One of the biggest mistakes most married couples make when thinking about when to claim their Social Security is exactly that: when to claim THEIR Social Security without thinking about when their spouse is also going to claim their Social Security.
To maximize Social Security benefits as a couple it is critical to COORDINATE your start dates because there are a variety of spousal benefit strategies available to married couples.
You need to function as a team to maximize your benefits and your goal should be to maximize your benefits as a household; not individually.
One Example of a Spousal Strategy: The Restricted Application
The Strategy: For those born prior to January 2nd, 1954 Filing a Restricted Application at Full Retirement Age or later allows the filer to file only for spousal benefits (worth up to 50% of their spouse’s Full Retirement Age benefit) while letting their own benefits continue to grow and accumulate Delayed Retirement Credits are at the rate of 8% per year until they claim their own benefits at a later date.
What You Should Do: Talk with a Social Security Advisor and obtain expert advice on who should file a Restricted Application and when. Your Social Security Advisor can even complete the filing for you given that it is difficult to complete correctly to implement the strategy.
The Restricted Application strategy is very valuable and it is important to obtain expert advice prior to proceeding.
- Singles: Because a Restricted Application is only valuable to those who are or have been married, singles will be unaffected by this change.
- Married Couples: All married couples, with at least one spouse who is at least age 62 but under 70, and that has not already claimed benefits on their own record, need to consider whether it would be beneficial to file a Restricted Application to help them maximize their benefits. Married couples have the most to lose by failing to consider these strategies. Failing to take advantage of this strategy can often cost couples $50k to $60k in lifetime benefits.
- Divorced: Even divorced individuals born prior to 1954, who have not already claimed benefits on their own record, should highly consider and evaluate filing a Restricted Application in order to preserve the option to receive spousal benefits while also obtaining Delayed Retirement Credits. This is often worth $50k to $60k in benefits.
For couples where neither spouse was born prior to January 2nd, 1954 there are also many other strategies to coordinate benefits and maximize the spousal benefits that are available to the couple.
Survivor Benefits & Longevity: Focus on JOINT Life Expectancy
When the first spouse in a couple passes away, the survivor is entitled to the higher of the two Social Security benefits that were being received by the couple and the lower benefit stops.
As a result, when planning when and how to claim your Social Security it is imperative for a married couple to focus on JOINT life expectancy, not their individual life expectancies.
Using Delayed Retirement Credits (especially for the higher earner) to your advantage can add $60k to $70k in lifetime Social Security benefits for you as a couple.
Also, if a spouse passes away and the survivor is under 70 years old, the survivor will be in a position in most cases of what is called “dual entitlement” meaning that the survivor will be entitled on his own record as a well as being entitled as a survivor.
Again here, it is very important to determine exactly when and how to claim benefits on each record to maximize the amount of COMBINED benefits received.
Also keep in mind that survivor benefits are NOT automatic. Contrary to popular belief, when your spouse passes away, Social Security survivor benefits are NOT paid to you automatically.
Like all other types of Social Security benefits, you must proactively apply for survivor benefits, which means that you have to know that you’re eligible and you have to know exactly when to apply.
Underestimating life expectancy is also another common mistake and it is important to note that actuarially, there is a 50 percent chance that one member of a healthy 65-year-old couple will live to age 93.
The Bottom Line
Making the optimal Social Security claiming decision and maximizing your benefits is complicated. You should work with a Social Security advisor that is an expert in the myriad of strategies that are available to you.
Determining which Social Security strategy is best for you and your family requires careful analysis as each situation is different.
If you have questions and would like to schedule a Free Initial Consultation with an advisor, you can do so by clicking here.
Talk with a Social Security Advisor and obtain expert advice that is customized to your unique circumstances.
Until next time,
Matthew Allen is the Co-Founder/CEO of Social Security Advisors and creator of the new course Maximizing Your Social Security produced in conjunction with Weiss Educational Services. Matthew has helped thousands of seniors maximize their Social Security benefits and avoid costly mistakes when filing. Matthew has been at the forefront of financial services for over a decade. In addition to co-founding Social Security Advisors, Matthew also founded The Universal Group of Companies, a private investment firm, in 2004. From 2000 to 2004, Matthew was a NYSE Market Maker with LaBranche & Co., a Fortune 500 New York Stock Exchange firm.