Courtesy of Bob Williams:

As discussed in preceding articles, there are many factors to consider in deciding when to begin taking social security.  For couples, there are additional considerations which make the decision a little more complicated but may help maximize benefits.

File and Suspend

Assume that John has reached his full retirement age (FRA) of 66.  He plans on working until he’s 70 to get the maximum Social Security benefit he can receive.  John’s wife, Marsha, decided to take early retirement and has just retired at the age of 62.  Her employment history has gaps because she left the work force to stay home and raise the kids.  In doing the math they discover that Marsha’s Social Security check, based on her own work history, will be less than if she takes a spouse’s benefit, which is 50% of John’s Social Security benefit based on his work experience.

Although John will continue to work, he files for Social Security but requests an immediate suspension of benefits.  This allows Marsha to apply for the spousal benefit at Michael’s FRA benefit level.  Since John has suspended his application he receives no benefits for now but his Social Security benefit continues to grow by 8% each year (delayed retirement credits).  He reapplies for Social Security benefits at age 70, receiving a larger monthly check than if he had not used the “file and suspend” strategy.  Key point—the “suspending” spouse must have reached FRA before file-and-suspend is available.

Restricted Application

But what if Marsha’s Social Security benefit, based on her own work history, was higher than John’s?  Marsha most likely would not want to draw on John’s employment history.  Instead, she could draw on her own record, which would be a benefit to John.

John can do what is called “restricting an application.”  John would file as a spouse on Susan’s work history.  As mentioned above, John is at FRA so he would receive the full spouse benefit, which equals 50% of Marsha’s benefit.  At the same time, John would continue to earn delayed retirement credits (DRC) on his own record.  Then, at age 70, John can file for Social Security benefits based on his own work history, receiving a larger check than if he had started to receive his own benefits at FRA.

What If You Change Your Mind

What if you begin to receive Social Security benefits and then have a change of heart?  Maybe you decide that it was a mistake retiring early and taking a reduced benefit.  Well, your decision isn’t written in stone and can be reversed.  The process is known as a “Request for Withdrawal of Application.”  You can suspend benefits and restart at a later date at a higher amount.  As of December 2010 you are entitled to one withdrawal per lifetime.  You must apply for such a withdrawal within 12 months of the first month that you are entitled to receive benefits and you have to pay back all the benefits you’ve received up to the point of your request to withdraw.  Once your benefits are suspended your Social Security account will receive delayed retirement credits (DRC) from the point of your original application date until you refile or until you reach 70 years of age, whichever is shorter.

If you’ve passed 12 months you can still voluntarily suspend your benefits. In this example, you will receive delayed retirement credits (DRC) from the point of suspension until you refile or until you reach 70 years of age.

Collecting Social Security Benefits on a Former Spouse

And what about the schmuck you used to be married to (husband or wife)?  Can you collect Social Security benefits on the work history of a former spouse?  Yes you can, if you meet certain criteria:

  • You must have been married to your former spouse for 10 years or longer.
  • You must be divorced from your former spouse for at least two years.
  • You cannot have remarried

The good part is that exes don’t have to coordinate their filing strategies.  You don’t even have to talk to your ex!!!  If you meet the criteria you can collect benefits independently as long as your ex-spouse is eligible for Social Security benefits, even if he or she hasn’t yet filed for benefits.

But divorced people who wait until 66 can restrict their claims to spousal benefits.  That means they can collect half the full benefit to which the ex is entitled at the normal retirement age (not including delayed retirement credits) and delay collecting their own benefits until 70, when they will be worth the maximum amount.

One other hook to collecting on an ex-spouse’s work history, if you are collecting a spousal benefit on your ex and your ex-spouse dies and is at least full retirement age, then you would receive a survivor benefit worth 100% of the Social Security benefit that your ex was receiving, including delayed benefit credits, replacing the 50% spousal benefit you had been receiving.  You can receive the 100% benefit even if your ex has remarried.

It gets a little complicated figuring out when to begin taking Social Security.  There’s more to it than just drawing at 62 because you’ve paid into the system and you’re “gonna get what’s yours.”  These strategies will help you avoid leaving money on the table during your lifetime and in many cases that can amount to hundreds of thousands of dollars.

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