A few million people still are eligible to use a Social Security benefits strategy that’s so valuable Congress banned it. But time is running out for them.
The strategy is known as filing a restricted claim for benefits. It is available to married couples and some divorced people.
Normally, when you file to claim Social Security retirement benefits, you automatically receive the higher of your earned benefits and 50% of the benefits your spouse is entitled to at full retirement age, also known as the spousal benefit.
Under the restricted claim strategy, however, you don’t file to claim your own Social Security benefits. Instead, you claim only the spousal benefit. The restricted claim allows you to receive a check from Social Security while your earned benefits continue to increase thanks to the delayed credits earned for postponing your benefits. Your earned benefits increase 8% each year you delay, even when you’re receiving spousal benefits.
The strategy was so attractive that Congress eliminated it in a 2015 law. But a grandfather clause keeps the strategy available to anyone who was born on or before January 1, 1954. That means 2019 is the year when the last group of people eligible for the restricted claim strategy are reaching full retirement age. If you’re in that age group and married or divorced, consider the restricted claim strategy. There are a couple of details to the strategy.
The first detail is that you must be at least full retirement age to file a restricted claim for spousal benefits. The last of the grandfathered group are reaching their full retirement age by turning 66 in 2019.
The second detail is that to claim spousal benefits, your spouse must already have filed to receive his or her own retirement benefits.
Let’s look at a couple of examples.
Suppose you’re turning 66 in 2019 but your spouse won’t turn 66 and reach full retirement age until 2020. You fall under the grandfather clause and are eligible to file a restricted claim for spousal benefits. Your spouse missed the grandfather cut off by one year.
You can’t file that restricted claim until your spouse claims his or her own benefits. Fortunately, you don’t have to file the restricted claim right at age 66. You can file the claim any time between ages 66 and 70 and receive the spousal benefits until claiming your own benefits, presumably at age 70.
If your spouse chooses to maximize benefits by waiting until age 70, then you won’t be able to file a restricted claim. If your spouse chooses to begin benefits at his or her full retirement age, you’ll be able to file a claim for restricted benefits next year.
Here’s another example.
Suppose you’re turning 66 in 2019, are divorced, were married for at least 10 years and still are single. You are eligible to delay your own retirement benefits and file a restricted claim of 50% of your ex-spouse’s benefits.
Unlike a married spouse, an ex-spouse can claim spousal benefits without regard to whether the other ex-spouse has filed to claim benefits if you’ve been divorced at least two years. Your own benefits continue to earn delayed retirement claims until you decide to terminate spousal benefits and claim your earned retirement benefit.
This is another example of why it’s important to plan Social Security jointly with your spouse. You’re likely to maximize lifetime income by coordinating benefits instead of having each spouse claim benefits independently.