Maybe you're planning to use your Social Security income in retirement to travel or join a country club. Or maybe you'll be using it to pay for essentials like housing, food, and transportation. No matter what you plan to use those benefits for, making the most of them will help you enjoy retirement to the fullest, all the while avoiding financial stress. So regardless of when you're planning to file for Social Security, you'll need to do one key thing to ensure that you're doing just that: coordinating with your spouse.
Maximizing your benefits
If both you and your spouse are eligible for Social Security benefits based on your respective work records, you have a real opportunity to play around with different filing scenarios that could work wonders for your retirement.
But first, a quick refresher on why filing strategies are important. Though your benefits themselves are calculated based on your earnings history (specifically, your 35 highest years of earnings), the amount you receive each month will also depend on the age at which you initially file. If you wait until full retirement age, or FRA (which is either 66, 67, or somewhere in between), you'll get the exact monthly benefit your earnings record entitles you to. Wait beyond FRA, and you'll grow your benefits by 8% a year up until age 70. And if you file before FRA (you can do so as early as age 62), your benefits will be reduced by a certain percentage depending on how early you claim them.
Now that that's out of the way, let's talk about how and your spouse can sync up to make the most of your Social Security benefits. For one thing, you might coordinate so that you're able to retire early without reducing your lifetime income steam too drastically. If you have a lower benefit coming to you and your spouse has a higher benefit, you might decide to claim your own benefits at age 62, or another age before FRA, to generate some retirement income, thereby allowing you and your spouse to leave your jobs and start enjoying your golden years. Meanwhile, your spouse can leave his or her benefits to grow until FRA or beyond to secure that higher monthly payout for life.
You could also do the opposite if you need more money up front -- have the higher earner claim benefits early and take the hit there, but let the lower earner's benefits grow so that they perhaps match those of the higher earner by the time they're finally claimed. There's a host of combinations you can play around with, but the key is to make sure you and your spouse get on the same page before rushing to file.
Another thing to keep in mind is that Social Security pays spousal benefits, so if you didn't work but your spouse did, you'll be entitled to up to half of your spouse's benefit at FRA once they file. Furthermore, if you did work, but are entitled to a benefit that's less than 50% of your spousal benefit, Social Security will pay you the higher of the two. The only catch? You can't claim spousal benefits until your spouse is actually taking benefits as well, so that's another point you'll need to discuss.
Finally, remember that Social Security also pays survivor benefits, so if your spouse passes away, you might collect the amount they were receiving upon their death. This is an important point to consider if the higher earner of the two of you is also significantly older, or has health issues that lead you to think they will pass away first. Or, to put it another way, if you expect to outlive your higher-earning spouse for many years, it might pay to have that spouse avoid taking benefits early and slashing them in the process, since that could impact the amount you receive after their passing. Keep in mind that if you become eligible for survivor benefits but are already collecting benefits of your own, you'll get the higher of the two, but not both.
Being married gives you more options when it comes to Social Security. Whether you're thinking of filing for benefits in three months or three years, it never hurts to develop a strategy along with your spouse so that you secure the highest possible income stream in your collective lifetime.
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