Mary Beth Franklin discusses two of the most-common misconceptions held by financial advisers when it comes to Social Security claiming for married couples looking to maximize their retirement income.
I think the biggest misconception among financial advisers is to how implement the claiming strategies for married couples to maximize their social security benefits over their lifetime. The 2 main strategies are to file and suspend and to restrict a claim to spousal benefits only. The first one, file and suspend, means if you wait until you’re full retirement age of 66, you can state to the social security administration, I want to file and suspend for the purpose of triggering spousal benefits for my wife, for my husband. And I want to suspend my own so they keep growing by 8% year up until age 70 then you switch to your own enhanced benefit. Now, in a different situation where one spouse is already collecting, you might wanna say, at 66, I want to restrict my claim to spousal benefits only. That means give me half of what my spouse is getting, but don’t give me my own. Let that keep growing by 8% a year up until age 70. So, the most common question I get from financial advisers is, can a married couple where they’re both 66, can they both file and suspend or can they both file a restricted claim for spousal benefits only? The short answer is no and let me explain why. It’s a bit like watching a couple walk down the New Jersey boardwalk with I’m with stupid t-shirts on putting to each other. They just cancel each other out. See, if you file and suspend, you’re saying, I’m filing to trigger my spouse’s benefits. So, if both of you did that, which social security wouldn’t let you, it basically means you’d both say, I’m going to file, but neither of us want benefits. Now, that’s not smart. Separately, if you said, I want to restrict my claim to spousal benefits only, if you both did that, nobody’s claimed a benefit, so there’s no benefit to restrict to. It just doesn’t work. But there is a combo strategy for couples where they each have an earnings history where they can work. What would happen with a combo strategy, if both spouses are at least 66 years old, is one would file and suspend to trigger benefit for the spouse. That first spouse will get nothing for 4 years. The second spouse would say, I want to restrict my claim to spousal benefits only. That second spouse will get half of the first spouse’s benefits. And then when they each turn 70, they return on their own benefits, which would each now be worth 132% of what it would have been at 66. That’s real money.