Couples nearing retirement face a complex web of choices in maximizing their Social Security benefits, necessitating a strategic approach to ensure financial stability.
At a Glance
- “File and suspend” and the spousal choice options are no longer available for most.
- Strategies for maximizing benefits include delaying claims or employing a split strategy.
- Coordinating benefits with one’s spouse’s earnings can optimize payouts.
- Couples must plan for survivor benefits, especially if one spouse is a considerably higher earner.
Navigating the Complex Landscape of Social Security
Since 2016, couples can no longer use the “file and suspend” strategy. This change removed a key option for optimizing Social Security income. Those born after January 2, 1954, also face restrictions on choosing between spousal and retirement benefits. Couples now need to employ different strategies, factoring in age, health, and financial needs to determine the best approach for claiming benefits.
Careful planning is vital, particularly regarding the timing of claims. By delaying Social Security claims until age 70, couples can maximize their total income, significantly boosting long-term financial security. Additionally, a split strategy may be advantageous, allowing one spouse to claim benefits early while the other waits, a beneficial choice in scenarios requiring caregiving or supporting dependents.
Maximizing Survivor Benefits
Focusing on survivor benefits is crucial, especially if the higher-earning spouse is significantly older or has health concerns. In such circumstances, the surviving spouse will inherit a higher benefit amount, reinforcing the importance of strategic planning. “The higher earner’s benefit is what’s going to be paid if someone survives the other,” notes Jim Blair.
Strategically coordinating retirement claims with spousal earnings records can also increase overall benefits, making it a vital component of retirement discussions. The Full Retirement Age (FRA), usually between ages 66 and 67, plays an essential part in determining the amount of Social Security benefits, with the Primary Insurance Amount (PIA) directly linked to historical earnings.
Are you eligible for both retirement and spouse's benefits? Here's what you need to know: https://t.co/pTR1zPMDy7 pic.twitter.com/LGBcKV9UZr
— Social Security (@SocialSecurity) December 6, 2023
Factors Impacting Benefits
Numerous factors influence Social Security benefits, including the possibility of working while collecting benefits, taxes, Medicare premiums, and potential government pensions. Couples must consider whether to start claiming early at age 62, at the FRA, or delay until age 70 to secure maximum benefits. This decision affects both immediate payouts and long-term financial security.
A unique strategy known as “reset,” detailed by Deborah, allows beneficiaries to repay received benefits within a year to reset their benefit amount. Another option is voluntary suspension, enabling the stopping and restarting of benefits at FRA for increased payments in the future.
Careful coordination, intelligent use of strategies, and thorough understanding are crucial to successfully maximizing Social Security benefits for couples. Planning discussions are necessary to align on strategies, focusing on both personal needs and potential impacts, ensuring a financially secure retirement.
Sources:
- https://www.aarp.org/retirement/social-security/info-2024/benefits-couple-strategies.html
- https://investor.vanguard.com/investor-resources-education/social-security/strategies-for-married-couples
- https://www.ssa.gov/oact/quickcalc/spouse.html
- https://www.fool.com/retirement/2024/12/23/1-important-conversation-to-have-with-your-spouse/
