Reframing the Social Security Claiming Decision for Married Couples

For married couples, correctly answering the question, “When should we begin to take our social Security benefits?” is critical in planning for retirement because it is not just one life to consider, but two. And let’s face it, no one wants to leave money on the table. Here is more info on how to reframe the Social Security claiming question.

Making the right choice for you and your specific life and financial circumstances can be difficult. There are thousands of rules governing the Social Security system and many benefits.

Also, choosing the best time to claim Social Security benefits also means trying to guestimate how long you will live, which just complicates things further. For married couples, the decision-making process can be even more challenging, because it’s not just one life to consider, but two.

With that in mind. Let’s consider one way that married couples can reframe their thinking about Social Security benefits and simplify claiming decisions. First, let’s look at a quick recap of some basic Social Security rules.

In general, Social Security retirement benefits can be claimed as early as 62. However, claiming at 62 will result in a significantly reduced benefit (25% to 30%, depending upon the year in which you were born) compared to waiting until Full Retirement Age (66 to 67, depending on the year you were born). Waiting until your Full Retirement Age will earn you a so-called unreduced retirement benefit.

By delaying benefits beyond your Full Retirement Age, you are entitles to receive “Delayed Credits,” which further increase your benefits by 8% per year, in addition to any cost-of-living adjustments that might apply. Therefore, by waiting until at least 70 to begin receiving Social Security retirement benefits, you can effectively increase your “unreduced” benefit by as much as an additional 24% to 32% (depending on the year you were born).

Delaying the receipt of your Social Security benefits can boost your monthly benefit amount, and it can reduce the number of months you will receive benefits. Thus the obvious question arises:

“Should I start receiving smaller Social Security checks sooner so I get more total checks during my lifetime, or should I wait to take Social Security until some future date to make the checks I receive larger?”

Often people, including married couple, base their decision to this question on how long they ( the individual person) will live. For married couples, this is often a mistake. Instead of each spouse looking at their own life expectancy, they should consider the following planning hack.

Instead of focusing on when their own death will occur, the higher-earning spouse should focus on answering the question, “When will the second of our deaths occur?” By contrast, the lower-earning spouse should focus on answering the question. “When will the first of our deaths occur?”

Stated simply, instead of focusing on when their own death will occur, the higher-earning spouse should focus on answering the question, “When will the second of our deaths occur?” By contrast, the lower-earning spouse should focus on answering the question, “When will the first of our deaths occur?” (Note that the term “higher-earning spouse” refers to the spouse with the higher Social Security benefit).

If the higher-earning spouse believes that either spouse will still be alive into their 80s, they should give more consideration to delaying Social Security benefits, possibly until as late as age 70, even if they don’t think that they will live much beyond that time themselves. Conversely, if the lower-earning spouse believes that either spouse will die within the next decade or so, they might want to give additional consideration to claiming their own benefit sooner, even if they think that they will personally live to 100.

So, why does this work?

When the first spouse of a married couple dies, so too does the lower Social Security check. Meanwhile, the higher of the couple’s Social Security checks will live on with the surviving spouse.

If the spouse with the lower benefit dies first, that spouse’s Social Security check will stop being paid, but the surviving spouse will keep their own monthly retirement benefit (which was the higher monthly check). Alternatively, if the spouse with the higher benefit dies first, the surviving spouse can trade in their own lower retirement benefit or spousal benefit for a higher monthly survivor’s benefit.

Note: In certain circumstances, a pre-Full Retirement Age surviving spouse receiving their own Social Security benefit may decide to delay switching from their own retirement benefit to a survivor’s benefit to prevent reductions in the survivor’s benefit due to the surviving spouse’s age.

As long as at least one spouse ends up living until their early-to-mid 80s, it often makes sense for the higher-earning spouse to delay receiving Social Security benefits (possibly until as late as age 70). And in truth, it is this spouse’s decision that is generally more important. Claiming “too early,” for instance, could not only hurt the higher-earning spouse during their lifetime, but the lower-earning spouse as well if they are the second to die.

Conversely, the lower-earning spouse can also claim benefits “too early,” but that mistake is only relevant until the first death occurs. As such, for couples who are on the fence about when to claim Social Security (because they want the protection of higher checks if they live a long time, but also want to start getting something sooner to enjoy in case they don’t live as long as they expected), the default thought process should often be to have the higher-earning spouse delay benefits and to have the lower-earning spouse claim benefits earlier to get that desired taste of Social Security at a younger age.

This framework, of course, doesn’t work for all couples. And even couples that it helps will still have questions, like just how early the lower-earning spouse should consider claiming and just how long the higher-earning spouse should wait. So, in the end, Social Security claiming decisions remain incredibly personal and complex, which is why we strongly urge clients to consult with us before taking any action.

Resource: Reframing the Social Security Claiming Decision for Married Couples, By Jeffery Levine, Buckingham Strategic Partners

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