My spouse and I always planned to claim Social Security at age 66 — but they earn 4 times my salary. Would it make more sense for us to stagger our benefits?
The average retired worker on Social Security as of July collects $1,919 per month in benefits. But the amount of one’s benefit is based on a number of factors, including your wage history and filing age.
You can claim Social Security as early as age 62, however, if you enroll at full retirement age, you're entitled to your full monthly benefit based on your individual earnings record. Those born between 1943 and 1954 have a full retirement age of 66, and from there, it increases all the way up to 67 for people born in 1960 or later.
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It’s also possible to delay Social Security past full retirement age for a larger monthly benefit. You can delay claiming benefits until you turn 70 to score an extra 8% per year. So, if you have a full retirement age of 66 and you claim Social Security at 70, you’re looking at 132% of your monthly benefit.
If you’re married, it’s important to coordinate carefully with your spouse before either of you claim Social Security. But when one of you earns considerably more than the other, it can pay to be extra strategic.
The upside of staggering your Social Security claims
If you and your spouse are both eligible for Social Security benefits, it can be helpful to stagger your claims. This allows your household to receive some income while also growing the second benefit.
When there’s a big discrepancy in incomes, it’s often helpful for the lower earner to claim Social Security sooner while the higher earner delays their claim. This isn’t your only option, though. Some couples choose to have the higher earner file first while the lower earner delays their claim for more money each month.
Be mindful of spousal benefits
Your approach to claiming Social Security as a couple should hinge on whether you expect spousal benefits to apply to you. In the absence of your own earnings history, you can qualify for Social Security by virtue of being married to someone who’s able to claim.
With a spousal benefit, you’re eligible for up to 50% of your spouse’s monthly benefit at their full retirement age. But that’s the maximum you can get, and you must wait until your own full retirement age if you want that full 50%. Filing earlier will result in a reduced spousal benefit. You also cannot claim a spousal benefit before your spouse begins collecting Social Security if you’re still married.
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If you’re entitled to both your own benefit because you did work and a spousal benefit, Social Security will only pay you one of those benefits at a time. But if you’re the lower earner, what you can do here is file for Social Security early or on time, get some money, and have the higher earner in your household delay their claim for a larger benefit. Once that happens, you can switch to a spousal benefit if that amount is higher than the monthly benefit you’re eligible for based on your own income record.
To be clear, the maximum spousal benefit you can get is 50% of your spouse’s benefit at their full retirement age. Your spouse may decide to file for Social Security at 70 for a larger monthly benefit. In that scenario, you’re still limited to 50% of your spouse’s original benefit at your spouse’s full retirement age.
How to set yourselves up to wait on Social Security
Having the higher earner in your household wait on Social Security could set you up with more monthly income for life. But you may need to plan carefully to make that possible, assuming you wish to retire before signing up for Social Security. If you decide that the higher earner will work until age 70, that problem is likely solved.
If you both want to retire earlier, assess your savings to see how much monthly income you can comfortably withdraw. Consider following the 4% rule, at least as a starting point.
From there, set a budget to see how much monthly income you need. Compare that total to the amount you can comfortably take from savings plus the lower earner’s Social Security benefit. If the numbers work, then a delayed filing makes sense.
If there’s an income shortage, you can still consider having the higher earner delay their Social Security claim. But in that case, you may need to make some compromises, such as working part-time, to bridge that income gap. Or, you may need to scale back your spending for a few years until that higher Social Security check starts coming in.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
