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Ask Rusty - File & suspend? Restricted application? Or just wait?

January 6, 2019

Dear Rusty: My wife and I were both born in 1953. My wife will reach her full retirement age in March 2019 and I will reach mine in June of 2019. My wife’s benefit will be roughly $2,200 per month and mine will be about $2,700 per month if we were to file for payments. An option I have considered is spousal benefits only.

In June of 2019, can my wife or I file and suspend our benefits and the other file for spousal benefits and receive half of the others benefits while both our benefits continue to earn credit (8 percent per year) until we both hit 70? Signed: Looking to Maximize

Dear Looking: Well, you can’t do things quite the way you suggest, but you do have a different option known as the “restricted application for spousal benefits only” which either of you can exercise because you were both born before the cutoff date in the 2015 law which changed the File and Suspend option.

You can’t both “file and suspend” benefits as you asked but using the Restricted Application allows one of you to file for benefits and the other to file the RA to collect half of the other spouse’s benefit while allowing their own benefit to grow.

To use the restricted application, I usually suggest that the lower-earning spouse apply for their retirement benefits first, allowing the higher-earning spouse to file the RA and collect ½ of the lower-earning spouse’s benefit while their own retirement benefit grows at a rate of 8 percent per year of delay (actually 2/3rds of 1 percent per month of delay). You can delay up until age 70 when you’ll get 32 percent more than you will get at age 66.

So if your wife applies in March 2019 and collects her full benefit, you could file the RA when you reach age 66 in June 2019 and get half of your wife’s benefit (about $1,100/month) for four years until you reach 70, at which point you can switch to your own retirement benefit which would be about $3,564 per month (using the numbers you provided).

Since your wife’s retirement benefit would always be more than her spousal benefit (half of your FRA benefit), she would continue receiving her own full retirement benefit, unless you should predecease her, in which case she would get 100 percent of the increased benefit you are receiving instead of her normal retirement benefit.

But there is another alternative: You could both simply wait until you are 70 to apply and both get the 32 percent benefit increase, which for your wife would mean about $700 more per month.

Which is the better alternative? Only you can decide, while comparing expected longevity against your wife collecting an additional $700 per month starting at age 70. In a little over six years, your wife’s additional monthly benefit would offset what you would have received in spousal benefits from the Restricted Application, and she’d get the higher benefit for the rest of her life. In the end, it always comes down to how badly you need the money now, your health and your expected longevity.

Russell Gloor is an Association of Mature American Citizens-certified Social Security advisor.

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