Strategies Married Couples Can Use to Boost Benefits
The payoff can be big when spouses carefully coordinate their Social Security benefit claims.
For married couples, claiming Social Security can be a complex task. They have more options than singles do, providing more opportunities to boost cumulative lifetime income—if they coordinate their start times.
One of the most important rules of thumb for married couples: If just one spouse is expected to live past age 80, their cumulative lifetime benefits will usually be highest if the higher earner delays collecting until age 70, according to William Meyer and William Reichenstein, principals of consulting firm Social Security Solutions. The full retirement age is 66 for those born between 1943 and 1954. For every year you delay until 70, you earn an 8% delayed retirement credit.
A top goal for couples is to boost the benefit for the surviving spouse. In most cases, the surviving spouse is the wife, and the higher earner is the husband. If he dies first, the wife will get 100% of his benefit if she takes the survivor benefit at or past her full retirement age. If she claims earlier, the survivor benefit will be reduced.
That means it often makes the most sense for the higher earner to delay claiming until 70. Here are two strategies with the most potential to boost household income. The higher earner must be at least full retirement age to employ either one. (A wife who is the higher earner can use these strategies, too.)
And beware: These strategies have become so popular that they have caught the eye of the White House, which may be looking to put the kibosh on these tactics. President Obama's budget for 2015 "proposes to eliminate aggressive Social Security claiming strategies, which allow upper-income beneficiaries to manipulate the timing of collection of Social Security benefits in order to maximize delayed retirement credits."
File and suspend. Let's say you're a married man and the higher earner. You want to maximize your benefit by delaying until 70. If your wife is 62 or older, she could collect a benefit based on her own earnings record, but perhaps she'd get more money with a spousal benefit (which is up to 50% of the husband's benefit). One catch: She cannot collect a spousal benefit until you file for your own.
Here's a way to boost household income immediately. You file for your benefit, and your wife applies for a spousal benefit. You ask Social Security to suspend your benefit. Your wife will receive a spousal benefit—even though you are not collecting your own. If your wife is younger than full retirement age, her spousal benefit will be less than 50% of your benefit. But you can continue to work and accrue delayed credits until you reapply for your benefit.
This file-and-suspend maneuver helps provide for your lower-earning wife if you die first. She will be able to step up to a survivor benefit that will be 100% of your benefit at the time of your death. The survivor benefit will include any earned delayed retirement credits and cost-of-living adjustments.
Restrict an application. Typically, the lower-earning spouse is the one who collects a spousal benefit. But there's nothing to say the higher earner can't opt for a spousal benefit temporarily.
Let's say you are the higher-earning spouse and have hit full retirement age. But you want to delay your benefit until 70, to maximize your own benefit and the survivor benefit. In the meantime, you can bring in extra money by applying for a spousal benefit.
First, your lower-earning spouse claims her own benefit. Let’s say she's 62, and because she's claiming early, she gets 75% of her full benefit. Then, you apply for a spousal benefit. Because you are full retirement age, you get an extra bonus: Rather than getting just 50% of her current reduced benefit, you get 50% of what she would have received if she had waited until full retirement age to collect her benefit.
Known as restricting an application to a spousal benefit, this strategy only works if you are full retirement age. If you are younger, you cannot choose between your own benefit and the spousal benefit. The Social Security Administration will automatically give you the highest benefit you're entitled to, which is likely to be the one based on your earnings.
At age 70 or anytime before, you can switch to your own higher benefit. At that point, your wife can switch to a spousal benefit, which will be based on what you were entitled to if you had filed at full retirement age. If you die, your wife's survivor benefit will be based on what you would have received at the age of your death.
Kiplinger's has partnered with Social Security Solutions. For information on obtaining a customized report on maximizing your benefits, go to kiplinger.socialsecuritysolutions.com.