Helping Married Couples Maximize Their Social Security Benefits

Social Security can feel like the reward at the end of a major challenge. Social Security benefits can be claimed as early as age 62, though at a reduced rate.¹  Despite that, it’s tempting for many eligible people to want to receive their benefits early. On the other hand, waiting until age 70 can significantly increase monthly benefits money people receive, so there is a potentially powerful incentive to wait for the maximum benefit.¹

Married couples may find themselves in even complex situations where one claiming strategy or another — or even a combination — might work best. How can you best help married couples maximize Social Security benefits? Expect to have a few conversations to understand the details of clients’ individual situations, for a start.

In this article, we’ve broken down some of the most important issues to remind clients to consider.

When Social Security Benefits Can Be Claimed

First, it’s important to remember that different people claim Social Security benefits at different times, and reasons for the timing can be deeply personal. Here’s a quick overview of how age affects benefit payouts:²

• Early Retirement Age: Individuals can begin claiming benefits as early as age 62, but monthly benefits payments will be reduced if they begin before the individual reaches their full retirement age.
• Full Retirement Age: This isn’t the same for everyone and depends on year of birth, but it currently maxes out at age 67. Waiting until full retirement age to withdraw Social Security benefits gives a person their full monthly benefit amount.
• Delayed Retirement Age: Delaying claiming Social Security until after full retirement age increases the benefit amount until age 70. At age 70, the maximum benefit amount is reached.

Factors Affecting the Decision

In a perfect world without medical issues, daily risks, or financial concerns, everyone might just wait until age 70 and get the most out of their monthly benefits. 

Of course, no such perfect world exists, and in the real world, different people have different variables to consider as they decide when to claim Social Security. When there are two people involved in the decision, that can further complicate matters. Key factors in play:

• Each individual’s age
• Each individual's work record and earned benefit
• Individual health
• Individual and combined income
• Financial responsibilities and debts
• Savings and retirement accounts

This isn’t an all-inclusive list of factors that affect the decision of when to begin taking Social Security benefits, but each one plays a role and deserves consideration.

Spousal Benefits and Deemed Filing

If one person files for Social Security benefits, their spouse may be eligible for spousal benefits, if the spouse is at least age 62.³ The spouse can begin receiving as much as half of the worker’s benefit amount depending on the spouse’s age at retirement, though if the spouse begins taking the benefit before full retirement age, it will still be subject to that reduction.³

When an individual is eligible for benefits as both a retired worker and a spouse, they are presumed to be filing for the larger benefit for which they are eligible based on the deemed filing rule.⁴ They will then receive the larger of the two benefits.⁵

So, keeping in mind the rules for filing for spousal benefits and one’s own benefits at the same time, what different timelines and scenarios exist where couples can get the most out of their Social Security benefits?

Navigating Different Social Security Scenarios for Couples

Claiming Early

In some instances, both spouses may wish to claim their benefits as soon as possible. Maybe they are already in excellent shape financially, with plenty of money stashed away in savings or other retirement accounts waiting for them.

Or, maybe one or both are not in the best of health, and they want to ensure that they enjoy the fruits of the labor by having the chance to still claim what is theirs. Claiming Social Security benefits early might be a way to go, though they’ll need to be made aware of the drawbacks.

Since claiming early reduces the benefits, it is likely best that they don’t rely on Social Security as their primary source of retirement income if they go this route. With such a reduction, they’ll need to be certain they have enough from other financial resources available to thrive in their twilight years.

Delaying or Waiting Until Full Retirement Age

There are also valid reasons to delay filing until age 70. If one partner turns 70 but their spouse hasn’t yet reached full retirement age, the 70-year-old could claim their maximized benefits, while their spouse could delay claiming spousal benefits, until capping out at 50% of the primary benefit at the spouse’s full retirement age.³  In addition to age considerations, some advisors recommend the higher wage earner delay benefits as long as possible.⁶

But before the decision is made, it’s important to answer a few key questions. Are they confident they will live well beyond 70 to benefit from the higher monthly payments? Or would they be better off claiming benefits early, or at full retirement age so their spouse can claim benefits? If they do want to opt for delayed benefits, will they have enough to support them from the end of their working years until they start taking benefits? And even if longevity is not expected, would a higher survivor's benefit be reason to delay at least one spouses benefit as long as possible?

Those questions need answers. Delaying is one way to financially maximize the Social Security benefits specifically, but conversations should cover more than just the financial aspects of retirement.

If both spouses decide to start taking benefits at their full retirement ages, whether that’s at the same time or a few years apart, each spouse will receive 100% of their own benefit. And if spousal benefits for the lower-earning spouse are more than their own individual benefits would be worth, they’ll receive the higher spousal benefits instead.⁴

Guiding Clients with the Right Tools

Numerous scenarios exist for a married couple claiming Social Security benefits, each with its own set of pros and cons. Maximizing Social Security benefits can mean different things for different couples. It’s essential to consider many factors apart from Social Security itself that can affect their well-being, financial and otherwise, during retirement.

Many people today are facing a retirement income crisis — possibly even some of your clients. Helping them understand their options can help ease their concerns and better prepare for whatever lies ahead. Click the link below for more details on how advisors can help address these client fears. You can also download or print this resource and refer back to it at any time.

Written by: Marshall Heitzman, CFP®, ChFC, FLMI, CPCU, BFA™

Marshall is a VP - Advanced Planning Consultant with CUNA Mutual Group and has more than 25 years of experience in the insurance and financial services industry. He consults Financial Advisors on advanced retirement planning concepts for retirement and wealth management clients.