While collecting Social Security payments may seem simple enough, there are several benefit collection strategies – particularly for married couples – that might boost your retirement income. (Here at David Ortiz Advisors, we believe that by maximizing your social security you can expand your budget in ways you didn’t know where possible. Granted it may not pay for as much as it did when your parents were collecting their checks from Uncle Sam, but it is without doubt the most powerful and underrated tool for creating a dependable retirement income.)
There are three basic options to select from when determining the timing of your Social Security benefit distributions:
- Begin receiving benefits between age 62 and your full retirement age
- Wait until full retirement age
- Delay benefits – taking them anytime until you reach age 70
The longer you postpone the payments, the higher your benefit will eventually be. If you’re married, you also have the option of collecting spousal benefits rather than relying on your own employment record. If your spouse’s earnings were much higher than your own, this is likely to produce a higher Social Security income.
Combining these four options can open the door to even more choices. Here are three of the most popular strategies for maximizing Social Security benefits:
Restricted Application. Until just recently, it was still possible for a working spouse who has reached full retirement age to file for benefits and then immediately suspend them. This permitted his non-working spouse to start drawing spousal retirement benefits while he continued to work. Unfortunately, the Bipartisan Budget Act of 2015 eliminated this strategy. Now, if workers suspend their benefits at full retirement age in order to earn higher benefits in the future, other related benefits (such as spousal benefits) will also be suspended.
The good news is, a related strategy known as “Restricted Application” is still a possibility for some filers. Here’s how it works: Your full-retirement-age spouse applies for Social Security benefits and begins to collect. You “restrict” your application by only applying for the spousal benefit determined by your spouse’s work record, even though you could receive a higher amount based on your own earnings. This way, you can collect the spousal benefit as you build up delayed retirement credits, giving you a higher Social Security payout once you apply for your own benefit. You must be full retirement age or older to use the restricted application strategy.
Some Now, More Later. With this strategy, the lower-earning spouse claims early retirement benefits at age 62, while the spouse with higher earnings waits. The higher-earning spouse claims a spousal benefit upon reaching full retirement age. Then, at age 70, the higher-earning spouse claims the maximum retirement benefit – ceasing to receive the spousal benefit.
The Do-Over. If you claim early retirement benefits starting at age 62, you can stop those benefits within the first 12 months – repay them – and still qualify for the higher benefit amount at full retirement age. This amounts to an interest-free loan of up to one year. If you claim benefits early but fail to stop them within 12 months of starting, you may still suspend them in order to earn higher benefits later on. For instance, if you started collecting Social Security at age 62 but no longer need the income, you can suspend the benefits until you’re 70. Between your full retirement age and 70 you’ll earn delayed retirement credits, increasing your ultimate benefit amount when you begin collecting again at age 70.
(The saying, patience is a virtue, holds up when it comes to retirement planning, Social Security in particular. However, patience alone a retirement does not make. At David Ortiz Advisors, we use every tool available to us to build you a retirement income you can depend on. Call us now so we can get started planning a retirement, specifically for you. Remember, Plan Smarter, Live Better.)