How, and when, do you switch between Social Security Benefits?

Under Social Security rules, if a person receiving a benefit becomes entitled to a different benefit, that person may switch to the new benefit if it’s higher. This switching is one of the most important ways clients can maximize their benefits, but they don’t always know how or when or even if they can do so.

Social Security Administration (SSA) often does not notify people of these switching opportunities, either because they don’t know that a higher benefit is available, or their system is not set up to issue such notifications. So YOU need to be more aware!

Sometimes the switching strategy is not intuitive. A maximization strategy might call for a client to start with the lower benefit and switch to the higher benefit later. Because SSA seeks to pay the highest amount a client is entitled to right now, their advice often conflicts with strategies developed with multiple claiming timeframes. In my own case [Elaine’s *], I filed a restricted application for my divorced-spouse benefit at FRA with the plan to switch to my own maximum benefit at 70. A few months after starting my spousal benefit, I got an auto-generated letter from SSA telling me that I could receive more if I switched to the benefit off my own work record. This, of course, would have undermined my whole strategy. Thankfully, I knew what I was doing and ignored the letter. But clients, who may be wondering if taking the lower benefit first really makes sense anyway, could easily be lured into short-sighted switching, or at the very least become confused. They may wonder if the advice they got from their advisor was best for them after all.

And this is why adviser’s must hold clients’ hands [or you stick to your original multi-phase benefit switching strategy] throughout the claiming process when benefit switching is planned. This means filing at the proper time, in the easiest manner (preferably online), and, if necessary, armed with clear instructions for SSA. We have found that when clients go into their SSA office with a calculator report laying out a multi-step claiming strategy, SSA workers get confused. Inexperienced workers who only know how to take applications for benefits often don’t understand the different types of benefits that may be available or why it makes sense to switch from one benefit to another. They will sometimes simply say, “you can’t do that.” This is why we recommend online filing and, when talking to SSA workers, to focus on the application being filed right now. It’s okay for clients to talk briefly about their intentions, such as wanting to delay their own benefit to get maximum delayed credits, but when filing that initial application they want to make it clear that that’s what they are there to do. A worker can’t refuse to take a client’s application for benefits if entitlement to that benefit exists.

There are many situations described below – so skip the ones that don’t apply to you, and learn about those that do!

Bob and Betty: Strategy calls for 5 separate applications

Here’s an example of a somewhat convoluted—but quite common—strategy for Bob and Betty. [Note that Bob was born in 1953, so he’s in the grandfathered group where more multi-phase strategies are possible].

As you can see in the chart above, there are five separate filings here. First, Betty claims on her own record now. She cango online and file a regular application for retirement benefits. A week or two after she submits her application, an SSA worker will contact her and let her know what, if any, documents she needs to provide. A week or two after that she should get her award letter telling her how much her benefit will be and when she can expect to receive it.

Since Bob can’t file a restricted application for his spousal benefit until he turns Full Retirement Age (FRA), his initial filing will take place in August, the month he turns 66. He can also do this online. Sometime in July he can go online and follow the prompts. He will specify an August 2019 start date. Again, SSA will contact him and let him know what they need to process the application, probably a marriage certificate. He’ll get his award letter two to three weeks later. His first check, for August, will be paid in September. Now Bob and Betty are set for the next four years.

In August of 2023, when Bob turns 70, he will go online again and apply for his retirement benefit. Again, he can do this about a month prior, in July, specifying an August 2023 start date. The switch from his spousal benefit to his own retirement benefit will happen in August and be reflected in his September check.

Once Bob has received his award letter, Betty can go online and apply for her spousal benefit. She will specify the same start date as Bob: August 2023. Technically, her spousal benefit will not be a “switch.” It will be an “add-on.” She will keep her existing benefit and the difference between her Primary Insurance Amount (PIA) and one-half of Bob’s PIA will be added to that benefit. Again, once she submits her application they will call her and tell her what they need. They may already have her on file as married to Bob because he had previously received a spousal benefit off Betty’s record. Now they are set until one spouse dies.

If Bob lives (or rather dies) according to plan, Betty will be claiming her survivor benefit in December of 2038 at her age 83. SSA will be notified of Bob’s death, either by the funeral home or by Betty herself. Since Betty is receiving a spousal benefit, it is possible she will automatically be switched to the survivor benefit. (That’s what happened in my [Elaine*] own case. I was receiving my divorced-spouse benefit when my ex-husband died; The very next month my divorced-spouse benefit was replaced with my divorced-spouse survivor benefit without my having to do anything.) Still, you should be alert to these situations and check to be sure the switch to the survivor benefit happens. Note that Betty will receive the full survivor benefit even though she took her own benefit before FRA; as long as a surviving spouse is over FRA when claiming the survivor benefit, she will get the full amount. Also note that if Betty had not been receiving a spousal benefit—say she had a high PIA and was getting her own retirement benefit—she would not automatically be switched to the survivor benefit if it was higher because she would have been claiming off a different record. And it’s possible SSA would not notify her that she was entitled to a higher survivor benefit, if they hadn’t put it together that she and Bob were married and that he was now deceased. She will have to make an appointment with SSA to apply for the survivor benefit, as survivor benefits cannot be applied for online.

