Q: My husband will be 65 on May 2. I turn 65 in August. Would we be eligible to apply for the restricted application based on the new rules? We would like to start Social Security at full retirement age (66) in 2017, but I would also like to take advantage of the restricted application option and delay my benefit until age 70. Some articles refer to being eligible if born before 1954, but others refer to a need to already be collecting Social Security before you can apply, and all apps need to be filed prior to May 1, 2016. Can you clarify? — Alice Matthews, Los Angeles
A: For what it’s worth, you’re not alone. Many are confused about changes to Social Security laws regarding claiming retirement and spousal benefits, says Ted Sarenski, CEO of Blue Ocean Strategic Capital in Syracuse, N.Y., and author of The CPA’s Guide to Social Security Planning.
The Bipartisan Budget Act of 2015 made several changes to the Social Security Act, in effect closing two complex loopholes used primarily by married couples: 1) the timing of multiple benefits (also called “deemed filing”) and 2) voluntary suspension of benefits (also called “file and suspend”). Read What do the Recent Social Security Claiming Changes Mean for Me? and What You Need to Know About the New Laws for Claiming Retirement Benefits.
File and suspend deadline is April 29
The file-and-suspend application allowed someone at full retirement age (currently 66) to apply for benefits and then suspend receiving them to a later date in order to give them time to grow. When you finally do start collecting, the amount could be up to 32% higher. In the meantime, the person's spouse or qualifying child could start collecting a benefit right away based on the filer's record, Sarenski says.
But that loophole closes on April 29, 2016. That’s the last day someone 66 or older by that date can file and suspend with the spousal benefits strategy in mind, says Sarenski.
Under the new law, if you submit a request to suspend your benefits to earn delayed retirement credits on or after April 30, 2016, no one else will be able to get auxiliary benefits based on your own Social Security record, according to the Social Security Administration (SSA).
So, technically, people can still file and suspend after April 30, but their spouses and qualifying children can't file for benefits unless the worker whose record they are collecting on is also collecting his or her own benefit, says Sarenski.
A restricted application strategy lets a lower-earning spouse collect a spousal benefit while allowing their own benefit to grow through delayed retirement credits until age 70.
Here the date you need to know is Jan. 1, 1954. If you were born on that day or before, then you can still use this strategy once you reach FRA. If your birthdate is Jan. 2, 1954, or later, you're out of luck.
In your case, you and your husband were each at least 62 by the end of 2015. And that means you are both eligible to file for "spousal benefits only" at your FRA, says Sarenski.
Note, however, that only one person of a couple can apply for spousal benefits, says Sarenski. The other person needs to apply for their own benefit and be collecting that benefit in order for it to work, he says.
So, here’s Sarenski’s advice: Your husband will turn 66 in May of 2017 and will begin collecting his benefit. In August of 2017 you will apply for spousal benefits only on your husband’s record and begin collecting one-half of his benefit.
When you turn 70, you will switch to your own benefit, which will be 32% higher than what you would have received on your own work record at age 66. Whoever lives longer, you or your husband, will keep your higher benefit for the rest of their life.
Another option to consider, assuming that your husband had the higher earnings, would be for you to file for your earned benefits in August of this year and then have your husband file for spousal benefits, but he does this as a restricted application to exclude his earned benefits. At age 70, your husband could then file for his earned benefits. According to Financial Engines, this strategy could increase your household’s lifetime benefits by 12%.
Robert Powell is editor of Retirement Weekly, contributes regularly to USA TODAY, The Wall Street Journal and MarketWatch. Got questions about money? Email email@example.com.