“For couples, timing when to claim your Social Security benefits can be tricky, especially if one of you earned far more during your career.”
What happens when there is an age and an earnings gap and it’s time to think about when to file for Social Security benefits? That’s the question posed in the article “How couples can avoid a costly Social Security mistake” from Considerable.
Start by looking at the higher and lower earners levels. As the Social Security rules stand now, it makes sense for the higher earner to defer filing for Social Security, so that her benefit can be maximized. It’s also ensures that the spouse who lives longest, will have the largest household benefit, when one dies. This is the side of Social Security that is often overlooked, because who wants to think about what will happen when a spouse dies? However, in most cases, one survives the other, usually by as many as 10 years.
In a case where the lower earning spouse is also the younger spouse, one strategy is to have that spouse file first for his own retirement benefit, while the older and higher earning spouse files as late as possible.
The key variable: How old are the spouses when they file for benefits? One common misunderstanding is how Social Security benefits are determined. To claim a maximum spousal benefit, the filing spouse must not file for this benefit before his full retirement age (FRA). If either spouse files earlier, the potential for large reductions in the percentage of the benefit the spouse would otherwise receive will be significant.
If the lower earning spouse files early for his own retirement, it not only reduces his own retirement benefit, but also the potential for the spousal benefit in the future.
That additional benefit would equal the amount by which the lower-earners spousal benefit exceeded his own retirement benefit. There’s no double dipping here. You can’t get the full amount of both benefits, but you can get the amount equal to the higher of the two benefits.
Because the lower earner in this case would already be receiving benefits, the additional benefit would be termed “an excess spousal benefit” by Social Security.
Social Security benefits take a fair amount of figuring out, so do your homework before filing. Include this topic in your conversation, when you sit down with an estate planning attorney to update your estate plan and related documents.
Reference: Considerable (April 18, 2019) “How couples can avoid a costly Social Security mistake”