Mar 22, 2019 4 min read

We are going to have a slightly different discussion about Social Security.

Sometimes the Social Security Administration sends out letters that can be a little confusing. People born before 1954 have a valuable option that those born that year or afterward do not have: the right to file a restrictive application. A restrictive application gives you the right to file for one of your benefits without automatically filing for all of your benefits. This can be worth a lot of money in additional benefits.

Married couples can receive retirement benefits from their own work record or that of their spouse if they have been married for at least nine months. Anyone who files before their full retirement age or was born after 1953 is considered deeming when they file. This means they are filing for their own benefit first, then it is determined if they are eligible for any spousal add on.

You get this additional money if half of your spouse’s benefit is greater than all of your income amount. For example, if you would get $700 on your own and your spouse would get $2,000 at full retirement, you would get an additional $300 per month. If your spouse gets $1,400 per month and you get $1,000, there would be no additional money awarded to you. If you file before your full retirement age, you will get less than 50 percent.

A restrictive application allows people who are full retirement age and born in 1953 or earlier to file for spousal only and allow their own benefit to continue rolling up 8 percent a year until age 70. This is a very valuable benefit for those who qualify.

If you are doing this, you might receive a letter from the Social Security Administration saying you could receive more money today from SS if you changed to your own benefit. We know that, but changing would destroy the opportunity to get up to 132 percent of your higher income for life while still receiving a SS benefit today.

Remember, these delayed credits do increase the amount someone receives as survivor’s benefits upon the first death. If you receive this letter, and your plan is to maximize this future income, ignore this letter.

Another factor that is affecting the health of the overall SS system is the change in our economy to more independent workers. These workers are independent contractors, freelancers or workers selling goods and services through apps and on online. These self-employed people sometimes operate in the underground economy.

Because they work for themselves, they would be responsible for paying both halves of SS. This is the employer and employee share.

A recent research paper from the Center for Retirement Research at Boston College found that many of these workers under-reported self-employment income. This loss affects the Trust Fund balance because SS has always been a system in which current workers fund the benefits for retired workers.

It also will have a dramatic impact on future benefits for these independent workers. Because they are paying less into Social Security, their benefit will be much lower when they retire. Because these workers will be responsible for their own retirement income, they may have a difficult time making ends meet during retirement.

Social Security is an important government program in need of updates to continue its pivotal role.

Gary Boatman is a Monessen-based certified financial planner. He is author of “Your Financial Compass: Safe passage through the turbulent waters of taxes, income planning and market volatility.”

To submit columns on financial planning or investing, email Rick Shrum at rshrum@observer-reporter.com.