Deciding at what age to start receiving Social Security benefits is one of the biggest questions most retirees face when approaching retirement. The same question gets even more complicated if you are married, as you and your spouse need to plan together to maximize the benefits. Fortunately, a few strategies are available for married couples that can help them boost their Social Security benefit. In this article, we will discuss Social Security strategies for married couples that can help them to maximize their benefits.
Points to note
Before we detail Social Security strategies for married couples, there are a few points that couples need to understand.
First and most important is to get an idea of the amount of benefit they could expect after retirement. One easy way to estimate your benefit is to create a mySocialSecurity account on the Social Security Administration’s (SSA) website.
Your mySocialSecurity account offers a personalized estimate of your future benefits based on your expected retirement age and work history. Alternatively, several calculators are available online that can help you estimate your benefits at different claiming ages. It is recommended that you estimate your and your spouse’s benefits at different ages to get a clear idea of the maximum and minimum benefits.
Also, married couples need to know they won’t receive the full benefit until they reach full retirement age (FRA). Additionally, couples must also know they can claim spousal benefits based on their partner’s work record. The spousal benefit can be up to 50% of their spouse’s benefit at FRA.
Also, to maximize benefits, couples need to understand how the SSA calculates benefits. One of the most important factors determining your Social Security benefit is your work history.
The SSA uses your 35 highest-earning years to calculate your AIME (average indexed monthly earnings). If you worked for less than 35 years, the SSA will use zero for each year you worked less. This would reduce your overall benefit amount.
After determining your AIME, the SSA uses a formula to determine your PIA (primary insurance amount). The PIA is the amount you get if you claim benefits at FRA.
If you claim benefits before FRA, which depends on your birth year, your monthly benefits are permanently reduced. On the other hand, if you claim after FRA, your benefits will increase. In fact, delaying your benefits until age 70 could increase your monthly benefits up to 24% more than your PIA.
In particular, four Social Security strategies for married couples can help them maximize the combined benefits. These strategies mainly revolve around the timing of when each spouse claims their benefits. Choosing one of these four Social Security strategies primarily depends on their income and financial needs.
Following are the Social Security strategies for married couples:
One claims early, one delays
This is the best strategy for couples needing immediate money. Under this strategy, one couple claims benefits early, while the other one delays until age 70.
Such a strategy offers immediate income to the family while allowing the couple to benefit from higher delayed retirement credits in the future. The spouse who delays claiming benefits will get more in monthly benefits which could offer the couple long-term financial security.
Both claim early
In some scenarios, it makes sense for both spouses to claim benefits as early as possible, i.e., at age 62. Although such a strategy results in lower monthly benefits checks, it offers money earlier.
Claiming benefits early is the best option for couples who don’t expect to live long due to deteriorating health conditions. When selecting this strategy, it is important for couples to take into account the long-term implications of reduced benefits.
Both delay until age 70
Such a strategy results in maximum monthly benefits payments. As noted above, delaying benefits beyond FRA boosts monthly benefits. So, if circumstances allow both spouses to delay their benefits until age 70, adopting this strategy could significantly boost their monthly benefit checks. Such a strategy, however, will only prove effective if both spouses have worked and earned their benefits.
Such a strategy is more useful for couples who don’t have enough savings to retire early and, thus, want to work for more years. Also, the strategy is suitable for those who love working. On the other hand, such a strategy may not prove useful for people who don’t expect to live very long.
One claiming spousal benefits
Claiming spousal benefits, rather than claiming your own benefits, could prove extremely beneficial if one spouse has significantly higher lifetime earnings and the other has low earnings. So, the spouse with lower earnings could benefit by claiming spousal benefits based on the higher earnings spouse’s record.
To claim spousal benefits, the lower-earning spouse needs to be at least 62 years old and the higher-earning spouse must have claimed their own benefits. The spousal benefit could be as much as 50% of the higher-earning spouse’s benefit.
These Social Security strategies for married couples can help them maximize their monthly Social Security checks. Choosing the right strategy requires a careful evaluation of the financial needs, health and working history of each spouse. It must be noted that the above-discussed strategies are not perfect, and each has its own pros and cons. So, the best strategy for you will be the one that helps you to meet your current and future financial needs.