Social Security: It Pays to Know the Rules


For most retirees, Social Security will play a significant role in their overall retirement income picture. And when it comes to the rules for how Social Security works, most people are at least somewhat familiar with the basics, such as the fact that they can take their regular benefit at “normal retirement age” (around age 66 for most people), or elect to take a reduced benefit at age 62, or postpone and qualify for a higher benefit until age 70.

However, there are a host of other little-known strategies available that most people are unaware even exist. One of them is sometimes referred to as the “restricted application” strategy, and under the right circumstances it can be extremely valuable. Here’s how it works:
Let’s say that you have a spouse who is already drawing Social Security benefits, and now you’ve also reached normal retirement age of 66. You could really use some extra income right now, but you also know that if you can delay a few years, your benefit will be higher. Most people in this situation would assume that they have to choose between one of these two alternatives: either take their regular benefit now, or wait and take a higher benefit later.

However, that’s not the case; there is actually a third option. In this situation, you could apply for Social Security but “restrict your application” to a spousal benefit only. If you do this, you would be entitled to begin collecting 50% of your spouse’s regular benefit right away. In the meantime, your own benefit would continue to increase until age 70, and at any time you could elect to switch to this higher benefit.

Many people in this situation, unaware of this strategy, choose to wait a few extra years to take their own higher benefit and wind up totally missing out on the spousal benefit they could have been taking in the meantime. The key to this strategy is that they must have reached their normal retirement age before applying; that’s when they become entitled to choose which benefit to take first, the spousal or their own, and to switch from one to the other whenever they wish.

This strategy is so little-known that there have even been reports of cases where Social Security personnel were unaware of it and initially denied the applications until they were shown the relevant statutes. And this isn’t the only little-known strategy available; there are a host of others buried in the Social Security rules. This just goes to show that it pays to do your homework before making important decisions regarding Social Security. Good luck and happy planning.


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