If Bob and Betty do as instructed and file online, everything should come off without a hitch. The confusion happens when they go together to the Social Security office and show the print-out to the SSA worker. We’ve had cases where the worker looks at the second filing—Bob’s restricted application in August 2019—and says “you can’t do that.”

Many Social Security workers today are not very well informed about the Budget Act of 2015 and who’s grandfathered and who’s not. As the window closes for restricted application—everyone grandfathered will be FRA by the end of 2019—fewer of them are being done now. Note that restricted applications can still be filed after 2019, such as when a grandfathered spouse can’t file yet for the spousal benefit because the other spouse hasn’t filed. It is a common misconception that there is a December 2019 deadline for restricted application. There is no such deadline, but uninformed Social Security workers may say there is.

The actual “deadline” is December 2023: those born in 1953 or earlier, have until they’re age 70 to switch to their higher benefit. 1953 + 70 = 2023. Even if you’re born after 1953, you can see from the below examples, switching considerations are still very important!

Other switching opportunities

Indeed, one of the most valuable services observant advisers can provide to clients is alerting them to situations where they can switch from one benefit to a higher benefit if their situation meets certain criteria.

This may happen from the outset, as in the Bob and Betty case, or it may happen when meeting new clients who are already receiving benefits. One of my [Elaine*] favorite cases was the woman in her 70s who came to one of our Savvy advisors and said she was receiving a retirement benefit of about $700 a month. In gathering information, the advisor learned that she had been married and divorced early in her life and that the marriage had lasted over ten years. The advisor told her to file for her divorced-spouse benefit, which gave her an additional $400 a month. Shortly thereafter, the ex-husband died, increasing her benefit to $2,200 a month. If the advisor had not alerted the client to the divorced-spouse benefit (it never occurred to her that she could claim off an ex-husband from a long-ago marriage), she would still be receiving the $700.

Here are some other switching opportunities that may apply to some unique situations (are one of these yours?) :

Spousal add-on. It is fairly common for a lower-earning spouse to apply for her own retirement benefit and not get a spousal benefit at that time because her husband hadn’t filed yet. After he files, she becomes entitled to the spousal add-on, but it is often overlooked. Watch for cases where the lower-earning spouse is receiving significantly less than the higher-earning spouse. You may have to do some math, though. If she claimed at 62 (with a 25% reduction) and he claimed at 70 (with four years of 8% credits), her benefit would be less than half of his even if her PIA is more than half. That’s what they look at: the PIAs. A spouse is entitled to a spousal add-on only if her PIA is less than half of his.

Divorced-spouse add-on. Ditto, as in the case above. Have a prior marriages. If a marriage lasted at least 10 years and the client is currently unmarried, she or he may be entitled to a spousal add-on.

Survivor benefits. Are you a widow who is receiving a Social Security benefit? You may be entitled to a survivor benefit that you never thought to claimed. If she had been claiming off her own record (i.e., not a spousal benefit), she would not automatically be bumped up to the survivor benefit after the death of her husband. SSA has stopped putting Social Security numbers on award letters, so it is not so easy to determine whose record a benefit is being paid off of. If there is any question, ask your local SSA. This also goes for divorced-spouse benefits if the marriage lasted at least ten years and the client is either unmarried or remarried after age 60.

Maximum retirement benefit at 70. If a widow claimed her maximum survivor benefit at FRA, and if she had a relatively high PIA so that by age 70, with delayed credits it exceeds the survivor benefit, she may not know to go back to SSA to switch to her now-higher age 70 retirement benefit. She should go to SSA at age 70 to check and see if her own retirement benefit might be higher than the survivor benefit she is currently receiving.

Dependent benefits. Clients with children under 18 or adult disabled children may not know that they can get benefits for these dependents once they have filed for their own retirement benefit. Or they may be unaware that they may be entitled to survivor benefits if one parent is deceased.

Disability to retirement benefits. Clients who start disability benefits prior to FRA will have their benefit automatically switched to their retirement benefit at FRA. The amount does not change. The only difference is that the benefit is being paid out of the Social Security fund instead of the Disability Income fund. What they may not know is that once they turn FRA they can suspend the benefit to build 8% annual delayed credits to age 70. Note that a person who received disability benefits prior to FRA may not file a restricted application for spousal benefits. To file a restricted app you must not ever have filed for any type of benefit.

On the surface, Social Security seems to be cut and dried. However, assuming other higher benefits may be available can be a costly error, as the above discussion shows.

*Original article for an adviser newsletter by Elaine Floyd, CFP®, Director, Retirement and Life Planning, Horsesmouth, LLC, within which I’ve made edits for the broader public.

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