Just Business

In general, the primary factors that determine when married people should take Social Security are the same as those for determining when unmarried people should take Social Security:

• The longer you expect to live, the more sense it makes to delay Social Security.
• The more you care about maximizing your spendable income as opposed to maximizing the amount you leave to your heirs, the more sense it makes to delay Social Security.

And as we’ve discussed before, if one spouse’s Social Security benefit is significantly higher than the other spouse’s, delaying benefits for the higher-earning spouse is often an especially good deal because it results in an increased payout for the longer of the two spouse’s lifetimes (due to survivor benefits).

In addition to the above considerations, however, there are two clever strategies available to married couples that (depending on circumstances) might allow them to maximize their Social Security benefits even further.

The “Spouse then Switch” Strategy

From SSA.gov:

If your spouse has reached full retirement age and is eligible for a spouse’s benefit and his or her own retirement benefit, he or she has a choice. Your spouse can choose to receive only the spouse’s benefit now and delay receiving retirement benefits until a later date. If retirement benefits are delayed, a higher benefit may be received at a later date based on the effect of delayed retirement credits.

Example: Steve and Beth were both born in 1945, so they each reached their full retirement age of 66 this year. They have similar earnings histories, so their own retirement benefits will be larger than what either would receive via a spousal benefit.

When Steve reaches full retirement age, he applies for his own retirement benefit, and when Beth reaches full retirement age, she applies for a spousal benefit. Four years later, when Beth reaches age 70, she files for her own retirement benefit.

Result: Beth was able to receive spousal benefits for four years (from age 66 to 70) at essentially no cost to her, since her own retirement benefit was growing the entire time because she had not yet filed for it.

Note: When filing for only a spousal benefit, it’s important to make it very clear that you are not filing for your own benefit. I’m told by readers who have done this that it’s probably best done in person rather than online, so that you can make sure that the SSA employee you’re speaking with understands exactly what your intention is.

The “File and Suspend” Strategy

Again from SSA.gov:

If you are full retirement age, you can apply for retirement benefits and then request to have payments suspended. That way, your spouse can receive a spouse’s benefit and you can continue to earn delayed retirement credits until age 70.

Example: Katie and Joe were both born in 1945, so they each reached their full retirement age of 66 this year. Katie has earned significantly more than Joe over their lifetimes. As a result, Joe’s spousal benefit is going to be larger than his own retirement benefit.

Both Katie and Joe have family histories of people living well into their nineties. As a result, they’ve decided it makes sense for Katie to delay her own Social Security retirement benefit until age 70.

Spousal benefits, however, do not increase for delaying beyond full retirement age. Joe, therefore, would like to claim spousal benefits starting at 66 (his FRA), but he cannot claim a spousal benefit until Katie has filed for her retirement benefit (which she doesn’t want to do until age 70).

Solution: Katie files for her retirement benefit as soon as she reaches full retirement age. She then immediately requests to have payments suspended. Because Katie has filed for her retirement benefit, Joe can now file for his spousal benefit. And because Katie has had payments suspended, her benefit will continue to grow until age 70.

Combining Both Strategies

If both spouses want to delay their own retirement benefit until age 70, it may be possible to combine the two strategies above to get 3-4 years of “free” spousal benefits for one spouse.

Example: Christopher and Patricia were both born in 1945, so they each reached their full retirement age of 66 this year. They have similar earnings histories, and they both want to delay their retirement benefits until age 70.

Upon reaching full retirement age, Patricia files for benefits and asks to have payments immediately suspended. Christopher then applies for a spousal benefit (as outlined in the first strategy above). Then, at age 70, Christopher switches to his own retirement benefit, and Patricia ends the suspension of her benefit payments.

Result: Christopher is able to receive spousal benefits for four years (from age 66 to 70), while they both allow their own retirement benefits to grow until age 70.

Important note: To implement the combined strategy, it’s often important for only one spouse to file and suspend. Once you’ve filed for your own benefit (even if you’ve suspended payments), if your own benefit is greater than 50% of your spouse’s full retirement benefit, you cannot choose to collect only a spousal benefit. As a result, if both spouses file for their own benefit, neither one will be able to get the “free” years of spousal benefits.

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