Sandra Block answers readers’ questions about Social Security claiming strategies for couples and working while on Social Security.
Claiming Strategies for Couples (and Exes)
Question: We often hear about strategies couples can use to get the most from their combined benefits when one spouse had higher lifetime earnings from work. But what’s the best approach if a dual-income couple has a similar earnings history and will be eligible for roughly the same benefit?
Answer: The decision to file for benefits shouldn’t be made in a vacuum, says Martha Shedden, president of the National Association of Registered Social Security Analysts. If the couple has sufficient income from other sources, such as a pension or a retirement savings plan, they should wait until they’re both 70 to file for benefits, Shedden says. “That’s going to be the best-case scenario because they’re maximizing benefits for them as a couple,” she says.
If both partners can wait until age 70 to file, they’ll both benefit from delayed-retirement credits, which increase benefits by 8 percent a year between full retirement age and age 70. (Full retirement age is 66 for those who were born between 1943 and 1954; it gradually increases to 67 for those born in 1960 or later.)
In instances in which one spouse is the higher earner, it makes sense for that spouse to postpone benefits as long as possible. Consider having the lower-earning spouse file for benefits at full retirement age, or even as early as 62 if necessary. Use the lower-earning spouse’s benefits, along with income from other sources, to pay expenses while the higher earner’s benefits—which will get the biggest boost from delayed-retirement credits—continue to grow until the higher earner turns 70.
Question: How early can you claim survivor benefits after your spouse dies?
Answer: Surviving spouses who were married for at least nine months before their spouse’s death are entitled to survivor benefits at age 60, or age 50 if they’re disabled (or at any age if they have a dependent child who is younger than 16 or who became disabled before age 22).
However, if you claim survivor benefits at age 60, you’ll be entitled to only about 71.5 percent of your late spouse’s benefits, compared with 100 percent of your late spouse’s benefits if you wait until you reach full retirement age. If your own benefits will be less than the survivor benefits, a better strategy is to file for your own benefits at age 62 and switch to survivor benefits when you reach full retirement age, which is when those benefits reach their maximum.
Conversely, if your own benefit will be larger, you could claim survivor benefits as early as age 60 and allow your own benefits—which are eligible for delayed credits—to grow until you reach age 70, at which point you could switch to your own benefits. Survivor benefits don’t increase after you reach your own full retirement age, so this is the most effective way to take advantage of delayed-retirement credits.
By Sandra Block
From Kiplinger’s Personal Finance
