Stop The Gaming

     From Alicia Munnell, writing for Market Watch:

In 2009, we published three briefs under the title “Strange but True” that described Social Security claiming strategies that allowed individuals to get more benefits. The idea was to show how they worked, who was most likely to benefit, and how much they could cost. Our hope was that publicity would compel Congress to close down these options.

We had mixed success. The immediate result is that these strategies continued to gain in popularity with financial planners, and individuals increasingly approached their Social Security offices asking for arrangements that some staff had never heard of. Today people are writing best-selling books about how to get the maximum out of Social Security. ...

Under Social Security, married individuals are entitled to a retired worker benefit based on their own earnings and/or to a spousal benefit equal to one half of their spouse’s benefit claimed at the Full Retirement Age (currently 66). If a married individual claims before the Full Retirement Age, the SSA assumes that the individual is claiming both types of benefits, compares the worker and spousal benefits, and awards the highest. This procedure is called “deeming.”

After the Full Retirement Age deeming does not apply, and individuals can choose which benefit to receive. As a result, married individuals can claim a spousal benefit at 66 and switch to their own retired worker benefit at a later date. This approach allows a worker to begin claiming one type of benefit while still building up delayed retirement credits, which will result in a higher worker benefit later. ...

The final strategy – “claim and suspend” – allows people who have already claimed Social Security to re-enter the labor force and continue to build their retirement benefits. However, it also offers couples a claiming advantage. For example, a husband who reaches the Full Retirement Age can claim and immediately suspend his benefits, allowing his wife to receive a spousal benefit based on his earnings record. The husband is then free to continue working and receive delayed retirement credits, which increases not only his monthly benefit but also his wife’s.

     Munnell argues that Congress should pass legislation requiring deeming even after full retirement age.