The Smart Social Security Strategy Nobody Knows About

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Millions of Americans rely on Social Security to help them make ends meet in retirement. That makes it more important than ever to get as much in Social Security benefits as you can. But given how complex Social Security is, that task can be a big challenge. You really have to know the ins and outs of several Social Security strategies in order to maximize your benefits.

In this video, Dan Caplinger, the Motley Fool's Director of Investment Planning, looks at a little-known Social Security strategy called the restricted application strategy. Dan gives a simple explanation of the strategy, noting that under the restricted application method, one spouse files for Social Security benefits but restricts them to spousal benefits based on the other spouse's work history only. The first spouse doesn't claim benefits based on his or her own work history, instead deferring them and letting them grow until reaching age 70, at which point they max out. By doing this, the first spouse is able to get what amounts to extra benefits while still getting increased payments later on.

In discussing the benefits of the restricted application strategy, Dan points out that the strategy works best when there isn't too large a disparity between the two spouses' earnings histories. When one spouse has little or no income record, the file-and-suspend strategy often works better. Dan concludes with some discussion of the importance of making the most of both spouses' work records in order to maximize total benefits.

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