Social Security Tips for Couples

My Comments: More ideas about the ongoing saga of when and how to best apply for Social Security benefits.

02/24/2016

There are many benefits to marriage, but one you may not yet have considered is the flexibility married couples enjoy when deciding how and when to claim Social Security. Even though the basic rules apply to everyone, a couple has more options than a single person because each member of a couple can claim at different dates, and may be eligible for spousal benefits.

Making the most of Social Security requires some strategy to take advantage of the basic benefit rules, however. After you reach age 62, for every year you postpone taking Social Security (up to age 70), you could receive up to 8% more in future monthly payments. (Once you reach age 70, increases stop, so there is no benefit to waiting past age 70.) Members of a couple may also have the option of claiming benefits based on their own work record, or 50% of their spouse’s benefit. For couples with big differences in earnings, claiming the spousal benefit may be better than claiming your own.

What’s more, Social Security payments are guaranteed for life and should generally adjust with inflation, thanks to cost-of-living increases. Because people are living longer these days, a higher stream of inflation-protected lifetime income can be very valuable.

But to take advantage of the higher monthly benefits, you may need to accept some short-term sacrifice. In other words, you’ll have less Social Security income in the first few years of retirement in order to get larger benefits later.

“As people live longer, the risk of outliving their savings in retirement is a big concern,” Ann Dowd, a CFP® professional and a vice president at Fidelity. “Maximizing Social Security is a key part of how couples can manage that risk.”

Until recently, many couples had additional options known as “file and suspend” and “claim now, claim more later” that are now being eliminated. Before you choose a strategy, be sure to review those options to see if you qualify.

In the absence of “file and suspend” and “claim now, claim more later” strategies, the big question is how long you expect to live. Deferring means a higher benefit, but it takes time to make up for all the payments you skipped in your 60s and to replace the savings you spent in the meantime. But when one spouse dies, the surviving spouse can claim the higher monthly benefit for the rest of his or her life. So, for a couple with at least one member who expects to live into his or her late 80s or 90s, deferring the higher earner’s benefit may make sense. If both members of a couple have serious health issues, claiming early may make more sense.

How likely are you to live to be 85, 90, or older? The answer may surprise you. Longevity has been steadily increasing, and surveys show that many people underestimate how long they will live. According to the Social Security Administration, a man turning 65 today will live to be 84.3 on average and a woman will live to be 86.6 on average. For a couple at age 65, the chances that one person will survive to age 85 are more than 75%.
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