A Strategy to Maximize Social
Security Benefits
A look at how some couples can still use the ‘file and suspend’ strategy
and other issues
PHOTO: ISTOCKPHOTO/GETTY IMAGES
By
GLENN RUFFENACH
Jan. 31, 2016 10:01 p.m. ET
4 COMMENTS
Planning for retirement can be a daunting process that raises a host of questions. So we
introduce Ask Encore as a regular feature in the Wealth Management and the Investing in Funds
& ETFs reports. Written by Glenn Ruffenach, a former reporter and editor for The Wall Street
Journal, and co-author of “The Wall Street Journal Complete Retirement Guidebook,” the
column will examine financial issues for those thinking about, planning and living their
retirement. We welcome your questions and comments at [email protected].
I will be 66 in April, and my wife will be turning 65 in July. Given the new Social Security
rules, what would be the most effective strategy to optimize our benefits? My wife devoted
herself to a career as a full-time mother, which unfortunately means that, in the eyes of the
Social Security Administration, she doesn’t qualify for retirement benefits.
Given your ages, you can still take advantage of a claiming strategy that has largely been
curtailed. But you would need to act quickly. First, some background.
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The Bipartisan Budget Act of 2015, enacted in November, puts an end, in most instances, to two
Social Security filing strategies: “file and suspend” and a “restricted application” for spousal
benefits. (You can find a summary of the changes at MarketWatch.com. Search for: “new Social
Security rules change claiming strategies.”)
In the months since, we have heard from numerous readers who have asked, in effect, the same
question: What do I do now?
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Broadly speaking, there are still steps that would-be beneficiaries can take to “optimize,” or
maximize, their benefits in retirement. (Example: Each year you delay collecting Social Security
between ages 62 and 70, your payout increases about 7%.) The best way to do the math is to take
advantage of the growing number of tools and online advisory services that help identify an
individual’s (or couple’s) optimal claiming strategy.
At this point, most services have updated their computer coding to account for the new rules.
Among them: SSAnalyze!;
and MaximizeMySocialSecurity.com,SocialSecurityChoices.com and SocialSecuritySolutions.co
m. The latter three all charge a fee.
As for this specific question, the Budget Act has several grandfather clauses, one of which
allows a person who has reached full retirement age to file and suspend—as long as the request
to do so is received before April 30.
If you turn 66 before that date, you could file and suspend, which would allow your wife to begin
collecting a spousal benefit. (If you plan to do this, I would book an appointment immediately
with your local Social Security office, or apply online. You can do so four months before turning
66.) Meanwhile, your benefit, when you eventually claim it, will have grown in size, thanks to
“delayed retirement credits.”
But again—and without knowing the specifics of your financial situation—I would urge you to
run the numbers through an advisory service. Social Security remains far too complicated to try
this on your own.
My husband and I have two daughters in college. How can we help them begin to build a
good credit score?
Start by sitting your daughters down and explaining the possible consequences of having a bad
credit score, says Beverly Harzog, a consumer-credit expert and author of “Confessions of a
Credit Junkie.” As your children enter the workforce and start their own households, their bills—
for an auto loan, a mortgage, health and life insurance—will likely be higher if they fail to build
a strong credit history.
If you haven’t already, arrange for your daughters to be an “authorized user” on your credit-card
account—and set up alerts (say, for a purchase exceeding $50) to monitor their spending. (Avoid
co-signing for a credit card in a student’s own name. You will be legally responsible for making
payments if your child comes up short.)
Double check that your credit-card issuer does report authorized-user information to credit
bureaus, Ms. Harzog notes. Many issuers do—but not all.
PREVIOUSLY IN ASK ENCORE
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New Social Security Strategies for Couples (December 2015)
Ease Tax Bills on Initial IRA Distributions (October 2015)
When You Forget a Required IRA Withdrawal (June 2015)
From a Standard 401(k) to a Roth(March 2015)
The Math on Delayed Social Security Benefits (January 2015)
At some point, look for a second form of credit: say, a gas or department-store credit card, or
installment debt, such as a personal or auto loan. For students living off campus, monthly rent
and utilities payments won’t do much to help credit scores. But missing such payments
(including cellphone bills!) could end up being reported to credit bureaus.
Which leads, of course, to the single-most important (credit) lesson you can share with your
daughters: Pay all your bills on time—every time.
If that message sticks, says Ms. Harzog, “you really empower your kids.”
In an earlier column and question about Social Security, you mentioned a “restricted
application.” My wife and I are both 63 years old. She is planning to retire at 66, her full
retirement age, and I plan to continue to work for an indeterminate amount of time,
possibly until I turn 70. Is a restricted application still available in our situation?
Yes, you can still take advantage of this strategy—but only because you have already passed
your 62nd birthday.
Under the changes in Social Security claiming strategies, workers who reached age 62 before the
end of 2015 are still able to file a restricted application when they reach full retirement age. This
means a person could file for just a spousal benefit, instead of his or her own benefit.
Let’s say your wife claims a benefit of $2,000 a month at her full retirement age. When you
reach your full retirement age, you could claim a spousal benefit of $1,000 (half of your wife’s
benefit) and defer claiming your own benefit to, say, age 70.