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Friday, September 30, 2016

Well, dear readers: do you want the good news … or the bad news? Let me get the bad news out of the way first. I’ve been working on a new fact sheet for my readers (that’s actually the good news – but more about that in a minute); and as part of my research, I’ve discovered that I haven’t been completely clear in some past columns when explaining the coordination between taking reduced benefits on your own Social Security record and any possible benefits you might be due on your spouse’s Social Security record.

A question I’m frequently asked goes something like this: “Can I take reduced benefits on my husband’s record at age 62 and then at 66, switch to full benefits on my own account?”

The answer to that question is “no.” But sometimes I’ve overstated that negative response by following up with a comment similar to this: “If you take reduced benefits on one Social Security record, you cannot later switch to full benefits on another record.”  As a politician who’s caught bending the truth might say: “That statement is no longer operational.”

Before I can clarify that, I have to explain a technical part of Social Security rules called the “unrestricted application policy.” That means that an application for any kind of reduced Social Security benefit is automatically an application for all other Social Security benefits a person might be due. Because most people are usually due benefits from only two accounts — their own and a spouse’s — in practical day-to-day use, the policy is saying that if you apply for your own Social Security benefit before age 66, you are automatically applying for spousal benefits at the same time. Or the reverse is also true: if you are applying for reduced benefits on a spouse’s Social Security record, you are simultaneously applying for your own Social Security.

But here is something I didn’t make clear in my prior columns. If your spouse is not yet getting Social Security when you apply for benefits, then you can claim spousal benefits later when your husband or wife signs up for Social Security. And you will get whatever spousal rate you are due based on your age at the time (e.g., 50 percent at age 66; about 40 percent at age 64, etc.). But the reduction you took on your own Social Security record will still impact your overall benefits.

  • If one waits until age 70 to take Social Security benefits, then one would have to live into one’s mid to high 80’s to break “even” over having less money sooner. If you take the money early, save or invest it, then you would have a nest egg that would give one more freedom and flexibility, so long as one takes a disciplined approach to money management. No one answer is right to everyone.