social security

Why Couples Must Plan for Social Security as a Couple

There are 576 ways to collect Social Security. The option you pick will have a direct impact on your spouse.

I have sat with clients on countless occasions where one or both spouses have told me defiantly, “I am taking Social Security at 62 because [fill in the blank].” Common rationales include:

  1. “The system is going broke.”
  2. “I’m going to be dead by 75.”
  3. “I need the money.”

But in most cases a more accurate statement by the client taking benefits early would be: “I am taking Social Security at 62 because I don’t understand the rules.” It’s no wonder. There are 567 different ways to collect Social Security. That three-digit number is not a typo. Meantime, the number of employees available to help you is shrinking, and, by policy, they can’t give advice. You, as an individual, may never regret taking benefits early, but your surviving spouse won’t be thrilled when inheriting your reduced benefits.

If you turn on the TV, listen to the radio or read the newspaper, odds are the news you’re hearing about Social Security is not upbeat. And yes, I agree, Social Security will face strain over the next few decades as 10,000 Baby Boomers hit 65 every day and the number of workers per retiree continues to decline. According to the Social Security Administration’s 2016 trustee report, the reserves will run dry in 2035. Beyond that, payroll taxes will be able to pay out 77% of scheduled benefits. But let’s not panic. It would take only a small adjustment to the tax rate, wage base or full retirement age to solve this problem.

My point here is that taking benefits because you fear the system will become insolvent is unwise.

People often use the terms spousal benefits and survivor benefits interchangeably. Doing so may lead you down a treacherous path. Social Security whiz Mary Beth Franklin has coined the phrase “You must be present to win.” In other words, you must live a certain number of years to make it worthwhile to delay benefits. That is true for individuals but may not be for couples. When your spouse dies, you continue to receive their benefit or your own, whichever is greater. Sorry — you don’t get both.

How delaying benefits pays off for SURVIVOR benefits

Let’s pretend that Bob and Jane are married. Bob had a full retirement benefit (Primary Insurance Amount) of $2,000 per month, which he would get starting at age 66. Jane has a benefit of $1,200 per month.

Scenario No. 1: Bob decides to take his Social Security benefit early, at age 62. Therefore, instead of $2,000 a month, he gets a reduced benefit of $1,500. That makes their combined benefit a total of $2,700. He later dies at age 70. At that point Jane would see her monthly household total benefit amount of $2,700 drop to $1,500.

Scenario No. 2: Bob decides to delay his benefits until age 70, and because of that his monthly benefit is $2,600, due to delayed retirement credits. Delayed retirement credits (DRCs) are the reward for delaying benefits. Your monthly income will increase by 8% per year from your full retirement age (which is 66 for most people currently) all the way until age 70. Just like in Scenario No. 1, he dies later that year at age 70. Jane’s monthly benefit would switch from her own $1,200 to Bob’s higher benefit of $2,600.

Which benefit would you prefer: $1,500 or $2,600? Survivor benefits include DRCs, and therefore you must plan as a couple.

Delaying benefits doesn’t help for SPOUSAL benefits

Spousal benefits were born in 1939 and allow a spouse to take his/her benefit or half of the spouse’s, whichever is greater. This is the case even for spouses who have not worked enough quarters to earn their own benefits. However, spousal benefits are capped at half of your spouse’s full retirement age benefits. Unlike survivor benefits, they do not increase beyond your full retirement age. If you’re delaying spousal benefits in hopes they will increase, consider your bubble burst and get down to your local Social Security office.

For the folks that we work with, Social Security is part of a much bigger picture. In order to figure out the best time and way to take benefits, it’s essential to take into account pension streams, investments, employment, life expectancy and goals. But consider this: The average man will die before his wife does. When that happens, his pension often vanishes or is reduced, his investments may have been drawn down according to his own life expectancy, and his employer-based life insurance went away when he retired.

Unfortunately, according to the Administration on Aging, 7 out of 10 Baby Boomer women will outlive their husbands. Many can expect to live another 15 to 20 years.* Their major expenses, including housing, are unlikely to significantly change, and they may need long-term care. Don’t increase the burden by passing along a reduced Social Security benefit.

The opinions voice in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The example presented is hypothetical and is not representative of any specific situation. Your results will vary.

*U.S. Administration on Aging. Meeting the Needs of Older Women: A Diverse and Growing Population, The Many Faces of Aging


About the Author

Evan T. Beach, CFP®, AWMA®

Wealth Manager, Campbell Wealth Management

Evan Beach is a Certified Financial Planner™ professional and an Accredited Wealth Management Adviser. His knowledge is concentrated on the issues that arise in retirement and how to plan for them. Beach teaches retirement planning courses at several local universities and continuing education courses to CPAs. He has been quoted in and published by Yahoo Finance, CNBC,, Fox Business, Bloomberg, and U.S. News and World Report, among others.

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