Social Security Strategies for Married Couples in 2020

Married Couples Have Flexibility In Claiming Social Security Benefits

In terms of claiming benefits, Social Security provides married couples with more flexibility than it offers single folks. The best strategy for each couple depends on their ages, health, and earning histories.

Social Security Claiming Basics

Before we review Social Security strategic options for couples, let’s look at some basics about claiming options.

Individuals can claim Social Security:

Early at age 62
At this age, individuals will permanently reduce their benefits by 25%. Make sure early claiming is the best option for you. Once you select it, you will forever reduce your social security or spousal benefit.

At Full Retirement Age (FRA)
Social Security describes the full retirement age as “the age at which a person may first become entitled to full or unreduced retirement benefits.”

FRA is 66 and a few months for individuals born prior to 1960. For people born after January 1, 1960, the FRA is 67. You can check your exact FRA at this chart on the Social Security website.

Delayed past FRA
Individuals can delay taking their social security benefits until age 70. For each year of delay, the individual’s benefit increases by 8%. After age 70, the benefit stops increasing.

Factors for Couples to Consider in Timing

To make the most of your Social Security benefits, you and your spouse should develop a joint plan.

Typically, the best strategy is for the higher-earning spouse to delay claiming their benefits for as long as possible. By delaying up to age 70, an individual gets the highest possible benefit. This strategy also provides the highest possible survivor benefit for their spouse. This tactic works if both spouses are close in age and relatively healthy.

The health of each spouse
Before you decide to delay, you should consider health factors. If the higher-earning spouse has a major health issue, the decision is more complicated. The higher-earner still might want to delay taking a benefit until age 70 to provide the surviving spouse with a higher spousal benefit.

If the healthier spouse will receive a Social Security benefit based on their own work record, the older (less-healthy spouses) could take the benefit as soon as possible.

If both spouses have serious health issues, you might be better to take benefits at the full retirement age or earlier.

The age of each spouse
If you have a large age gap (10 or more years) between you and your spouse, your planning is also a little complicated.

With large age-gap couples, a staggered retirement might be the best plan. For example, assume this scenario: the husband is older and the higher earner and the wife’s benefit will be at least ½ of her husband’s benefit.

In this case, the husband should make his claiming decision based on his wife’s life expectancy. For this couple, she’ll receive a survivor benefit of 100% of his benefit, if she has reached full retirement age when he dies. Therefore, it’s best for him to delay claiming his Social Security until he reaches age 70.

With this couple, because the wife is the lower-earning partner, she should claim her benefit as soon as possible (age 62). She can then switch to the higher survivor benefit when her husband dies. When she claims her own benefit, it does not affect her survivor benefit.

Spousal Benefits

Spousal benefits are different from personal benefits with regard to delayed claiming. If you delay your personal benefits (up to age 70), the benefit increases over time.

However, the spousal benefit reaches the maximum limit at full retirement age. Therefore, you receive no additional benefit in delaying your spousal benefit claim.

Older Couples Have Unique Claiming Option

For couples born prior to January 1, 1954, they have a unique claiming option called a restricted claim for a spousal benefit. With this strategy, a partner can file a “restricted claim” for their spousal benefits and not trigger a start of their own benefit.

For example, let’s assume the husband was born in 1952 and claimed his Social Security benefit when he reached his FRA. His wife, born in 1953, could file for a restricted spousal benefit because she has also reached her FRA.

She can receive ½ of his Social Security benefit as his spouse. With the restriction, she delays taking her own Social Security benefit until she reaches age 70. Her benefit will grow each year. This restricted application is not available to individuals born after January 1, 1954.

Government Pension Offset (GPO)

If you worked many years for a federal, state, or local government, you did not pay Social Security on your income. Due to your time in civil service, you may receive a government pension. Social Security will reduce your Social Security spousal or survivor benefit with an offset factor based on your pension annuity.

Why the Offset
In the 1930’s Social Security set up spousal and survivor benefits as “dependent” benefits. At that time, a spouse, typically the wife, stayed home to raise a family. As she did not work outside the home, she could not accrue Social Security benefits and she depended on her husband’s income.

Fast forward to today’s dual-income couples, where it’s common for each spouse to work and earn their own Social Security benefit. The law requires a person’s spousal or survivor benefit to be offset by the dollar amount of their own retirement benefit.

What is the Offset
Social Security reduces the spousal or survivor benefit by 2/3 of their government pension.

For example, assume you are eligible for a $500 spousal or survivor benefit and the Federal government pays you a civil service pension of $600.

Social Security will deduct two-thirds (or $400) of that $600 pension from your spousal benefit. In this case, you will receive a $100 spousal or survivor benefit ($500 – $400).

If two-thirds of the government pension is more than your Social Security benefit, the agency will reduce your benefit to zero.

If you have any questions about the best Social Security claiming strategy for you, please contact us.

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