Well, dear readers: do you want the good news ... or the bad news? Let me get the bad news out of the way first. I've been working on a new fact sheet for my readers (that's actually the good news - but more about that in a minute); and as part of my research, I've discovered that I haven't been completely clear in some past columns when explaining the coordination between taking reduced benefits on your own Social Security record and any possible benefits you might be due on your spouse's Social Security record.
A question I'm frequently asked goes something like this: "Can I take reduced benefits on my husband's record at age 62 and then at 66, switch to full benefits on my own account?"
The answer to that question is "no." But sometimes I've overstated that negative response by following up with a comment similar to this: "If you take reduced benefits on one Social Security record, you cannot later switch to full benefits on another record." As a politician who's caught bending the truth might say: "That statement is no longer operational."
Before I can clarify that, I have to explain a technical part of Social Security rules called the "unrestricted application policy." That means that an application for any kind of reduced Social Security benefit is automatically an application for all other Social Security benefits a person might be due. Because most people are usually due benefits from only two accounts — their own and a spouse's — in practical day-to-day use, the policy is saying that if you apply for your own Social Security benefit before age 66, you are automatically applying for spousal benefits at the same time. Or the reverse is also true: if you are applying for reduced benefits on a spouse's Social Security record, you are simultaneously applying for your own Social Security.
But here is something I didn't make clear in my prior columns. If your spouse is not yet getting Social Security when you apply for benefits, then you can claim spousal benefits later when your husband or wife signs up for Social Security. And you will get whatever spousal rate you are due based on your age at the time (e.g., 50 percent at age 66; about 40 percent at age 64, etc.). But the reduction you took on your own Social Security record will still impact your overall benefits.
Here is a simple example of how that works. Becky files for her own retirement benefits at 62. Her full (age 66) rate is $1,000, but she is getting $750 per month in reduced retirement benefits. Her husband, Tom, is also 62, but he does not plan to file for Social Security until age 66. When he turns 66, he starts getting $2,400 in full retirement payments. At that point, Becky can file for wife's benefits. To figure her rate, the Social Security Administration will take her full age 66 benefit, or $1,000, and subtract that from one-half of Tom's full benefit, or $1,200. So, $1,200 minus $1,000 leaves $200. That $200 would be added to Becky's reduced retirement benefit of $750, giving her total benefits of $950 per month.
And please note: the "unrestricted application rule" does NOT apply to widows and widowers. For example, a woman can take reduced widow's benefits as early as age 60, and then at age 66, switch to full retirement benefits on her own Social Security account. Or, she can wait until age 70 and get full benefits plus a 32 percent "delayed retirement bonus."
Also, the "unrestricted application rule" does not apply if you wait until 66 or later to file for Social Security. For example, if you are 66, you could apply for spousal benefits on your husband or wife's account, and then at age 70, file for your own retirement benefits and get your full rate plus that 32 percent bonus mentioned above.
So now: back to my new fact sheet. There is no question I am asked more often than this one: "When should I start my Social Security?" Another version of that question goes like this: "Should I take my Social Security at 62 ... or wait until age 66 or even age 70?" As I've pointed out so many times in this column, that is almost an impossible question to answer because there are so many potential variables. And the biggest variable of all is your life expectancy. I could give you a very good answer to that question if you could give me an answer to this question: "Exactly when are you going to die?" And because no one really knows the answer to that question, no one really knows when it would be the best time to start one's Social Security benefits.
And some of the many other variables include your anticipated earnings (if you are under age 66, an earnings penalty can reduce your Social Security benefit payments) and, as discussed in the first half of this column, your potential eligibility for benefits on a spouse's Social Security record.
To help readers decide when to take their Social Security benefits, I've written this new fact sheet. It discusses all the variables. It explains the earnings penalty rules; it clarifies benefits you might be due as a spouse; and it offers several strategies for "maximizing" your Social Security benefits.
As always, I make these fact sheets available free of charge to my readers. If you want a copy, simply send an email to me at email@example.com. Because I've written so many fact sheets, please specify that you want the new one titled, "When to take your Social Security benefits."