Social Security is a critical source of income for many retirees, especially married couples. However, understanding how to maximize these benefits can be tricky. With proper planning, couples can significantly boost their Social Security payments. Here are three ways married couples can maximize their Social Security benefits.
1. Coordinate the Timing of When to Claim Benefits
The timing of when you claim Social Security benefits plays a huge role in the amount you receive. While the earliest you can claim is age 62, it’s important to know that claiming before your Full Retirement Age (FRA) will result in a permanent reduction in benefits. FRA varies based on birth year but is typically 66 or 67. If you delay claiming until after your FRA—up to age 70—you’ll receive an increased monthly benefit.
Why Delaying Benefits Makes Sense
Delaying your claim can make a significant difference in your monthly payout. For example, if your FRA is 66 and you claim at 62, your benefit is reduced by about 25%. However, if you wait until 70, your benefit could increase by as much as 32%. By waiting, you maximize the lifetime value of your benefits, especially if you live longer than average.
Spousal Benefits and Coordinating Timing
Married couples can further boost their benefits by strategically coordinating when each spouse claims. For example, the higher-earning spouse may benefit from delaying their benefits until age 70, while the lower-earning spouse can claim spousal benefits as early as FRA. Spousal benefits can be as much as 50% of the higher-earning spouse’s benefit if that amount is greater than the lower-earning spouse’s individual benefit.
This strategy allows the couple to receive some benefits earlier while still allowing the higher-earning spouse’s benefits to grow, ultimately ensuring a larger payout later on.
2. Maximize Survivor Benefits
One often-overlooked aspect of Social Security benefits is the survivor benefit. If one spouse passes away, the surviving spouse is entitled to receive the higher of their own benefit or the deceased spouse’s benefit. Therefore, delaying the higher earner’s benefit can not only maximize their monthly payments but also increase the survivor benefit that the surviving spouse will receive.
Delaying the Higher Earner’s Benefits
For couples, it makes sense for the higher-earning spouse to delay claiming Social Security until age 70. This way, not only do they receive a larger monthly benefit, but if they pass away, the surviving spouse will be able to collect the larger survivor benefit.
In this scenario, delaying the higher earner’s benefit guarantees that the surviving spouse will receive a larger benefit throughout their lifetime. The longer the delay, the higher the survivor benefit, which can provide significant financial stability for the surviving spouse.
Ensuring the Survivor Is Covered
If one spouse has little or no work history, they can rely on the other spouse’s record for survivor benefits. The surviving spouse is eligible to receive up to 100% of the deceased spouse’s Social Security benefit, which can be a huge advantage if the higher earner has delayed claiming. This ensures that the surviving spouse will not experience a dramatic drop in income after the other spouse passes away.
3. File and Suspend Strategy (Now Limited)
Previously, married couples could use a strategy called “File and Suspend.” This allowed one spouse to file for Social Security benefits and immediately suspend them, allowing the other spouse to begin claiming spousal benefits while the first spouse’s benefits grew. Unfortunately, this option was eliminated for new claims after April 2016.
Although the “File and Suspend” strategy is no longer available for new claims, couples can still use other strategies to maximize their Social Security benefits. Coordinating the timing of both spouses’ claims and focusing on survivor benefits can help achieve similar results without the use of the “File and Suspend” option.
Conclusion
Maximizing Social Security benefits as a married couple requires careful planning and consideration of various factors. By coordinating the timing of claims, maximizing survivor benefits, and understanding how spousal benefits work, couples can ensure they receive the highest possible payouts. Additionally, delaying claims, especially for the higher-earning spouse, can significantly increase monthly benefits and provide a larger survivor benefit.