Advanced Underwriting Consultants

Ask the Experts – June 5

Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers. Here’s the question of the day.

Question: I’ve heard about a Social Security strategy that enables both spouses to draw half of the other spouse’s benefit now, and then each could later collect their own respective higher benefit in the future. How is this possible?

Answer: No, it’s not possible.

Here’s the proposed scenario. Husband and wife have both reached full retirement age (FRA) and both have primary insurance amounts (PIAs) equal to $2,000 per month. Husband files and suspends his own retirement benefit to allow his wife to collect spousal benefits equal to $1,000, half his PIA. Wife also files and suspends, allowing her husband to also collect spousal benefits based on her work record, equal to $1,000 per month. This way, they have a total $2,000 monthly benefit while also accruing delayed retirement credits at 8% per year. At age 70, they each switch to their own retirement benefits, now at $2,640 per month.

This doesn’t work because the SSA has said that only one spouse is permitted to file and suspend his or her retirement benefits. Therefore, in the above example, if the husband files and suspends, the wife cannot. However, she may still access spousal benefits while still accruing DRCs. The only difference is that instead of $2,000 per month from ages 66 to 70, they will receive only $1,000 per month. Both spouses will still have $2,640 benefits by the time they’re both age 70.

This strategy is only available for spouses who have reached FRA, because, as we discussed here, if an individual files for spousal benefits prior to reaching FRA, she is deemed to have filed for her own retirement benefits as well. Both the spousal and her own benefits will be permanently reduced for filing early.

Have a question for the professionals at AUC? Feel welcome to submit it by email. We may post your question and the answer as the question of the day.