When you make your retirement
plan, you need to give careful thought to your Social Security claiming
strategy. This is especially true if you are a married couple. The decisions you
make about when each spouse should claim benefits can have a huge
impact on your household income.
Unfortunately, many spouses make independent claiming choices without realizing
this can be a costly mistake and a major missed opportunity. Couples that work
together, on the other hand, can find a strategy that makes sense for both
spouses and often end up with thousands of dollars more in benefits in
the process.
It just takes a little knowledge and some coordination. Here’s how you can do
it.
Why married couples have more Social Security claiming options
Married couples have more Social Security claiming options because each spouse
can claim benefits on their own work record or their spouse’s. For example, you
could claim:
- Retirement benefits, with the amount based on an inflation-adjusted average
of monthly wages during your highest 35 earning years. - Spousal benefits equal to up to 50% of your spouse’s primary insurance
amount (standard benefit). - Survivor benefits, equal to the amount your spouse was collecting or the
amount they’d have been entitled to at full retirement age, plus any delayed
retirement credits they earned.
You have to understand the way these benefit programs work and how much each can
provide so you can maximize combined benefits.
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Why coordination matters so much to maximize lifetime Social Security
Spouses have to coordinate on their benefits because the decisions made by one
spouse impact the other. Specifically, your spouse can’t claim spousal benefits
on your work history until you claim retirement benefits. Additionally, if you
make an early benefits claim as the higher earner, you shrink your spouse’s
survivor benefits. You also can’t just file for spousal or retirement benefits; if you file for one kind of benefit, you’re deemed to be filing for all the
benefits you are entitled to (with the exception of survivor benefits).
This means your choice could affect whether your spouse gets to start their own
benefits, as well as the benefits they’ll have to live off if you pass away.
A common and effective Social Security claiming strategy for married
retirees
Given the details about how Social Security works, one of the best strategies
recommended to many married couples involves:
- The lower-earning spouse claims their own retirement benefits
early (usually around age 62 to 64) to bring some income into the
household. They take a hit on their benefits, shrinking the amount they collect
compared to their standard benefit. - The higher earner delays until 70. This enables them to max
out the larger of the two benefit checks each couple was entitled to. Plus, it
increases survivor benefits. - The lower earner switches over to spousal benefits. The
higher earner’s benefits claim unlocks spousal benefits (which were previously
inaccessible due to rules requiring the person whose records the benefits are
based on to claim first).
This locks in the maximum larger benefit, as well as survivor benefits, and
often not much was lost if the lower earner ends up switching to spousal
benefits once their spouse finally claims.
How much can you increase your benefit?
Waiting to claim benefits increases your payment for each month you wait between
full retirement age and 70. If the higher earner has an FRA of 67 and waits
three extra years, that amounts to a 24% increase.
If the higher earner had been on track for a $2,000 standard benefit at FRA, the
24% boost means they collect $2,480. And, of course, their spouse will get this
bigger benefit too if the higher earner passes away, as Survivor benefits equal
100% of the deceased person’s benefit, including the delayed retirement credits
earned.
As a bonus, the other spouse will have been able to collect Social Security for
several years before finally claiming their spousal benefits. At 50% of the
higher earner’s $2,000 standard benefit, that means the other spouse would be
getting $1,000 in benefits per month after making the switch.
Some married couples can end up with $10,362 per month
For some couples, coordinating requires a review of multiple complex scenarios.
But for older couples with a similar (high) income, the best bet may be for both
to just wait until 70.
If each person in the couple worked for at least 35 years and earned an income
equal to or above the wage base limit (the maximum wage subject to Social
Security tax), they can max out their standard benefit.
If they then wait until 70 to also max out delayed retirement credits, they’ll
earn the highest possible Social Security check of $5,181 per month.
And if both earned an income above the wage base limit and are entitled to the max benefit, they’re each entitled to that $5,181, so they can get a total of $10,362 per month in Social Security benefits coming into their household.
Bottom line
Social Security is protected against inflation by COLAs, and it’s not going to
run out as long as you live. Those two critical features alone make Social
Security checks extremely valuable. If you want to make the right
moves for retirement, taking the time to maximize these benefits absolutely
pays off.
So, give yourself the best chance of maxing out lifetime Social Security
benefits by understanding all the different options for married couples and
choosing the strategy that is best for you and your spouse, given how
much you each earned, your ages, and your goals for the future.
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Author Details
Christy Rakoczy Bieber
Christy Rakoczy Bieber is an attorney turned personal finance writer who has spent 17 years helping readers understand Social Security: the claiming rules, the policy shifts, and the fine print that can mean thousands of dollars in lifetime income. Her work has appeared in Kiplinger, Forbes, The Motley Fool, and the Wall Street Journal.
