How Couples Can Max Out Their Social Security Benefits

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I hope you had a wonderful weekend. Today is National Vanilla Pudding Day! There had to be a day to mindlessly eat vanilla pudding and today is the day!

LRPC’s Monday Morning Minute for this week, “How Couples Can Max Out Their Social Security Benefits” (presented below) comes to you courtesy of Charles Schwab & Co. As an independent, objective Registered Investment Advisory firm, Lawton Retirement Plan Consultants, LLC has access to research from many sources. Be assured that I will share enlightening, useful information with you each week.

Bring yourself up-to-date on the recent changes in the law that relate to how couples may claim Social Security benefits. Learn how Schwab suggests couples maximize those benefits.

Have a wonderful week!

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How Couples Can Max Out Their Social Security Benefits

By Carrie Schwab-Pomerantz, Charles Schwab & Co.

Key points

  • While new Social Security rules have eliminated some options for couples, there are still workable strategies to maximize benefits.
  • If you were born before January 1, 1954, you can still use the “restricted application” to file for a spousal benefit.
  • Other strategies for maximizing overall benefits, including spousal and survivor benefits, vary based on relative age and earning records but are worth exploring.

The 2015 Budget Act dramatically shifted the landscape for couples attempting to maximize their Social Security benefits. As you’ve discovered, just when many of us had our plans in place, we’ve been forced to reevaluate. Fortunately, there are some strategies that still work. But before I get into those, let’s review what’s changed.

No more ‘file and suspend’

First, the old ‘file and suspend’ strategy is no longer available to new filers. In the past, one spouse could file for benefits — which allowed the other spouse to file for a spousal benefit — then suspend their own benefit to let it grow. No more. Now when a person suspends their own benefit, they also suspend spousal benefits. This effectively prevents one spouse from collecting benefits on their husband’s or wife’s record while the other spouse holds off in order to accrue delayed retirement credits. It was great while it lasted.

Further restrictions on a ‘restricted application’

The second related, but different, change impacts what is known as a ‘restricted application.’ For many years, this provision allowed a married person to collect a benefit based on their spouse’s work record rather their own record as long as their spouse had already filed. In this way, at Full Retirement Age (66 for those born between 1943 and 1954), a spouse could file for a spousal benefit only (a restricted application) and then switch to their own increased benefit at a later date.

This possibility hasn’t been completely eliminated, but whether or not you can use it depends on your age. If you were born before January 1, 1954, you’re in luck. The provision is still available to you. Anyone younger isn’t eligible.

Couple strategies that still work

So where does this leave us with the new rules? Unfortunately, there’s no one-size-fits-all recommendation. Each couple’s financial situation, birth dates, relative ages, anticipated longevity, and earnings records factor in.

Because of this complexity, it generally makes sense to consult with an advisor who specializes in Social Security benefits before deciding. In the meantime, here are a few guidelines to consider:

  • A primary breadwinner should consider delaying filing to age 70. Assuming good health and the prospect of a long life, this makes sense for two reasons. First, it can eventually add up to a larger lifetime benefit. And second, it will mean an increased benefit for a surviving spouse.
  • It may make sense for the lower earning spouse to file for their own benefit at Full Retirement Age (FRA). The tactics will vary, however, depending on birthdate. Here are a couple of examples:

1. Let’s say, as the lower earner, you file for benefits at your FRA. Since your husband turned 62 before the end of 2015, at his FRA he could file a restricted application for spousal benefits. He could then switch to his own higher benefit at age 70. Plus, since you waited until FRA to file for your own benefit, your benefit could increase if the spousal benefit were higher than your own benefit.

2. If, on the other hand, your husband had not turned 62 by the end of 2015, and wasn’t eligible to file a restricted application, it would still likely make sense for you to wait until at least your FRA to file for your own benefit and your husband to wait until age 70 to file. Your benefit could still increase to a potentially higher spousal benefit of 50% of his FRA benefit.

3. Should your husband pre-decease you, you would receive a higher survivor benefit by his delaying to age 70 in either case.

  • If both partners have equivalent earnings records, it may make sense for both to delay filing until age 70. Provided that both anticipate a long life and can afford to postpone benefits, this would maximize both retirement benefits for themselves and survivor benefits for each other.
  • Married couples with a single income face a different set of issues. Although health and anticipated longevity certainly come into play, it often makes sense for the breadwinner to postpone benefits until age 70. While the couple will forego spousal benefits until the earner files, it will allow for the largest possible retirement and survivor benefits. Other couples, however, may want the earner to file once the spouse reaches FRA, which is when the spousal benefit maxes out (the spouse would need to be at their FRA to be eligible to claim the maximum spousal benefit). In this case, though, they are forfeiting the highest survivor benefit.

No easy answers

While the new law in some ways simplified things, it’s still a complex and important decision. So I can certainly appreciate that many people may take one look at all this and want to run for cover. But I strongly advise every person approaching retirement age to stop and carefully assess their Social Security choices. Timing is important and there are still strategies — especially for couples — that can result in a higher overall benefit. Sit down with your advisor to help you make the best decision based on your situation.

