Make the Most of Social Security for Couples

As married couples enter their sixties, they face an important, and difficult, decision: when to start collecting Social Security. Logically, husbands should start taking benefits early while their wives should claim higher benefits later. Because women tend to live longer than men, the presumption is that women are more likely to reach the “break-even age” -- when the total value of those higher benefits exceeds the total value of lower early-retirement benefits.

But a new study tosses that logic on its head. Married women generally are better off claiming benefits at the early-retirement age of 62, while their husbands generally should wait until 69, according to Boston College's Center for Retirement Research. The study was conducted by center director Alicia Munnell and senior research associate Mauricio Soto.

The authors set out to determine how married couples can collect the most benefits during their years together and the rest of the surviving spouse's life. A married woman can collect Social Security based on her own earnings starting at 62, or she can claim "spousal" benefits based on her husband's earnings. A spousal benefit is equal to 50% of the husband's benefit. In either case, her benefits will be reduced if she claims before she reaches full retirement age, but her decision will not affect her survivor benefits, which she can receive after her husband dies.

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A key to maximizing a couple's benefits is to increase the value of the survivor benefit, the study found. The surviving spouse is eligible to receive 100% of the higher-earning spouse's benefits. If a husband collects at 62, his benefits, and his wife's survivor benefit, will be reduced by 25%. If he waits until his full retirement age of 66, his widow will get his full benefit. Each year he delays, until age 70, boosts his benefit, and the survivor benefit, by 8%.

If her benefits are cut, why would a wife claim early? For a married woman, her reduced benefit is only temporary, say the authors. By collecting early, she increases the household income and then qualifies for a higher survivor benefit.

Coordinate Your Start Dates

The authors calculated the optimal ages to claim benefits based on various age differences and relative earnings. If the wife's earnings produce a benefit that's 40% or more of her husband's, she should claim at 62 -- because her own benefit is relatively high. He should claim at 69 to maximize the survivor benefit.

If a woman's relative earnings are equal to 30% to 40% of her husband's benefits, the couple's decision is based in part on their age difference. If they're the same age, the husband should hold off until 67 and the wife should wait until 66. The couple will spend most of the retirement period together, during which they'll be enjoying 100% of both his and her benefits. If the wife is three to six years younger, she should take her benefits at 62 and he should claim at 69 to maximize survivor benefits.

Finally, wives with the lowest relative earnings should collect a spousal benefit, which she can only do when her husband retires. If there's an age difference of five or six years, he should wait until 68 and she should collect at 62. If they're the same age, they should both collect at 66; the spousal benefit is less important because they’ll be spending most of their retirement together. (To see where you stand, visit the Web site of the Journal of Financial Planning at www.fpanet.org/journal (opens in new tab) to read the study.)

Despite the advantages of claiming benefits early, Munnell says that women are hurt in the long run by leaving the workforce early. Because women live longer, they typically need more money to fund their retirement. Working more years increases their earnings and 401(k) savings. She said in an interview that a husband should work until 69 and a wife should work until 66: "The couple will probably have a more secure retirement when the husband retires later and the woman retires with him."