Married Couple's Guide to Claiming Social Security

If you are not married, the decision about when to claim Social Security comes down to economics: If you wait until you are full retirement age to file, you’ll get 100% of the benefit you have earned. Claiming benefits before this date (as early as age 62) means you’ll get less, and delaying claims (no later than age 70) could make your monthly check 32% higher.

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The decision becomes significantly more complex for married couples. Not only must each spouse consider the financial impact of when they file (the age they start), married individuals have additional choices as to how they can file. If the goal is to maximize their joint benefit, a couple must weigh the various combinations of ages (the “when”) and strategies (the “how”) very carefully. The wrong choice can mean tens of thousands of dollars less in income in retirement.

Figuring this out isn’t easy. The Social Security website provides a benefit calculator that enables you to estimate your benefit at different ages. Unfortunately, it will not allow you to integrate your benefit with your spouse’s to test various joint claiming scenarios.

Because the Social Security claiming rules can seem devilishly complex, mistakes--expensive ones--get made. One of the more common ones involves the ability to switch from one type of benefit to another.

Here’s an example:

Fred and Wilma have been married for 35 years. In September she will turn 62 and Fred will celebrate his 66th birthday. They both have a full retirement age (FRA) of 66.

Fred and Wilma are joint owners of a quarry, which Fred has run for the past three decades. Wilma was an executive there for several years, but took time off to raise their daughter, Pebble. When Pebble went off to Slippery Rock University, Wilma returned to work as the manager of the company. Because Wilma spent 11 years as a stay-at-home mom, Fred’s Social Security benefit is significantly larger.

Fred and Wilma plan to start receiving Social Security in September. At that point, Wilma will be eligible for two types of benefits: one based upon her own earnings record and a spousal benefit based upon Fred’s earnings history. In either case, the amount that Wilma will receive will be reduced due to the fact that she will be starting Social Security before she herself is full retirement age. Under this scenario, here’s what the benefit amounts look like for Wilma at age 62:

Wilma will not receive both amounts. Instead, Social Security will pay her whichever benefit is larger. In this case, it’s the benefit she earned. That’s fine with Wilma, because it is $45 per month higher. She figures that when she turns 66 (FRA), she’ll just switch over to her 50% spousal benefit of $900/month.

That is impossible.

Because she is under full retirement age when she started Social Security, Wilma is locked into the type of benefit she receives at that time. She cannot switch from one based on her own earnings to a spousal benefit based upon Fred’s when she reaches FRA. (3)

Most people are shocked to learn this.

The only condition that will allow Wilma to change the type of benefit she is receiving is Fred’s death. At that point, she will be eligible for a widow’s benefit equal to the amount Fred was receiving when he died.

In fact, the only individual who can switch from one type of benefit (their own to a spouse-based one or vice versa) is a widow, widower or “surviving divorced spouse.” This individual has more flexibility than any other type of spouse beneficiary.

For instance, a widow(4) could start a benefit based upon her dead spouse’s earnings record as early as age 60 and two years later change over to one based upon her own earnings record, if that would result in a bigger benefit. Or, she might choose to receive a widow’s benefit until she reaches full retirement age and then switch to her own benefit, receiving 100% of what she has earned herself. She could also delay claiming her own benefit until age 70, which would boost her check by at least 32% over her full retirement age amount.

A widow can also change the type of Social Security benefit she is receiving when her marital status changes. For instance, she begins a widow’s benefit at age 61 after her first husband dies. Two years later she re-marries. At that point, she can choose to switch to a “current spouse” benefit based upon the earnings of her new husband, if that would result in more money.

Yes, this is complicated. But it’s worth the time and effort to make the smart choice. If you realize later that you took the wrong approach, you only have a limited amount of time to rectify the situation.

1. Based upon the fact that Wilma was born during 1943-1954, her own benefit would be reduced by 25% if she starts in the month she turns 62.

2. Reduction is applied to $900, which is 50% of Fred’s benefit at full retirement age. The percentage reduction for the spousal benefit is calculated as 25/36 of 1% per month for the first 36 months and 5/12 of 1% for each additional month. Based upon the year Wilma was born and the fact that she would be starting benefits at age 62, her spousal benefit would be reduced 30%.

3. The same is true of someone who is receiving a “divorced spouse” benefit based upon the earnings record of their ex.

4. For the sake of simplicity, the term “widow” is used in all examples. However, the same options are available to “widowers” and “surviving divorced spouses.”

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