Understanding the Power of Restricted Applications for Social Security

We emphasize Situational Social Security in the NSSA® Certificate program because all of your clients are unique. Your clients may be single, married with wide or narrow age differences, divorced, surviving spouses, eligible to file a Restricted Application, public employees, and more. Advisors—you—must understand the issues and questions that relate to every unique client. You are your clients’ trusted advisor and must understand Social Security. Advisors attending the National Social Security Advisor Certificate program change their mindset and become proactive. NSSA® Advisors do not wait for clients to bring up the topic of Social Security. NSSA® Advisors are confident in their knowledge and initiate the discussion. Which type of advisor are you? Hesitant to discuss Social Security? Confident in your understanding? Proactive?

In this installment of Situational Social Security, we will discuss a highly effective Social Security option: the Restricted Application. Many advisors are unaware of the benefits of the Restricted Application, but it remains a powerful strategy for certain clients.

Restricted Application – This strategy allows your client to file for a spousal benefit while their own benefit earns Delayed Retirement Credits (DRCs). With a Restricted Application, your client can collect a spousal benefit while deferring their own benefit, allowing it to grow.

For example, let’s say that my Full Retirement Age (FRA) is 66, and I am eligible for $2,000 in Social Security benefits at my FRA. I am also eligible for a spousal benefit of $1,000 at my FRA, as my wife worked and is eligible for her own retirement benefits. At my Full Retirement Age, I can file a Restricted Application and receive a spousal benefit based on her work record. I would receive $1,000 in benefits for 48 months (a total of $48,000), and then at age 70, I would start my own benefits. At age 70, my benefits would have increased by 32% due to DRCs, resulting in a monthly benefit of $2,640. In this scenario, I receive $48,000 in spousal benefits while also earning Delayed Retirement Credits of 32%.

This strategy—the Restricted Application—is only available upon reaching Full Retirement Age. Unfortunately, only clients born by January 1, 1954, are eligible to use this strategy. If you are meeting with a client born by January 1, 1954, you must consider a Restricted Application as one of their Social Security options. Just think of the potential benefit—$48,000 could go a long way toward enhancing their retirement.

It is also important to note that for a Restricted Application to be effective, the other spouse must be receiving a Social Security benefit. If my wife is not receiving a Social Security retirement or disability benefit, I cannot file a Restricted Application. Therefore, my wife would need to activate her Social Security benefits, allowing me to file a Restricted Application and receive a spousal benefit.

A common strategy for married couples is for the wife to take her own benefits as early as age 62. This allows the husband to delay taking his benefits until his FRA or even until age 70. If the husband was born by January 1, 1954, he can file a Restricted Application for spousal benefits while waiting to begin his own benefits. This approach can help maximize widow benefits, as the husband waits until age 70 to start his benefits. In some cases, it might make sense for clients to begin benefits before reaching FRA.

About half of our clients can still file a Restricted Application, as they were born by January 1, 1954. The benefits of a Restricted Application will be phased out by 2024. The Restricted Application should be an essential part of your Social Security toolbox. When meeting with clients to discuss their Social Security options, be sure to ask, “What is your birthdate?” If they were born by January 1, 1954, you must include the Restricted Application in the conversation.

Do not overlook the benefits of the Restricted Application. Ensure it is part of your Social Security strategy discussions.

The content on this blog is for informational purposes only and is not legal, financial, or professional advice. Social Security rules change periodically, so some information may become outdated. For the most accurate advice, consult a certified National Social Security Advisor (NSSA®). Social Security Professionals, LLC, and NSSA® are not responsible for any errors, omissions, or actions taken based on this blog's content. Use of this blog does not create a client relationship, and all information is provided "as is" without guarantees. By using this blog, you agree to hold Social Security Professionals, LLC, and NSSA® harmless from any claims or liabilities arising from its content. For personalized guidance, contact an NSSA® professional.