Social Security Switch Strategies Explained
There are two main switch strategies for married couples when planning for your Social Security benefits. Get this that Social Security is very generous to married couples. Married folks get two additional benefits (singles do not get) from social security- spousal benefits and survivor benefits.
What are Switch Strategies? Few people including advisors know the following options exist. Even fewer know when to use them, and how to use them to increase your Social Security check. These are called "Switch Strategies" because they entail electing a limited benefit for a period of time, then "Switching" to a higher benefit at some point in the future. These strategies alone regularly add $20,000 or more directly to your bottom line.
Switch 1 is called "Deeming Provision". If you file prior to full retirement age, you are "deemed" to have filed for all benefits you are eligible for at the time of filing. Prior to full retirement age there are few opportunities to use switches. After full retirement age, you have the ability to selectively file. You can choose to take only one benefit while continuing to get delayed credits on a different benefit, then switch to the higher benefit at some point in the future. The name for this enabler is "File and Suspend".
Switch 2 is under the name "restricted application". Let's say that Mrs. has already elected her own benefit- and that it's $1,000/month and the Mr. is planning on delaying his benefit to age 70 to get the most of his delayed credits. Remember the delay from 66 to 70 increased monthly benefit by 32% for life! Mr. can actually file a restricted application for only his spousal benefit under the Mrs. record and collect $500 per month until he turns 70. Doing this will not affect his age 70 benefits at all. If he doesn't file the restricted application, he is simply forfeiting his right to that $24,000. Ouch! you heard me gone forever $24,000 in benefits.
If this is interesting to you then you may want to check out a white paper from the Center for Retirement Research at Boston College titled;UNUSUAL SOCIAL SECURITY CLAIMING STRATEGIES: COSTS AND DISTRIBUTIONAL EFFECTS. Alicia H. Munnell, Steven A. Sass, Alex Golub-Sass and Nadia Karamcheva. This report came out August 2009 and provides amazing details to the strategies and estimated costs to the government for each of the strategies. Impressive work and intensive read should you want more than the necessary information to make a wise decision.
There are obviously several things to consider here and the more you read on this subject the more in might make sense to test the numbers and get some help with such a huge decision. If your single then realize this a simple break even analysis is all that would be necessary for you. If your married and want to try out what is considered by many as the best calculator on Social Security Timing Planning for married couple couples then click the link for online help- say no thanks to proceed on your own. Planning does matter and it's just good stewardship.
Here is my You Tube video on some free resources for you.