The Restricted Application
A Strategy for Married Couples and Divorced Individuals
The restricted application strategy enables a client to apply for Social Security benefits but restrict the claim so that he or she is receiving only the spousal benefit. The Social Security Administration will be phasing out the restricted application at a future, yet-to-be-announced date. However, clients employing this strategy are grandfathered in and may continue to use it.
Eligibility Requirements
When it’s time to apply for Social Security benefits, many married and divorced individuals may not realize they have a choice. If …
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They’ve reached full retirement age (FRA),
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They are eligible for both a retirement and spousal (dependent) benefit, and
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They were 62 or older prior to January 2, 2016.
They may claim either:
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The retirement benefit, or
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The spousal benefit, with the ability to switch to the retirement benefit at a later date. This is known as the restricted application for spousal benefits.
For a person to be eligible for a spousal benefit based on his or her current marriage, that person’s spouse must have already filed his or her retirement benefit based on his/her earnings. The eligibility requirements for divorced individuals are explained below.
Why Consider the Restricted Application Strategy?
Social Security Rewards Those Who Wait
For each year beyond FRA that a client defers taking his or her retirement benefit, that benefit receives a credit of 8% per year up to age 70.
Deferring May Increase Spousal Benefit
While the retirement benefit is deferred, taking the spousal benefit enables the married couple to still have income. Specifically, taking a spousal benefit after FRA results in income equal to half of the spouse’s (or former spouse’s) full retirement benefit. (Spousal benefits will be reduced if the client has not attained FRA.)
If clients are married, this also may result in extra income for the surviving spouse when the other spouse dies. This is because Social Security pays surviving spouses the larger of:
- His or her own retirement benefit.
- The survivor benefit, which equals 100% of the deceased spouse’s retirement benefit at FRA.
So, for example, a husband who earned more than his wife and defers his retirement benefit beyond FRA, may increase both:
- His own retirement benefit.
- His wife’s survivor benefit.
While electing the restricted application can be a smart move for some, it’s not for everyone. Your client’s current need for income, family situation, and health should all be considered before employing this strategy.
How the Strategy Works
For Married Couples
Example: A wife, age 62, and her husband, age 66, want to retire at the same time. Each is eligible for a $2,000 per month retirement benefit at his/her FRA of 66. However, because the wife has not reached her FRA, her monthly benefit will be reduced if she retires now and begins receiving benefits.
How might they retire together and maximize their Social Security income?
For Divorced Individuals
Example: A formerly married woman wants to retire at age 66. She and her ex-husband are eligible for a $2,000 per month retirement benefit at FRA. She can choose to defer her retirement benefit and, instead, claim a spousal benefit based on her ex-husband's Social Security benefits as long as all the following are true:
- She has reached her FRA.
- The marriage lasted at least 10 years.
- She is not remarried.
- Her ex-husband has filed for benefits, or if not, they have been divorced for at least two years.
- Her ex-husband is also currently eligible for Social Security benefits (he is at least age 62).
If this is the case, she can claim a spousal benefit equal to 50% of her ex-husband’s full retirement benefit.
