Tuesday, November 11, 2014

Married - Let Uncle Sam Pay You More Social Security

By:  Susan M. Graham, Certified Elder Law Attorney, Senior Edge Legal, Boise, Idaho

A married couple planning for their retirement may want to consider strategies that maximize the Social Security income for both spouses, and for the survivor. 

Married couples should consider a number of variables before making a claim for their Social Security benefits.  These include:

            Who is the higher-earning spouse?

            What is the age of each spouse?

            Does a spouse want to keep working until age 70?

            What is the anticipated life expectancy of each spouse?

            What other sources of income are available to the couple after age 62? 

Do you know long you will live?  New mortality tables prepared by the Society of Actuaries determined a woman age 65 today will live to 88.8 years (= 23.8 more years), and a man age 65 is expected to live to 86.6 years (= 21.6 more years).[1]  

An easy way to explore the Social Security choices is to look at examples for a couple approaching retirement. 

1.  Maximize the Survivor Benefit. 

Both Frank and Betty are now age 60.  Frank will receive Social Security benefits of $2,500 (100%), if he applies at his full retirement age of 66.  If he files at age 62, he will receive 75% or $1,875.  If he waits to apply until he reaches age 70, he will receive 132% or $3,300.  Betty stayed home until the kids were out of high school, so her work history is shorter than Frank’s.  If she claims Social Security at age 66, her payment would be $1,400.  The examples below assume a cost of living for Social Security that results in a benefit increase of 2.8% annually. 

Frank and Betty Die at Age 95[2]

Assume they both apply for their benefits at age 62 and both die at age 95. They will receive a total of $2,062,000 in Social Security monthly payments.  If Betty waits to apply for Social Security until age 66 and Frank applies at age 70 and they both die at age 95, they will receive a total of $3,128,000, or an extra $1,066,000.

Frank Dies at Age 70 and Betty Dies at Age 95

When Frank dies, Betty, as the surviving spouse, will receive 100% of the benefits Frank originally applied for, which is the benefit he was receiving at his death.  If both Frank and Betty applied for benefits at age 62, then Frank dies at age 70, and Betty dies at age 95, the total Social Security Benefit received by both Frank and Betty would be $1,456,000.  If Betty waits to apply for Social Security until age 66 and Frank applies at age 70, then Frank dies at age 70, and Betty dies at age 95, they will receive a total of $2,060,000, or an extra $604,000. 

2.  Claim and Suspend.[3] 

If the higher earning spouse wants to work past age 66, and the lower earning spouse wants to stop working and collect Social Security, the “claim and suspend” technique may be a good choice. 

How does this work?  

Doris is age 62.  Based on her work history, if she claims at age 62, she will receive a Social Security Benefit of $563.  If she waits to claim at age 66, her Social Security Benefit will be $750. 

Sam is age 66.  Based on his work history, if he claims at age 66, his Social Security Benefit will be $2,000 per month. 

Sam “claims” his benefit at age 66 but “suspends” (delays receiving) the benefit.  Doris can claim a spousal benefit based on Sam’s work history and she will receive $700 per month.  This is $137 more than she would receive if she claimed her own benefit at age 62 ($700 - $563 = $137).

At age 70, Sam “activates” (begins to take) his claimed benefit and, because he has delayed receiving his benefit until age 70, he receives $2,640 per month – an increase of 132% ($2,640 - $2000).  Doris continues to receive $700 per month. 

If Sam dies before Doris, then she will receive 100% of his benefit, or $2640, adjusted for inflation for the rest of her life.

To find out what is the best election for each married couple, they may want to talk to their CPA, financial advisor, or go to the Social Security website.  Do a Google search “Social Security Retirement Planner Benefits For Your Spouse.” 

The proper timing for claiming Social Security benefits can put thousands of extra dollars in a family’s pocket. 


[1] “How to Make Money Last for a Longer Lifetime”, The Wall Street Journal, November 1, 2014, page B8.

[2] “Social Security Planning for Couples:  Maximizing Survivor Benefits”, Horsesmouth LLC, by Elaine Floyd, CPA, September 23, 2013.

[3] “Social Security Tips for Couples”, Fidelity Viewpoints, May 2, 2014.

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