Now that you know the fundamentals of the social security system, it’s time to learn how to make the most of getting benefits as a married couple. Employing any of the following strategies will help maximize your social security income.
Spousal Benefits for Non-Working Spouse
The true key to getting the most out of social security comes from spousal benefits. The government allows a spouse to share in social security income, even if that spouse didn’t work. He or she can take up to 50% of the retired worker’s full benefit. In addition, the worker’s income is not reduced by the amount the spouse gets.
As a couple you could receive hundreds of thousands of dollars in benefits over the course of retirement that a non-married couple wouldn’t. Even if you’re married just one year, you’re allowed to collect a full spousal benefit. And you may claim survivor benefits if your spouse dies after you’ve been married at least nine months.
This strategy works best if the spouse takes benefits at full retirement age (FRA). If a spouse files earlier, say 62, the benefits will be reduced to 35% of the spouse’s benefit instead of 50%.
File and Suspend
If both spouses worked, you can enhance your spousal benefits by using the file and suspend strategy. In order to do that, one spouse will have to file for his or her benefit and suspend collection of that benefit until age 70. By doing that, the total benefit grows through delayed credits. The other spouse can then apply for the spousal benefit and receive half of what the fling spouse was supposed to get.
An example may make this a little clearer. Suppose Ben is entitled to $2500 per month and decides to apply for benefits at 67, his FRA. He can do so and immediately suspend his benefits to grow at 8% a year until he’s 70. At the same time, I would be able to apply for spousal benefits of $1250 per month while letting my own grow. Once I get to age 70, I could choose whichever benefit was higher – my own and the spousal benefit. (Caveat: I can only convert to my full benefit if I waited until my FRA to file for a spousal benefit.)
This works especially well, if the higher earner is the one delaying his or her benefit.
Claim Now, Claim More Later
You can also work the file and suspend strategy in the opposite direction. In that scenario, you would have the lower earning spouse apply for benefits, with the higher earner applying for spousal benefits at FRA. Then, at age 70, the higher earner can switch to his or her benefit.
So let’s go back to me and Ben in retirement. Say he is entitled to $2,500 at FRA, and I get $1000. Under claim now, claim more later, Ben would claim his spousal benefit (again, assuming he’s 67) getting $500 per month. And I would get $1,000 per month. When Ben reaches age 70, he would switch to his own benefit, which would be $3,300 per month. I could also get $1,250 per month, half of Ben’s FRA benefit, Combined we now get a retirement benefit of $4,550, as opposed to the $3500 if we both just claimed at our full retirement age.
This approach can help ensure the highest income and that the surviving spouse will receive the largest benefit possible when the surviving spouse dies. The surviving spouse would get 100% of the deceased spouse’s benefit including the retirement delay credits.
If it all seems a bit complex, it is. And as with most personal finance scenarios, one size won’t fit all. A lot of choosing when to receive benefits depends the ages of both individuals, each person’s health, and the need for the income.
Luckily there are several resources online that can help you sort all of this out. Check out maximizemysociallsecurity.com or socialsecuritytiming.com. You should also consider seeing a fee-only certified financial planner to help figure out your situation. Maximizing your social security will get you a lot more income in the long run.