Social Security & The Restricted Application – When It’s Useful And When It’s Not

I have been receiving many emails and questions centered around the use of the restricted application. I think the reason for this is that more people are aware of this available option and are planning their retirement strategy proactively and starting to analyze which Social Security strategy produces the most benefits over their joint life expectancies. The restricted application is not available to people who have never been married, as it’s only available to current spouses and ex-spouses. Many couples assume that they should automatically use the restricted application. I have written other articles on this subject but want to address in this article, hopefully in a simple fashion, when using the restricted application will produce the greatest amount of benefits.

As a quick refresher, to utilize the restricted application, you must meet the following qualifications:

• Born before 1/2/1954 – if you are born after 1/2/1954 – you cannot utilize the restricted application
• Must be a current spouse or ex-spouse
• Must have reached full retirement age
• Must be eligible for your own retirement benefit
• Your spouse needs to be receiving their own worker benefit

You also need to keep in mind that if you use the restricted application, your spousal benefit may be reduced for the following reasons:

1. Your spouse, who may not have reached their full retirement age, may be subject to the annual earnings limitation, which is $17,640 for 2019
2. If your spouse has suspended their own worker benefit, no spousal benefit is available
3. You may be affected by the Government Pension Offset

The purpose of using the restricted application is to allow the qualifying spouse to collect spousal benefits only, while deferring their own worker benefit to age 70 if they wish, and earn delayed retirement credits, up to an additional 32%. This also produces an additional advantage of providing the highest survivor benefit to the surviving spouse.

Now we need to talk about Social Security’s deeming rules, so please bear with me. With the new deeming rules enacted by the Bipartisan Budget Act of 2015, deemed filing applies at any age. Prior to the new law change, deemed filing only applied to people who claimed benefits before full retirement age. Deemed filing is the Social Security rule that says any time you apply for your Social Security benefits, you will be applying for any and all benefits available to you. Since you are always paid your own worker benefit first if you have one, if spousal benefits are available to you, you also will be paid spousal benefits. If you meet the qualifications listed above, you will be able to circumvent the new deeming rules and apply for a spousal benefit only.

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I have developed 3 general rules regarding when the restricted application is beneficial:

1. If the qualifying spouse is the high earner and their Primary Insurance Amount is greater than their non-qualifying spouses Primary Insurance Amount, in almost every situation, it is beneficial for the qualifying high earner spouse to use the restricted application.
2. If the qualifying spouse is the low earner and their Primary Insurance Amount is smaller than their non-qualifying spouses Primary Insurance Amount, and their age difference is within 1 year of each other, the Primary Insurance Amount of the qualifying spouse needs to be approximately 50% of the non-qualifying spouses Primary Insurance Amount to make the restricted application beneficial.
3. If the qualifying spouse is the low earner and their Primary Insurance Amount is smaller than their non-qualifying spouses Primary Insurance Amount, and their age difference is more than 1 year of each other, the Primary Insurance Amount of the qualifying spouse needs to be approximately 85% of the non-qualifying spouses Primary Insurance Amount to make the restricted application beneficial.

Although I have tried to simplify when using the restricted application is beneficial to you or not, these 3 generalized rules probably sound pretty complicated. There is no substitute for preparing an in-depth analysis of the various Social Security claiming strategies. Many times, people think that when they use the restricted application they will wait until 70 to start collecting their own worker benefit, only to find out that by preparing an in-depth analysis they should start their own worker benefits at 69 years and 3 months, or some other age than 70. Another variable to consider is how much additional benefit will be produced when the lower earning spouse files for spousal benefits when the high earning spouse claims their own worker benefit.

Although the restricted application is a very valuable tool to use in your Social Security claiming strategy, it needs to be implemented strategically to optimize the results.

Always remember, if you take the wrong benefit at the wrong time, it’s always smaller and it’s forever.

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