Popular Social Security Claiming Strategies

Take advantage of rules about spousal benefits to ensure you receive the maximum amount of payments.

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People nearing retirement naturally have a lot of questions about the best ways to claim Social Security benefits. Benefits can be claimed as early as age 62, but increase by about 8 percent a year—plus inflation adjustments—for each year you defer claiming until age 70.

Certain advantageous claiming strategies, especially those involving spousal benefits, don't become available until you've reached what's called full retirement age—anywhere from 65 to 67, depending on when you were born.

[See Social Security's Long-Term Outlook.]

The Social Security website provides extensive information, but unless you know what to look for, it can be a daunting encounter. Here are some reader questions about claiming strategies and answers from Social Security spokesperson Dorothy Clark.

Reader 1, Question 1: I am 63 and my wife is 62. I have sufficient credits after 40-plus years in the job market to qualify, and my wife of 40 years would qualify on my benefits (about 35 percent of my reduced benefits). Basically, my employment contract with the government has not been renewed and I am now looking at retirement for both of us. If we both retire now and both draw Social Security benefits, and I reenter the job market with the expectation of earning a salary well above the minimum allowed, I understand that I can withdraw my Social Security application (before my full retirement age), return all funds paid out to both of us, and then reapply later to receive a higher benefit. I understand repaying the funds and withdrawing my application, but does my wife have to withdraw her's or is it automatic? What will her status be?

Answer: Social Security has modified the rules regarding withdrawal requests of retirement-only applications after a decision has been made. In these cases, all withdrawal requests filed after Dec. 8, 2010, must be filed within 12 months from the first month of entitlement and one withdrawal per lifetime. For example, if the date of entitlement is December 2010, the 12 months would expire the last day of December 2011.

[See Begin Social Security Benefits for the Right Reasons.]

However, if you request withdrawal 12 months or more after you became entitled to retirement benefits, you cannot withdraw your application. The wife doesn't file a withdrawal request. She must consent in writing to the withdrawal by her spouse because the withdrawal nullifies her entitlement to spouse's benefits.

Question 2: As I have earned my salary this year through the end of August—and intend to have retirement effective soon—I believe the "special monthly rule" will apply for the remaining months of 2011 (e.g. the time up to retirement is not figured and any remaining portion/month of the first year is counted for penalty if I earn over $1,180 in that month for the "first year of retirement.") Is this correct? Also, can I apply in advance of the date, and once approved, will it be effective on the date I request or when the paperwork is completed?

Answer: In cases where an individual retires mid-year and has already earned more than the yearly earnings limit, there is a special rule that applies to earnings for one year, usually the first year of retirement. Under this rule, you can get a full Social Security check for any whole month you are retired, regardless of your yearly earnings. In 2011, a person under full retirement age for the entire year is considered retired if monthly earnings are $1,180 or less. It rises to $1,220 or less in 2012. Here is additional information. Social Security encourages people to file three months before they want their payments to start. You can file online.

[See 10 Steps to Fine-Tune Your Retirement Plan.]

Reader 2, Question 1: My wife is 65 (one year older than me) and has been receiving about $540 a month in Social Security since she turned 62. I will turn 66 in July 2013. I am not currently receiving Social Security payments. What is the best strategy for us? Right now my pension is about $4,200 a month and will decrease to about $2,100 a month when I turn 66. Will the "claim and suspend" strategy work—can I claim Social Security now at 64, with my wife receiving half of my age 64 Social Security (about half of $2,000) and suspend?

Answer: A worker who is full retirement age can apply for retirement benefits and then request to have payments suspended. That way, his or her spouse can receive a spousal benefit and he or she can continue to earn delayed retirement credits until age 70. However, in this scenario, voluntary suspension will not apply because the worker is under full retirement age.

Question 2: Would my wife's check increase when I reapplied for Social Security at 66?

Answer: If they file for benefits when the husband reaches age 66, his wife's benefits will increase by the amount she will be entitled to as a spouse. Here is additional information on a spouse's benefits.

Twitter: @PhilMoeller