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Social Security Planning for Married Couples with a Disabled Spouse

A reader writes in, asking:

“I would be interested in having you discuss Social Security decisions when one spouse is collecting Social Security Disability payments and the other spouse is working. I think I basically understand how the system works but then we have the monkey wrench of SSDI [Social Security Disability Insurance] to deal with.”

Firstly, an important piece of background information: When an SSDI recipient reaches full retirement age, his/her disability benefit will automatically convert to a retirement benefit. The monthly dollar amount stays the same; the difference is simply that, going forward, the amount received is technically a retirement benefit rather than a disability benefit.

In short, when it comes to Social Security strategies, the primary difference — relative to a couple in which neither spouse is disabled — is that the disabled spouse will not be able to use the “restricted application” strategy.

As a reminder, a restricted application is an application in which a person files for just spousal benefits (after reaching FRA) while allowing his/her own retirement benefit to continue growing until age 70. A person who is receiving disability benefits when he/she reaches FRA won’t be able to file for just spousal benefits, because he/she will automatically become entitled to his/her own retirement benefit upon reaching full retirement age.

So, roughly speaking, the primary strategies to consider would include:

  1. The non-disabled spouse filing a restricted application at full retirement age for a spousal benefit based on the work record of the disabled spouse.
  2. The disabled spouse suspending his/her retirement benefit after reaching FRA, in order to accumulate delayed retirement credits. This would likely make sense if this spouse’s primary insurance amount (PIA) is the larger of the two and the couple’s goal is to maximize the amount received per month by whichever spouse lives longer. (It’s important to note note, however, that if this spouse requests suspension after 4/29/16, doing so would “turn off” the other spouse’s spousal benefit, if applicable, until suspension ends.)
  3. The non-disabled spouse filing and suspending at full retirement age. This would generally only make sense if a) this spouse’s PIA is much larger than the disabled spouse’s PIA (such that the disabled spouse would benefit from filing for a spousal benefit) and b) this spouse reaches FRA prior to 4/30/16 (such that he/she can file and suspend prior to the new voluntary suspension rules kicking in).

How About a Few Examples?

Let’s run through a few examples, covering each of the above strategies. In each case, in order to slightly reduce the number of moving pieces, the male spouse will be the one with the disability.

Example 1: Geoffrey (age 63) and Charlene (age 65) are married. Geoffrey is currently receiving Social Security disability benefits. They have very similar primary insurance amounts. The strategy most likely to make sense is for Charlene to file a restricted application at her full retirement age, while allowing her own retirement benefit to grow until age 70.

By using the restricted application strategy, they achieve two goals. First, they increase the amount the couple receives per month as long as either spouse is still alive. (That is, they’ve maxed out Charlene’s retirement benefit, which also maxes out Geoffrey’s widower benefit, in the event that he outlives her.) Second, they manage to receive some drawback-free spousal benefits while allowing Charlene’s retirement benefit to continue growing.

Example 2: John (turning 66 on April 1, 2016) and Margaret (age 63) are married. John is currently receiving Social Security disability benefits. John’s PIA is $1,800, and Margaret’s PIA is $1,200. The strategy most likely to make sense in this case is for John to suspend his retirement benefit when he reaches full retirement age.

By using this strategy, they increase the amount the couple receives per month as long as either spouse is still alive (because they’ve maxed out John’s retirement benefit, as well as Margaret’s benefit as his widow, if she outlives him). Of note, this strategy would be somewhat less advantageous if a) Margaret’s PIA was smaller and she was receiving a spousal benefit on John’s work record and b) John reached FRA after 4/29/2016, because in that case his suspension of benefits would turn off Margaret’s benefit as his spouse while his benefit is suspended.

Example 3: Bill (age 65) and Tina (turning 66 in March 2016) are married. Bill is currently receiving Social Security disability benefits. Bill’s PIA is $400, and Tina’s PIA is $2,000. The strategy most likely to make sense in this case is for Tina to file and suspend when she reaches full retirement age. Doing so allows them to max out the larger of the two retirement benefits (thereby also increasing Bill’s benefit as a widower, if he outlives Tina), while allowing Bill to file for a spousal benefit based on Tina’s work record.

Note that this strategy is preferable to strategy #1 in this case, because Tina’s PIA is so much larger than Bill’s. (Point being that the total monthly benefit Bill will receive after claiming spousal benefits is greater than the total amount the couple would receive if Bill were receiving a disability benefit and Tina filed a restricted application for spousal benefits on Bill’s work record.) Also of note is that if Tina reached FRA after 4/29/16 (such that she’d be subject to the new voluntary suspension rules) this strategy would not work.

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  • How retirement benefits, spousal benefits, and widow(er) benefits are calculated,
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