IE 11 is not supported. For an optimal experience visit our site on another browser.

Social Security tips: when to use a 'restricted application'

A "restricted application" for Social Security benefits can be a smart move. TODAY's financial editor Jean Chatzky explains.
/ Source: TODAY

On Tuesday, we took a look at “file and suspend,” a Social Security strategy that can help you put more money in your family’s pocket without having to wait for deferred benefit payments to start. This time we’re looking at something called a restricted application – or a restricted application for spousal benefits.

Second of three parts

People often mix this up with file and suspend the strategy I talked about last time. And for good reason. Often the two go hand in hand.

Restricted application takes place when someone who is full retirement age (that’s 66 or 67 depending on when you were born) applies for spousal benefits only and delays his or her own benefits allowing them to grow 8 percent a year, explains Jim Blankenship, a financial planner in New Berlin Illinois and author of “A Social Security Owner’s Manual.”Couples who want to maximize the higher earner’s benefits might use this strategy to receive some income while they wait for the higher payout to grow. You can do this while implementing file and suspend for your own benefits – or on its own.

How about an example?

You bet. Ben and Mary, for example, are both full retirement age of 66. She’s eligible for a $700 monthly payment, Ben is eligible for $1,500. Ben can apply for a restricted application and receive $350 a month in spousal benefits immediately while waiting until 70 to apply when he applies for his own benefit. Together they’ll receive $1,050 in monthly income while they wait for Ben’s higher payout, which will total $1,980 when he reaches 70.

Is there an ideal situation for this?

Restricted application works well if the younger spouse is not the higher earner and wants to file for benefits early. A wife age 62, for example, may file early for her own benefits. Her husband, who is 66, applies for restricted application for spousal benefits on his wife’s account leaving his own benefits to grow. When the husband reaches age 70 he converts to his benefits, which have now grown 32 percent. The wife, who is now full retirement age, can now apply for spousal benefits on her husband’s account if they are higher than her own.

Part 1: Pad your pocketbook with 'file and suspend'

Part 3: Maximize your survivor benefits

It’s important to understand the restricted application lingo because if you do not mark this clearly on your Social Security claim you’ll receive payments from your own benefit record rather than your spouse’s.