Social Security for Married Couples

By Mitchell J. Smilowitz, CPA

Research shows that there is a 50% chance that at least one spouse in a married couple now 65 will live to age 90. This article explores a Social Security claiming strategy married couples can use to build longevity insurance to help their income keep up with inflation during a long retirement.

A “split strategy” is one approach to creating longevity insurance by allowing married couples to increase their Social Security benefits. The split strategy has many variations depending upon the age of each spouse at retirement, income needs, retirement savings and health. This article uses a simple example in order to provide a basic understanding of how a split strategy works.

Estimate the Benefits You and Your Spouse Will Receive

The Social Security Administration (SSA) website has a calculator you can use to estimate your benefits. It estimates your benefit at age 62, the earliest you can begin to collect Social Security, your Full Retirement Age (FRA), and age 70, when your maximum benefit is available.

Notice that starting Social Security before FRA permanently reduces your benefit (by up to 30% if you start at age 62). At FRA, you receive your full, unreduced Social Security benefit, also called your Primary Insurance Amount (PIA). Waiting until after FRA to begin claiming Social Security increases your PIA about 8% per year up to age 70. This “guaranteed rate-of-return” provides a powerful incentive for at least one spouse to wait until age 70 to apply for Social Security.

Identify the Spouse with the Higher Benefit

If you can afford for only one spouse to collect benefits, it can make sense for the spouse with the lower benefit to begin collecting Social Security first. This lets the higher earner’s annual benefit increase.

Here's an example. Jessie and Jordan are the same age, married and plan to retire when they reach their Full Retirement Age in 2022. Based on their earnings record, Jessie is entitled to a $3,000 monthly benefit and Jordan’s monthly benefit is $2,000. After reviewing their income and expenses, they decide that Jordan will claim Social Security at FRA and Jessie will wait until age 70. At age 70, Jessie’s benefit is $3,880. By waiting, they receive an additional $880/month for the rest of their lives. If Jordan had waited instead of Jessie, the increase would only be $586/month.

If one spouse’s benefit is more than twice as high as the other’s at FRA, the spouse with the lower benefit can claim first based on their earnings record. When the spouse with the higher benefit starts to collect, the lower earning spouse jumps up to half of the higher earning spouse’s benefit at FRA (spouses do not get an additional benefit if the primary worker delays filing). Social Security should automatically update the lower earning spouse’s benefit, but the JRB recommends that you monitor the process to ensure the benefit amounts are correct.

Here's an example. Once again, Jessie and Jordan are the same age, married and plan to retire when they reach their Full Retirement Age in 2022. In this example, Jessie is entitled to a $3,000 monthly benefit and Jordan’s monthly benefit is $1,000. They decide that Jordan will begin Social Security while Jessie waits until age 70 to maximize the benefit. At age 70, Jessie’s benefit will increase to $3,880/month. When Jessie begins collecting Social Security, Jordan’s benefit will jump from $1,000/month to $1,500/month (half of Jessie's PIA of $3,000). Rather than collecting $4,500/month if both began collecting at FRA ($3,000 plus a spousal benefit of $1,500), they collect $5,380/month ($3,880 + $1,500), an additional $880/month.

As a financial bridge to this increased benefit, Jessie and Jordan decide to use their retirement savings to pay for additional expenses until Jessie’s benefit is maximized.

The Reset Rule: Within 12 months of starting to collect, you can “reset” your benefits, but you must repay all of the benefits you received. Resetting your benefit allows you to claim at a later age and receive a larger monthly amount.

The Voluntary Suspension Rule: If you have begun claiming your benefits and have reached full retirement age, but are not yet age 70, you can suspend your benefits in order to restart them later and receive a higher monthly amount.


Conclusion

  • A “split strategy” for claiming Social Security can provide longevity insurance for married couples to help protect themselves against the effects of inflation as they age.
  • Where the higher earning spouse’s benefit is more than twice that of the lower earning spouse, it can make sense for both spouses to claim on the higher earning spouse's record.
  • The “split strategy” has many variations based on the age of each spouse, when each spouse retires and the couple’s income needs, retirement savings and health.

If you are close to retirement and have questions about Social Security or estimating your retirement income, contact the JRB at 888-JRB-FREE (572-3733) or email us.

April 2022