Claiming Social Security retirement spousal benefits used to be a complex matter for many married couples. Before the passage of new laws that closed so-called advanced strategies, married people considered file-and-suspend at FRA, restricted applications, and more. Advanced claiming strategies were considered in addition to the choice all Social Security beneficiaries must make about when to claim retirement benefits. This post addresses four key options for married couples claiming Social Security benefits now.
The Bipartisan Budget Act of 2015 eliminated many of the complex choices referenced above. On April 29, 2016, the option to file-and-suspend Social Security retirement benefits was closed. The Restricted Application is still an option for people born in or before 1953 but, with the passage of time, fewer Social Security beneficiaries will be eligible to claim this option. As the old Social Security rules wind down, married couples continue to consider four basic retirement benefits options, including:
Both married partners delay claiming Social Security retirement benefits to FRA or up to age 70
Partner 1 earner delays Social Security retirement benefits to FRA or up to age 70
Partner 2 earner delays Social Security retirement benefits to FRA or up to age 70
Neither partner delays Social Security retirement past FRA or, in some cases, one or both claim early retirement benefits from Social Security
When Both Spouses Delay Claiming of Social Security Retirement Spousal Benefits
In order for married people to benefit from both individuals’ decision to delay claiming Social Security retirement benefits, it’s necessary for both spouses to live longer than the break-even period. If both delay claiming benefits in order to capture higher Social Security retirement benefits but one passes away before the break-even point is reached, his or her benefit from the delay is lost: 1) either his or her benefits cease before benefits end or 2) the other marriage partner’s decision to delay is overwritten by the spouse’s death.
Even if both members of the marriage are likely to attain average life expectancies, it might not be the best idea for both to delay claiming Social Security retirement benefits. Although the odds may look good that both are likely to reach break-even by achieving an average life expectancy, it’s important to consider joint probability. Actuaries say that odds of both achieving an average life expectancy are less than 50 percent. Learn more about Social Security’s Life Expectancy Calculators at SSA.gov.
The decision to delay claiming Social Security retirement benefits is challenging when one couple of significantly older than his or her spouse. The likelihood that both spouses will survive to break-even point is reduced because of the gap between their ages.
Let’s consider an example. John got married at age 50 to Denise. She is 15 years younger than John. John decided to delay claiming Social Security retirement benefits until his 70th birthday to increase his retirement income and Denise’s potential survivor benefit. Denise is now considering whether to delay her Social Security benefits:
John is now 66 years old. He’s at FRA.
Denise isn’t eligible for Social Security yet. If she decides to wait until her 70th birthday, she’s still got years to go before reaching the break-even period in her 80s. It’s difficult for Denise to image that far ahead.
By the time Denise is old enough to claim Social Security retirement, her spouse’s health may decline. John is in average good health and he’s seeing a cardiologist because heart disease runs in his family. It’s possible that John will predecease her.
In order for John and Denise to decide it’s a good idea for both to delay claiming Social Security retirement benefits to age 70, it’s important to consider actuarial statistics. It may be a more prudent decision for John to claim Social Security retirement benefits at FRA or up to age 70, and for Denise to claim retirement benefits at age 62 or later.
When One Spouse Delays Claiming Social Security Retirement Benefits
Considering the challenge to determine if two spouses in a marriage will reach the required break-even age to make it prudent for both to defer, it’s likely that one spouse will decide to delay and the other spouse will claim benefits at plus-or-minus FRA.
In general, the higher earning spouse may delay. That’s because the couple’s goal is to maximize both spouses’ retirement benefits. If the higher earning spouse delays claiming his or her benefit to age 70, it’s possible to achieve the highest possible personal retirement benefit from Social Security and maximize the spouse’s survivor benefit.
Now, let’s think about the challenges facing another married couple. Arnold is 62 years old. He estimates that at FRA, age 66, he’s eligible to receive about USD 2,000 each month as a Social Security retirement benefit. Karen, his wife, is the same age but, because she stayed home for several years to care for their children, her PIA is about USD 1,200 a month:
If Karen decides to delay claiming Social Security benefits based on her record to age 70, she estimates that her monthly benefit would increase to almost USD 1,600 a month (along with cost-of-living or COLA adjustments). She’d need to reach her early 80s to achieve the break-even point.
Karen is concerned about living until her 80s. She’s in fair health today.
Arnold says he’s in average health.
Both spouses are concerned about the other’s ability to live past average life expectancy.
If Arnold delays claiming Social Security retirement benefits, his monthly retirement income will increase to about USD 2,600 per month.
If Arnold lives to break-even age or if Arnold dies and Karen lives to receive his higher monthly survivor benefit, it’s possible to imagine financial security in either case.
That’s why most couples conclude that the higher wage earner should delay claiming Social Security retirement benefits. In doing so, he or she claims a higher personal Social Security retirement benefit and creates the possibility of a higher survivor benefit for the spouse.
When Both Spouses Decide to Claim Early Social Security Retirement Benefits
If both spouses are in poor health, or both suffer from serious chronic conditions, it’s possible that neither spouse will survive to the necessary break-even point. Before making the decision to claim early retirement benefits in this scenario, the spouses should carefully consider life expectancy, family longevity, and lifestyle factors that could improve either or both health outcomes.
Perhaps one spouse is in average health and he or she assumes the role of caretaker to a spouse in poor health. In that case, it’s important for the couple to consider their options. If the caretaker spouse is able to perform a job outside the home, he or she can still accrue Social Security earnings credits. It may be in their mutual best financial interest to have the partner in average health delay his or her Social Security retirement benefits while the other spouse claims early retirement.
When both marriage partners are in poor health, the choice to claim early retirement benefits from Social Security may be a relatively easy decision. Claiming early retirement can help both individuals to focus on health issues and time with each other.
When to Claim Social Security Benefits
The decision about when to claim Social Security retirement benefits is a challenging task for most people. If you’re married and have multiple sources of income and investments, it’s a good idea to discuss your situation with a qualified financial adviser.