Strategies for maximizing Social Security spousal benefits
For every year you wait to begin Social Security benefits after your full retirement age, you receive an 8% increase in the benefit amount. This increase continues until age 70. There is no advantage to waiting to begin Social Security after that age.
Previously, couples could claim spousal benefits while allowing retirement benefits to grow until age 70 by using “restricted applications” and a “file and suspend” strategy.
But the Bipartisan Budget Act of 2015 eliminated both options. When you apply for Social Security now, you are deemed to be filing for all benefits you are entitled to receive. This means you can no longer pick and choose your benefits. The government assumes you are applying for both spousal and retirement benefits and pays out the larger amount.
As a result, the only way to maximize spousal benefits is to delay their start.
1. Both spouses delay the start of benefits
If both spouses wait until age 70 to receive their Social Security benefits, they will be assured of receiving the maximum amounts. Their benefits will grow 8% annually between their full retirement age and age 70. And they could see additional benefits if they keep working during those years.
Since benefits are based on your 35 highest-earning years, delaying retirement could wipe out lower-earning years on your Social Security record. This may be especially true for parents who reduce their workload while raising children.
“Having an analysis done is the easiest way to see the numbers,” Lynch said. Financial planners can model various scenarios to determine whether it makes sense to continue working and the ideal time to begin benefits.
2. Higher-paid spouse delays the start of benefits
It may not be necessary for both spouses to delay the start of Social Security until age 70, particularly if one spouse’s benefit is significantly lower.
In that case, you can use what Pan described as a split strategy. “The spouse with the highest benefits can delay until age 70,” he said.
The spouse with lower earnings can begin their benefits at full retirement age while the higher earner’s Social Security benefits grow. When the second spouse reaches age 70, they can claim their benefits. At that time, the first spouse’s payments will shift to spousal benefits, assuming they are higher.
This method assures the spousal benefit will be as large as possible while providing a couple with some Social Security income in the years prior.
How taking it early affects survivor benefits
If you claim your Social Security retirement benefits early, this won’t affect your wife’s dependents benefits, which are also called spousal retirement benefits. As long as your wife waits until her full retirement age to claim her spousal benefits, she can collect the full amount. That’s because your dependents’ benefits are always based on your primary insurance amount, which is based on your earnings record at your full retirement age.
Whether or not you claim benefits early doesn’t affect the amount of dependents benefits your spouse can collect.
If your wife claims her spousal retirement benefit at age 62, or at any time before her full retirement age, her spousal benefits will be lowered permanently.
When to claim Social Security spousal benefits
As with many financial decisions, there is no one right time for couples to claim Social Security spousal benefits. It depends on your situation and financial plan.
Remember that whenever you file for spousal benefits, you are also deemed to be filing for retirement benefits based on your own work record. Don’t make the mistake of thinking you can file for spousal benefits while letting your retirement benefits grow.
