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Planning Opportunities to Consider Before Applying for Social Security

J Terwilliger 2014
James P. Terwilliger, PhD, CFP®
Senior Vice President, Senior Planning Advisor
[email protected]
(585) 419-0670 x50630

Many retirees consider the decision of when to start receiving Social Security benefits to be a no-brainer. But life is not that simple.

This may be the most important decision faced by retirees. Making the wrong choice can mean the loss of tens of thousands of dollars in benefits to a household.

Some Basics

Full retirement age (FRA) for retirees born between 1943 and 1954 is age 66. Retirement benefits can start as early as age 62 but at a reduced level equal to about 75% of FRA benefits.

One can also delay beyond FRA to age 70, at which point benefits are enhanced to 132% of FRA benefits. There is no advantage to delay further.

For those still working prior to reaching FRA, there is a $1 reduction in benefits for every $2 in earned (W-2 or self-employment) income exceeding $15,120/year.

Finally, regardless of when benefits start, the “breakeven” age for an individual is about the same – age 79-80. That is, if one lives longer than the “breakeven” age, it would have been advantageous to wait until age 70. If one does not, it would have been better to start early.

Single, never-married

Generally, if one is working and annual earned income exceeds $15,120, it is best to wait until FRA before taking benefits. At that point, the decision to start depends on two factors: 1) need for cash flow, and 2) expected longevity. If one is fortunate to not need the money and expects to live a long life, it is generally best to wait up to age 70 to start. Otherwise, consider starting at FRA.

If one is not working prior to FRA, the same two factors are important, but the $1/$2 payback rule is not a factor.

Married Couples

Married couples are presented with options that are unavailable to singles not previously married. Coordinating benefits for couples is complex. The rules are confusing and must be followed carefully to maximize benefits.

As an alternative to their own benefit, spouses can elect to receive a spousal benefit. A spousal benefit is equal to one-half of the other spouse’s FRA benefit but is subject to a 30% reduction if started early at age 62.

If starting before FRA, the reduced benefits are the greater of spousal or own. If started at/after FRA, one can choose to receive spousal or own. If spousal, one’s own benefits can be deferred and enhanced up to age 70. There is no advantage to delaying a spousal benefit beyond FRA.

In order for a spouse to receive a spousal benefit, the other spouse must have filed for or be receiving his/her own benefit.

Spouse with little or no Earnings - Similar Ages

A spouse having little or no lifetime earned income is eligible to receive a reduced spousal benefit starting at age 62. However, it may be advantageous to wait until FRA but not a month longer!

Also, it is better for the high earner to delay his/her own benefit up to age 70 in order to enhance that benefit.

The rationale is to maximize the survivor benefit for the household. Regardless of who dies first, the survivor is entitled to the higher of the two benefits for his/her remaining lifetime.

The higher earner will need to “file and suspend” in order for the lower-earning spouse to begin to receive spousal benefits. The “file and suspend” action cannot be triggered prior to FRA.

Previously-Married Retirees

Previously-married retirees face an equally complex set of opportunities and decisions.


A surviving spouse is eligible to receive survivor benefits equal to 100% of the deceased spouse’s actual retirement benefit, as long as the couple was married for at least 9 months. These benefits can start as early as age 60.

At age 60, the survivor-benefit reduction is 28.5%. Between ages 60 and FRA, the reduction is pro-rated.

Taking a reduced survivor benefit prior to FRA does not cause the survivor’s own benefit to be reduced. For example, a high-earning widow(er) might claim a survivor benefit anytime after age 60 and then start his/her own enhanced benefit at age 70.

Age 60 is an important age for survivor benefits for another reason. If a surviving spouse remarries before age 60, survivor benefits are not available as long as that new marriage remains in effect. Remarriage after age 60 does not affect these benefits.


Non-own benefits also are available to divorcees – spousal benefits and/or survivor benefits.

A divorcee can receive spousal benefits, based on the ex-spouse’s work record, if the marriage lasted at least 10 years and the divorcee is not currently married. Otherwise, spousal benefits for divorcees operate much the same as described above for married couples.

One exception is that the divorcee is eligible for spousal benefits even if the ex-spouse has not yet filed for his/her own benefits – provided that the divorce occurred at least two years prior.

Another is that divorced spouses may each take spousal benefits simultaneously while deferring their own benefits, an option not available to married couples.

Receiving spousal benefits will not affect the ex-spouse’s own benefits or the benefits available to the ex-spouse’s new spouse, if there is one.

A divorcee is also entitled to survivor benefits following an ex-spouse’s death.

A divorcee can qualify for survivor benefits at age 60 (reduced amount), FRA (full amount equal to the ex-spouse’s actual benefit), or anywhere in between if the marriage lasted at least 10 years. Otherwise, the rules are generally the same as those described above for widow(er)s.

Choosing a Strategy

One thing is clear. Do not try this on your own.

The above scenarios should never be practiced without first seeking the help of a trusted advisor who thoroughly understands the intricacies of the system. Every household has circumstances that impact the selection of an optimal strategy.

This is why Social Security planning needs to be a key part of any credible retirement plan.

This material is provided for general information purposes only. Investments and insurance products are not FDIC insured, not bank deposits, not obligations of, or guaranteed by Canandaigua National Bank & Trust or any of its affiliates. Investments are subject to investment risks, including possible loss of principal amount invested. Past performance is not indicative of future investment results. Before making any investment decision, please consult your legal, tax or financial advisor. Investments and services may be offered through affiliate companies.