Social Security Claiming Strategies for Married Couples
Delay the Higher Earner’s Benefit
Many retirees focus only on the initial Social Security benefit amount and not the “second stage” benefit calculation, the survivor benefit. When this second stage calculation is taken into account, married couples may find that, if retirement income is needed, it’s beneficial for the spouse who is eligible for the lower Social Security payments to start collecting his/her own worker benefit early—while delaying the other spouse’s benefits.
Then, at the death of the primary breadwinner, the lower-benefit spouse will “step up” to a much higher benefit. In essence, when the primary worker delays benefits, at the death of the first spouse, the smaller benefit drops off and the larger benefit continues. When considering whether to delay Social Security, not only should the worker’s expected longevity be considered, but, perhaps more importantly, the spouse’s as well.
Delay Both Spouses’ Benefits
If both spouses expect to live long retirements, or merely wish to protect their income in the event that they do, they may both consider delaying their benefits. The latest age one can delay benefits and receive Delayed Retirement Credits is age 70. Further, a strategy whereby both spouses delay Social Security claiming to age 70 may prove more tax efficient than starting benefits earlier.
Delay the Higher Earner’s Benefit Until the Spouse’s Benefit Is Maximized
Since a spousal benefit does not grow larger with Delayed Retirement Credits after Full Retirement Age, a married couple may wish to start the higher earner’s benefit when the spouse reaches Full Retirement Age, as this triggers the ability of the spouse to claim a spousal benefit.
Using another example couple, let’s assume that Joe is three years older than Sue. Joe has earned a worker benefit, while Sue has no benefit based on her own work record and will rely on a spousal benefit based on Joe’s work record. Let’s further assume that Joe’s PIA is $2,000 at age 66. Since Sue’s benefit is based on Joe’s work record, her maximum benefit amount (excluding COLAs) is $1,000. This is the amount Sue is eligible for at her Full Retirement Age of 66. If she waits past age 66 to claim her benefit, it does not grow larger with a Delayed Retirement Credit. In addition, she cannot claim this spousal benefit until Joe files for his benefits. Since Sue’s $1,000 benefit does not increase past her Full Retirement Age, Joe could file for benefits at age 69, when Sue is age 66. Joe’s worker benefit would be $2,480 per month since he has earned Delayed Retirement Credits of 8% per year for three years by waiting until age 69 to start his benefits. Sue’s spousal benefit, which she can file for since Joe has filed for his worker benefit, would be $1,000 per month.
Hypothetical Benefit Amount
Before, At or After Sue’s Full Retirement Age (66)