Claiming Strategies

WHAT IS THE BEST strategy for claiming Social Security benefits if you’re married—and you can’t take advantage of the loopholes closed by the 2015 Budget Act and discussed elsewhere? For most couples, it will make sense for the spouse with higher lifetime earnings to delay claiming benefits until age 70. Let’s be politically incorrect and assume that’s the husband.

Delaying until 70 ensures not only the maximum possible monthly benefit for the husband, but also a handsome survivor benefit for his wife, assuming the husband dies first. Because the husband’s benefit could live on after his death, it can make sense for him to delay Social Security, even if he’s in poor health. Problem is, until the husband claims benefits, his wife can’t receive spousal benefits. She can, however, claim benefits based on her own earnings record—and, as we’ll discuss below, it may make sense for her to go ahead and claim those benefits.

The missed spousal benefits could amount to a tidy sum. For instance, if the husband and wife are the same age and the husband delays benefits until age 70, the wife will miss out on eight years of spousal benefits and, to make matters worse, she won’t receive any credit for delaying spousal benefits beyond her full retirement age of 66 or 67. Still, because the husband’s benefit will be paid until both he and his wife have died—thanks to the survivor benefit—it will typically make sense for him to delay.

When shouldn’t the husband delay? There are three factors that could prompt the husband to claim benefits earlier. First, he might claim benefits earlier than age 70 if both he and his wife are in poor health.

Second, the husband might claim earlier if he’s much younger than his wife. For instance, if the husband is four years younger than his wife and he delays benefits until age 70, his wife wouldn’t collect spousal benefits until age 74—which means she would miss out on 12 years of benefits. In that scenario, it can still make sense for the husband to delay until age 70, but the case isn’t as strong.

Third, the husband might claim earlier if his wife had little or no lifetime earnings. Remember, the wife receives the higher of either her spousal benefit or her own benefit based on her lifetime earnings. If the wife’s own benefit is large, the extra from spousal benefits may not be worth much, if anything, so there’s little cost in the husband delaying to age 70. But if the wife’s own benefit is modest, the spousal benefit will be worth a lot—and the husband might want to claim benefits when his wife reaches age 66 or 67. That will allow his wife to claim spousal benefits at her full retirement age, at which point her spousal benefit will be as large as it will ever get, ignoring any adjustments for inflation.

If the higher-earning spouse delays benefits until age 70, when should the lower-earning spouse—the wife in our example—claim benefits based on his or her own earnings record? If the wife claims benefits based on her own earnings record before her full retirement age, that will result in a reduced benefit. That reduction carries over, so that—when the wife is able to claim spousal benefits—she’ll receive less than the full 50% of her husband’s full retirement age benefit.

Still, when the wife claims is a less crucial decision, because the lower-earning spouse’s benefit disappears when the first spouse dies: At that juncture, either the wife would be collecting survivor benefits (assuming the husband had died) or the husband would continue with his benefit as before (assuming the wife had died). If one spouse is in poor health, the lower-earning spouse might claim at 62. If both spouses are in decent health, the lower-earning spouse might claim at his or her full retirement age of 66 or 67.

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