As we approach the end of the year and focus ahead on 2019 financial planning needs, we wanted to remind you of an important planning tool which will soon be phased out.

The underused and not well-known social security planning technique has to do with filing a restricted application to receive spousal benefits while allowing your benefit to grow until age 70. This was eliminated along with the “file and suspend” strategy for most individuals when social security was revised under the Bipartisan Budget Act of 2015. However, for individuals that turned 62 before the end of 2015, the restricted application is still available to use as a planning strategy. Under this strategy, the spousal beneficiary (usually a lower wage earner for maximum value) can file a restricted application on their own benefit and receive a spousal benefit instead while allowing their own benefit to grow at 8% per year up to the maximum amount at age 70, afterwards then switching to their own full benefit. Having the lower earner file early could make sense for couples that would like to bring in some additional income while allowing the higher earner to delay their benefit. As stated, the stipulation is that they must have turned 62 before the end of 2015 and has to have reached full retirement age (FRA) by the time he/she files. Also, it’s worth noting that the other spouse has to have applied for and be receiving their benefits for this to work. For individuals that turned 62 after 12/31/15, this technique is no longer available.

As many people may know, social security benefits grow on a monthly basis every month after FRA in which a person delays receiving their benefits until age 70 when they receive the maximum amount possible. Full retirement age is based on your date of birth. For most people, it is age 66, but has been increasing gradually over the years and for those born in 1960 or later, FRA is 67. Below is a link to the full retirement age chart from the Social Security Administration’s website.

https://www.ssa.gov/planners/retire/agereduction.html

Keep in mind that spousal benefits are up to half the amount the primary earner receives (if he/she waits until their FRA). If one spouse has no earnings history and is not eligible to receive benefits on their own record, they would be better off just filing for spousal benefits rather than a restricted application. Trying to determine a strategy that will work best, and which spouse should file first is really dependent on the facts and circumstances and one should consult with their financial planner or a qualified retirement planning specialist prior to making a decision. As a final point, 2019 will be an important year as this loophole will end in January 2020 and 2019 is the final year it can be used.

Numerous calculators to help determine the best filing strategy can be found online, including one provided by the Social Security Administration at www.SSA.Gov.

Keep in mind that you won’t find an estimate for your spousal benefit on either of your social security statements. To get that estimate, you will need to call SSA at 1-800-772-1213 or visit your local social security office.

Your team of trusted advisors at NEIRG is here to assist with any questions you have regarding the above or other planning strategies you should consider.