Choosing when to take Social Security isn’t the only option you have to increase your payments. If you are married, a host of other possibilities are available that should be explored. For some people, Social Security will be their primary source of income to cover expenses in retirement (see below chart).
For most married couples, it makes sense for the spouse who has earned the most money throughout his or her working career to delay receiving Social Security retirement benefits as long as possible. If you delay taking benefits beyond your full retirement age (FRA), your future benefit will increase each year by 8%. For example, if your FRA age is 66 with a promised payment of $1,000, your annual payment at age 70 would increase to $1,320, excluding annual inflation adjustments. Based on this information, it makes sense for the spouse with the lower wage base to begin receiving benefits on their own record either at the early retirement age of 62 or upon reaching FRA. Another option is when both spouses are at their FRA, the higher earning spouse can apply for a 50% benefit of the amount being paid to the lower earning spouse who’s currently receiving benefits without impacting the future value of the higher wage earners benefits. Once the spouse with the higher wage base turns 70 and begins taking their increased benefits, the spouse with the lower wage base will begin receiving an amount equal to 50% of the higher wage earners benefit.
As an example, let’s say Jack and Jill are married and are the same age. Jack worked most of his life with an above-average salary while Jane worked part-time until the children were grown and then full-time thereafter. Under this scenario, Jack is the primary wage earner and has earned a higher benefit than Jill. At 62, Jill begins drawing Social Security based on her record for a monthly benefit payment of $700. Jack, on the other hand, delays taking his benefit until he’s 70. Once Jill reaches FRA, when both of them are age 66, Jack can now begin drawing a spousal benefit based upon Jane’s current benefit (now at $800 per month adjusted for COLA). Jack’s spousal benefit would be equal to 50% of Jill’s benefit or $400 per month. When Jack turns 70, he takes his maximum benefit, which now stands at $2,500. At this time, Jill can receive a combined benefit (her own and a spousal benefit) not to exceed 50% of Jack’s current benefit or, in this case, $1,250. Since Jill’s current benefit at 70 (now at $900 per month adjusted for COLA) is less than 50% of Jack’s current benefit of $1,250, Jill will receive an additional $350.
This approach works best for a working couple where one member has worked longer or has a much higher wage than the other spouse. Now in the case where both spouses make roughly the same amount, the same approach should still be used, but the benefit increase wouldn’t be as large. Finally, a nonworking spouse is entitled to Social Security benefits but only after the working spouse has filed first. Let’s take a look at this scenario in a little more detail.
When the nonworking spouse reaches age 62, they can begin claiming a Social Security benefit simply for being the spouse of an eligible worker. Now if the nonworking spouse begins collecting benefits before FRA, the benefit is reduced based on how many months away he/she is from full retirement age (see below).
- One year before FRA, the amount will be reduced by 8.33%.
- Two years before FRA, the amount will be reduced by 16.66%.
- Three years before FRA, the amount will be reduced by 25%.
- Four years before FRA, the amount will be reduced by 30%.
- Five years before FRA, the amount will be reduced by 35%.
On the other hand, if the nonworking spouse waits until FRA to begin collecting spousal benefits, they’ll receive 50% of the working spouse’s benefit. But as stated above, you can’t claim spousal benefits until the working spouse has filed for benefits as well. However, once the working spouse has reached FRA, they can file for benefits and immediately ask to have payments suspended. This approach allows the non-working spouse to collect benefits while the working spouse’s benefit continues to increase up to the maximum amount payable at age 70.