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About LRPC’s Monday Morning Minute

Lawton Retirement Plan Consultants, LLC (LRPC) Monday Morning Minute is crafted to provide decision-makers with important information about the economy, investments and corporate retirement plans in a format that allows a reader to consume the information in less than 60 seconds. As an independent, objective investment adviser, LRPC has access to many sources of research and shares the best and most relevant information with its readers each week.

About Lawton Retirement Plan Consultants, LLC

Lawton Retirement Plan Consultants, LLC is a Milwaukee, Wisconsin-based independent, objective Registered Investment Adviser (RIA) providing investment advisory, fiduciary compliance, employee education, provider management and plan design services to retirement plan sponsors. The firm currently has contracts in place to provide consulting services on more than $400 million in plan assets. For more information, please contact Robert C. Lawton at (414) 828-4015 or bob@lawtonrpc.com or visit the firm’s website at http://www.lawtonrpc.com. Lawton Retirement Plan Consultants, LLC is a Wisconsin Registered Investment Adviser.

Important Disclosures

This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance, tax, legal or investment advice. Each plan has unique requirements and you should consult your attorney or tax adviser for guidance on your specific situation. In no way does Lawton Retirement Plan Consultants, LLC assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations. Investors should carefully consider investment objectives, risks, charges and expenses. The statements in this publication are the opinions and beliefs of the commentator expressed when the commentary was made and are not intended to represent that person’s opinions and beliefs at any other time. The commentary does not necessarily reflect the opinion of Lawton Retirement Plan Consultants, LLC and should not be construed as recommendations or investment advice. Lawton Retirement Plan Consultants, LLC offers no tax, legal or accounting advice and any advice contained herein is not specific to any individual, entity or retirement plan, but rather general in nature and, therefore, should not be relied upon for specific investment situations. Lawton Retirement Plan Consultants, LLC is a Wisconsin Registered Investment Adviser and accepts clients outside of Wisconsin based upon applicable state registration regulations and the “de minimus” exception.

Additional Important Disclosures

The information provided here is for general informational purposes only and is not intended to be a substitute for specific individualized tax, legal or investment planning advice. Where specific advice is necessary or appropriate, consult with a qualified tax advisor, CPA, financial planner or investment manager. 

Nine Social Security Myths Worth Busting

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MMM Newsletter and Website Header 10.2.15I hope you had a great weekend! Baseball is back, but not Spring!

LRPC’s Monday Morning Minute for this week, “Nine Social Security Myths Worth Busting” (presented below) comes to you courtesy of ThinkAdvisor. As an independent, objective Registered Investment Advisory firm, Lawton Retirement Plan Consultants, LLC has access to research from many sources. Be assured that I will share the most relevant information with you each week. If you are short on time, try and take a quick look at each of the nine Social Security myths in bold below.

The Monday Morning Minutes on Social Security are some of the most popular I share. Get the correct answers on the top Social Security myths and learn more about your Social Security benefits by reading this short piece.

Have a wonderful week!

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Nine Social Security Myths Worth Busting

By Janet Levaux, Editor in Chief, Research Magazine, appearing in ThinkAdvisor

Deciding when to begin taking Social Security is not an easy feat – even for financial advisors. There are many factors to consider, such as health, wealth and family situations.

Naturally, the devil’s in the details. And, as with any government program, there are lots of them. ThinkAdvisor spoke with Michael Lonier, retirement management analyst and head of Lonier Financial Advisory near Sarasota, Florida, about the ins and outs of Social Security planning. Lonier gave his views on misconceptions, Social Security myths and flawed – or at least confused – thinking on the best time to take Social Security benefits. Read on for a discussion of nine Social Security myths worth busting: [Read more…]

When Should You Take Social Security?

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MMM Newsletter and Website Header 10.2.15
Congratulations to all parents with high school graduates!

LRPC’s Monday Morning Minute for this week, “When Should You Take Social Security” (presented below) comes to you courtesy of Schwab Research. As an independent, objective Registered Investment Advisory firm, Lawton Retirement Plan Consultants, LLC has access to research from many sources. Be assured that I will share the most relevant information with you each week. If you would like to keep your time spent with this piece to around the promised minute, please page down and review the “Key points” section.

One of the frequent questions I receive when I speak at seminars or employee education sessions is “When do you think I should take my Social Security benefit?”  Read on below for answers from the experts at Schwab.

Have a wonderful week!
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When Should You Take Social Security?

By: Rande Spiegelman, Vice President, Schwab Center for Financial Research

Key points

  • Taking Social Security benefits early may not be the wisest choice.
  • We’ll cover Social Security benefit eligibility and factors to consider when deciding when to take Social Security.
  • The strategies for maximizing benefits can get complex, so be sure to get help from your financial planner or tax professional if you need it.

When it comes to your own Social Security benefits, you’ve got three alternatives:

  • Take them early;
  • Wait until your normal retirement age; or
  • Wait even longer.

The normal age for receiving Social Security retirement benefits is a moving target (see table below). You can still elect to take benefits early at age 62 (earlier only if you are a survivor or on disability), or wait as late as age 70. Given the range of choices, as your 62nd birthday approaches, you’ll likely be thinking about more than just how all those candles are going to fit on the cake. Before you consider whether it makes sense to take Social Security benefits earlier or later, let’s take a look at some of the rules.

What’s the “normal” retirement age?

[Read more…]