For many couples, Social Security benefits form the backbone of their retirement income. Understanding how to optimize these benefits can make a significant difference in financial comfort during your golden years. From timing your claims to coordinating benefits, several strategies can help maximize your combined Social Security income.
Understanding the Basics
Before diving into strategies, it's crucial to understand the basics of Social Security benefits. Your benefit amount is based on your 35 highest-earning years, and you can start claiming as early as age 62. However, waiting until your full retirement age (FRA) — between 66 and 67, depending on your birth year — ensures you receive 100% of your benefit. Delaying past your FRA up to age 70 can increase your benefits by about 8% per year.
Strategy 1: Delay Claiming to Maximize Benefits
One of the most straightforward strategies for maximizing Social Security benefits is delaying claims. When one or both spouses wait until after the FRA to claim, you ensure a higher monthly benefit. For couples with significant differences in their earnings records, the higher earner delaying their claim can also increase the survivor's benefit in the event of their passing.
Strategy 2: Claim and Suspend
Although the rules around "claim and suspend" have tightened, there are still scenarios where a version of this strategy can work. For example, one spouse can claim benefits at their FRA, allowing the other spouse to claim spousal benefits, while the first spouse suspends their benefits to continue accruing delayed retirement credits.
Strategy 3: File for Spousal Benefits
Spousal benefits allow one spouse to claim benefits based on the other's work record, up to 50% of the higher earner's benefit at FRA. This can be particularly useful if one spouse has a much lower earnings record or if one spouse can claim a spousal benefit while delaying their own benefit to grow.
Coordinating Benefits for Divorced Couples
Divorced couples who were married for at least 10 years and are currently unmarried can also benefit from Social Security strategies. You may be eligible to receive benefits based on your ex-spouse's record if it would be higher than your own, without affecting their benefits.
Navigating the Government Pension Offset and Windfall Elimination Provision
For couples where one or both partners receive a pension from work not covered by Social Security (such as certain government or overseas jobs), the Government Pension Offset (GPO) and Windfall Elimination Provision (WEP) can reduce Social Security benefits. Planning with these provisions in mind is crucial for minimizing their impact.
Maximizing Survivor Benefits
Understanding how survivor benefits work is crucial for couples. The surviving spouse is entitled to the higher of their own benefit or the deceased's benefit, not both. Strategies that maximize the higher earner's benefit can provide more security for the survivor.
Final Thoughts
Maximizing Social Security benefits as a couple requires a combination of understanding the rules, timing your claims wisely, and coordinating your benefits. Considering the long-term implications of your choices can ensure that you both enjoy a more comfortable and secure retirement.
Are you ready to optimize your Social Security benefits as a couple? Contact a financial advisor specializing in retirement planning today. With expert guidance, you can navigate the complexities of Social Security and make decisions that best suit your retirement goals.
Michael G. Romanello is a registered representative of and offers Securities through Independence Capital Company Inc. Member FINRA/SIPC.
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