How couples can maximize Social Security
Q: How can my spouse and I make the most of our combined Social Security retirement benefits?
A: Married couples have more to consider to maximize their benefits, but they also have certain advantages. Even if one spouse never earned income covered by Social Security, he or she may claim benefits based on the other spouse’s record, as long as the other spouse has started claiming benefits.
If you claim spousal benefits at your full retirement age, you get 50% of your spouse’s primary insurance amount — that is, the benefit your spouse is eligible to receive at his or her full retirement age. If your husband or wife waited to claim benefits past full retirement age, the calculation of your spousal benefit does not include any delayedretirement credits. And if you claim your spousal benefit between 62 and your full retirement age, the benefit is reduced.
If both members of a couple can claim benefits based on their own work history, the lower earner may still get spousal benefits if his or her own benefit is less than half of the other spouse’s PIA. In that case, the lower earner receives his or her own benefit plus an additional amount so that the total payout adds up to the maximum spousal benefit for which the lower earner is eligible.
Beyond the ins and outs of spousal benefits, there’s the question of when each spouse should start benefits. Ultimately, the spouse with the higher PIA should determine when to start benefits based primarily on the life expectancy of the spouse who is expected to live the longest, says Bill Meyer, CEO of Social Security Solutions. If at least one spouse is likely to live past 80, it often makes sense for the higher earner to delay claiming until age 70.
Meanwhile, the lower-earning spouse may choose to claim his or her own benefits as early as 62 to gain some income. When one spouse dies, the surviving spouse receives 100% of the highest benefit.
Those who were born before Jan. 2, 1954, can use a strategy called “restricting an application to spousal benefits.”
Using this method, the higher-earning spouse can temporarily take a spousal benefit, which may prove lucrative in the long run. At full retirement age or later, the higher earner applies for spousal benefits while the lower earner collects his or her own benefit. Because the higher earner has reached full retirement age, he or she gets half of the lower earner’s primary insurance amount.
During this time, the higher earner builds delayed-retirement credits on his or her own benefit, and at age 70, the higher earner switches to the boosted benefit. The lower earner switches to a spousal benefit if it’s higher than his or her own.
Lisa Gerstner is a contributing editor to Kiplinger’s Personal Finance magazine. Send your questions and comments to moneypower@kiplinger.com. And for more on this and similar money topics, visit Kiplinger.com.