Social Security Strategies for Married Couples

Social Security Strategies for Married Couples

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Benefits for a non-working spouse
Consider Tom and Faye, both turning 60 years old in 2013. At age 66 they qualify for full retirement benefits from Social Security, though they are able to begin drawing reduced benefits as early as age 62. Faye never worked outside the home and does not individually qualify for benefits. However, she does qualify for spousal benefits based on what her husband, Tom, has paid into Social Security.

In fact, if they wait until age 66 to apply for benefits, not only will Tom receive his full retirement benefit, but Faye will also receive a spousal benefit equal to half of Tom's benefit.

If Tom and Faye choose to begin receiving benefits at age 62, their benefits will be reduced, but Faye will still be entitled to a spousal benefit. Tom's benefit will be 25% less than what he would have received at age 66, while Faye's benefit will be 30% less. The reduction in Faye's benefits is based on her decision to draw benefits early. If Tom took his benefit at 62, but Faye waited to age 66, she would receive an unreduced spousal benefit.

Tom may instead plan to postpone the receipt of his benefit until age 70, which will increase his benefit by 32%. But once he reaches age 66, he can file and suspend benefits. This will permit Faye to begin receiving her spousal benefit at 66, while Tom's delayed benefit grows until age 70.

When either spouse passes away, the surviving spouse will receive only Tom's benefit; the spousal benefits will end. This increased benefit for the surviving spouse is frequently the motivating factor for a "file and suspend" strategy.

Strategies for working spouses
When two working spouses are involved, there are also several options to consider.

Suppose Steve and Jill both paid into Social Security and will qualify for equal benefits at age 66, but Jill wants to continue working until age 70 to raise her benefit. Steve can apply for benefits at 66 and start drawing his payments. At the same time, Jill can apply for spousal benefits. This will allow her to draw half of Steve's benefit, while still working and deferring her own benefit to increase the amount she will receive at age 70. This strategy may also be utilized by a divorced spouse who plans to defer benefits until age 70.

When either spouse passes away, the surviving spouse will receive only Jill's increased benefit. Steve's payments will end.

Selecting when to draw Social Security benefits is a major decision because it is irreversible. Spousal benefits add an extra layer of confusion because there are numerous possible scenarios, and they are not reflected on Social Security statements, which are only available online for most taxpayers. Educate yourself about the available options so you make a choice that aligns with your needs and long-term goals.


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