Goodbye to this Social Security benefit rule. You still have these tricks to

Social Security rules are not stagnant, they change and evolve with the times, and sometimes they are phased out year by year, applying to less and less of the population until they disappear altogether. One of these rules is ending this year for anyone under 70 years old on January 1, 2024. Until now, this rule has allowed recipients to switch between their benefits and their spouse’s benefits to receive the maximum amount, but if you were born after Jan. 1, 1954, you will no longer be able to do so.

The rule, which was put in place when single-income households were the norm, meant that the higher-earning spouse would claim spousal benefits at full retirement age while the other spouse claimed his or her own benefit. This would allow the person claiming spousal benefits to see their pension accumulate interest until age 70, when the full pension would be available, and then switch from spousal benefits to a regular pension.

After that, the spouse originally claiming the pension would do the math and calculate whether their Social Security pension was higher than the spousal benefit and decide which to claim for the remaining years. A clever and advantageous loophole that allowed retirees to maximize their benefits in the long run and earn more in the later years of their pensions.

The loophole has now been closed for younger generations who may have earned more and in two-income households as the norm, so more people could take advantage of the circumstances, but remains open for those who are 70 or older.

Other Social Security Tips to Consider

So, what should the rest of Americans do about their retirement? Well, in the words of Matthew Allen, co-founder and chief executive officer of Social Security Advisors, in an interview with MarketWatch. “It’s critically important for married couples to do Social Security planning.”

Maximizing Social Security spousal benefits requires engaging in discussions about the perfect timing and strategy for claiming benefits. This will vary from one couple to another, but as MarketWatch notes, Social Security always allocates the higher of an individual’s own benefits or spousal benefits to the lower-earning partner.

Couples considering claiming benefits should set up an online account with the Social Security Administration if they haven’t already. This will allow them to access the calculator, enter their data and estimate their expected benefits at different claiming ages, making it easier to make informed decisions about their benefit strategies.

So what else can you do to maximize your benefits? Well, first, avoid taking them too early. It is tempting to retire early and start claiming benefits as soon as possible, but if you have a reasonable amount of savings and your lifestyle is within your means, the longer you can wait to claim, the more money you will receive. Claiming at the minimum age will permanently reduce your hourly benefit by 30%, which you may not think matters now, but it will in a few years if your medical costs skyrocket or inflation continues to rise. Living comfortably for as long as possible is important.

In real numbers, if your full retirement benefit is $2,000 per month at age 67, claiming at age 62 will reduce that monthly amount to just $1,400. And it is not just your benefit that will be reduced, but your spouse’s as well, which will really put a damper on your future financial plans.

On the other hand, waiting until 70 may not be for you either. While the Social Security beneficiary will see his or her benefits increase, the spouse will not. Their payout is capped at 50% of the primary beneficiary’s full retirement age benefit, so waiting to claim may put you in an unnecessary financial bind. Have the conversations, set expectations, and do the math so that when the time comes, you are on the same page.