Decid­ing when to begin receiv­ing Social Secu­ri­ty ben­e­fits is a major finan­cial issue for any­one approach­ing retire­ment because the age at which you apply for ben­e­fits will affect the amount you’ll receive. If you’re mar­ried, this deci­sion can be espe­cial­ly com­pli­cat­ed because you and your spouse will need to plan togeth­er, tak­ing into account the Social Secu­ri­ty ben­e­fits you may each be enti­tled to.  For exam­ple, mar­ried cou­ples may qual­i­fy for retire­ment ben­e­fits based on their own earn­ings records, and/or for spousal ben­e­fits based on their spouse’s earn­ings record.  In addi­tion, a sur­viv­ing spouse may qual­i­fy for wid­ow or widower’s ben­e­fits based on what his or her spouse was receiving. 

For­tu­nate­ly, there are a cou­ple of plan­ning oppor­tu­ni­ties avail­able that you may be able to use to boost both your Social Secu­ri­ty retire­ment income and income for your sur­viv­ing spouse.  Both can be used in a vari­ety of sce­nar­ios, but here’s how they gen­er­al­ly work. 

 

Strategy #1:   File and Suspend

Gen­er­al­ly, a hus­band or wife is enti­tled to receive the high­er of his or her own Social Secu­ri­ty retire­ment ben­e­fit (a worker’s ben­e­fit) or as much as 50% of what his or her spouse is enti­tled to receive at full retire­ment age (a spousal ben­e­fit).  But here’s the catch:  under Social Secu­ri­ty rules, a husband/wife/partner who is eli­gi­ble to file for spousal ben­e­fits based on his or her spouse’s record can­not do so until his or her spouse begins col­lect­ing retire­ment ben­e­fits.  How­ev­er, there is an excep­tion – some­one who has reached full retire­ment age but who doesn’t want to begin col­lect­ing retire­ment ben­e­fits right away may choose to file an appli­ca­tion for retire­ment ben­e­fits, then imme­di­ate­ly request to have those ben­e­fits sus­pend­ed, so that his or her eli­gi­ble spouse can file for spousal benefits. 

The file-and-sus­pend strat­e­gy is most com­mon­ly used when one spouse has much low­er life­time earn­ings, and thus will receive a high­er retire­ment ben­e­fit based on his or her spouse’s earn­ings record than on his or her own earn­ings record.  Using this strat­e­gy can poten­tial­ly boost retire­ment income in three ways:

  1. The spouse with high­er earn­ings who has sus­pend­ed ben­e­fits can accrue delayed retire­ment cred­its at a rate of 8% per year (the rate for any­one born in 1943 or lat­er) up until age 70, there­by increas­ing his or her retire­ment ben­e­fit by as much as 32%.
  2. The spouse with low­er earn­ings can imme­di­ate­ly claim a high­er (spousal) benefit.
  3. Any survivor’s ben­e­fit will also increase because a sur­viv­ing spouse gen­er­al­ly receives a ben­e­fit equal to 100% of the month­ly retire­ment ben­e­fit the oth­er spouse was receiv­ing (or was enti­tled to receive) at the time of his or her death. 

Here’s a hypo­thet­i­cal exam­ple.  Jane is about to reach her full retire­ment age of 66, but she wants to post­pone fil­ing for Social Secu­ri­ty ben­e­fits so that she can increase her month­ly retire­ment ben­e­fit from $2,000 at full retire­ment age to $2,640 at age 70 (32% more).  How­ev­er, her hus­band Bill (who has had sub­stan­tial­ly low­er life­time earn­ings) wants to retire in a few months at his full retire­ment age (also 66).  He will be eli­gi­ble for a high­er month­ly spousal ben­e­fit based on Jane’s work record than on his own — $1,000 vs $700.  So that Bill can receive the high­er spousal ben­e­fit as soon as he retires, Jane files an appli­ca­tion for ben­e­fits, but then imme­di­ate­ly sus­pends it.  Jane can then earn delayed retire­ment cred­its, result­ing in a high­er retire­ment ben­e­fit for her at age 70 and a high­er widower’s ben­e­fit for Bill in the event of her death. 

 

Strategy #2:   File for one benefit, then the other

Note: If you were born on 1/1 of any year, refer to previous year to determine full retirement age.

Note: If you were born on 1/1 of any year, refer to pre­vi­ous year to deter­mine full retire­ment age.

Anoth­er strat­e­gy that can be used to increase house­hold income for retirees is to have one spouse file for spousal ben­e­fits first, then switch to his or her own high­er retire­ment ben­e­fit later. 

Once a spouse reach­es full retire­ment age and is eli­gi­ble for a spousal ben­e­fit based on his or her spouse’s earn­ings record and a retire­ment ben­e­fit based on his or her own earn­ings record, he or she can choose to file a restrict­ed appli­ca­tion for spousal ben­e­fits, then delay apply­ing for retire­ment ben­e­fits on his or her own earn­ings record (up until age 70) in order to earn delayed retire­ment cred­its.  This may help to max­i­mize survivor’s income as well as retire­ment income, because the sur­viv­ing spouse will be eli­gi­ble for the greater of her or her own ben­e­fit or 100% of the spouse’s benefit.

This strat­e­gy can be used in a vari­ety of sce­nar­ios, but here’s one hypo­thet­i­cal exam­ple that illus­trates how it might be used when both spous­es have sub­stan­tial earn­ings but don’t want to post­pone apply­ing for ben­e­fits alto­geth­er. Liz files for her Social Secu­ri­ty retire­ment ben­e­fit of $2,400 per month at age 66 (based on her own earn­ings record), but her hus­band Tim wants to wait until age 70 to file.  At age 66 (his full retire­ment age) Tim applies for spousal ben­e­fits based on Liz’s earn­ings record (Liz has already filed for ben­e­fits) and receives 50% of Liz’s ben­e­fit amount ($1,200 per month).  He then delays apply­ing for ben­e­fits based on his own earn­ings record ($2,100 per month at full retire­ment age) so that he can earn delayed retire­ment cred­its.  At age 70, Tim switch­es from col­lect­ing a spousal ben­e­fit to his own larg­er worker’s retire­ment ben­e­fit of $2,772 per month (32% high­er than at age 66).  This not only increas­es Liz and Tim’s house­hold income but also enables Liz to receive a larg­er survivor’s ben­e­fit in the event of Tim’s death. 

 

Things to keep in mind

  • Decid­ing when to begin receiv­ing Social Secu­ri­ty ben­e­fits is a com­pli­cat­ed deci­sion.  You’ll need to con­sid­er a num­ber of sce­nar­ios, and take into account fac­tors such as both spous­es ages’, esti­mat­ed ben­e­fit enti­tle­ments, and life expectations. 
  • Using the file-and sus­pend strat­e­gy may not be advan­ta­geous when one spouse is in poor health or when Social Secu­ri­ty income is need­ed as soon as possible.
  • Delay­ing Social Secu­ri­ty income may have tax consequences—consult a tax professional
  • Spousal or survivor’s ben­e­fits are gen­er­al­ly reduced by a cer­tain per­cent­age if received before full retire­ment age.