spousal benefit, so he couldn’t allow his benefit to increase 8% per year until age 70 because his filing would cause him to start receiving his benefit at Full Retirement Age.
Those affected by this new rule are those who will reach age 62 after 2015. There likely are individuals today not taking advantage of this opportunity who should consider doing so.
If you have questions about Social Security claiming strategies, feel free to contact one of our Wealth Planners. It’s possible that a smart claiming decision could be really beneficial for you.
Published: November 5, 2015
Authored by: Joshua R. Wichman, CFP®, MBA
Direct Phone: 812-602-6319
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