Jan 13, 2016 - 08:13 AM
If your goal is to maximize Social Security, the answer is no, this is not a good strategy. If you need income now, my answer might change.
Some basic SS facts: If you were born between 1943 and 1954, your full retirement age (FRA) is 66. You could file as early as 62, but you'll get an approximate 8% reduction for every year you file before your FRA. You could also delay filing up to age 70 (not 72 as you stated), and get an 8% increase every year above your FRA. Create an account at www.SSA.gov to see your potential benefits at any age and find out some interesting facts. Also, later in life when you are both collecting SS, when one of you passes away the survivor is left with the larger check - Survivor benefit. This is important, and why many couples try to maximize the higher wage earners benefit (age 70).
Be aware that there is a potential reduction of benefits if you earn income and you are under FRA. So if your wife is working, her SS could be reduced by $1, for every $2 she earns above the limit ($15,720 -2015). Once you're over FRA, you can earn as much as you want and your SS will not be reduced. As you see getting to FRA is often the key when it comes to Social Security
There are some claiming strategies you can use to increase your potential income. Restricted Applications (for Spousal Benefits or Suvivor Benefits), File & Suspend, and Switch strategies. The SSA.gov website will not help with this however. The key is determine your goal for SS. Is it to max annual income? Maxlifetime income? or possibly to max survivor benefit? You'll need a strategy to accomplish your goal. You should seek a financial advisor knowledgeable about SS claiming strategies.
Regarding Spousal benefits, one spouse must have filed for the other spouse to collect what's called a Restricted application for a Spousal benefit. Two new rules go into effect soon. The first is for people who turn 66 after April 30, 2016. This change basically states that when a worker suspends benefits Spousal benefits tied to this worker are also suspended. Thus ending File & Suspend. This means one spouse must be receiving benefits for the other to file for a Spousal benefit. The second is a change to Restricted applications for people born after Jan1, 1954. For anyone who files a Restricted application before they reach FRA (66) they are deemed to file for all potential benefits - their own and Spousal....thus eliminating the potential for their own benefit to earn delayed retirement credits. This deeming provision currently does not apply when filing for a Spousal benefit after you reach your FRA. The strategy being your own benefit grows up to age 70. This Deeming provision will now be in effect for people born after Jan 1, 1954 (or who turn 66 in 2020). Basically, for people born after Jan 1, 1954 when you file for a spousal benefit at any age, you'll have been deemed to file for your own benefit also ---- you'll get the larger benefit. These changes were included in the Bi-partisan budget act passed this past November.
Social Security is such an important component of your retirement income....seek a financial advisor for help. If you're in Georgia, Ohio, or nearby please give me a call. I'd love to help.