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Your Bank > Education and Advice > CNB University

Social Security Retirement Benefits: Strategies for Married Couples

James P. Terwilliger
James P. Terwilliger, PhD, CFP® is Senior Vice President - Group Manager, Financial Planning Strategies and can be reached at JTerwilliger@CNBank.com or (585) 419-0670 x50630.

When to begin taking Social Security retirement benefits is one of the most important decisions facing retirees.

The decision for married couples is complicated by options that are unavailable to singles not previously married.

A married couple having average life expectancies can expect to receive between $1,000,000 and $1,600,000 in lifetime Social Security retirement benefits, including cost-of-living adjustments. This translates to a total benefit value in today’s dollars of $750,000 to $1,200,000.

Most couples would never guess that this benefit rivals or even exceeds their life savings in value. Further, it is an asset that adjusts with inflation and cannot be outlived.

Coordinating benefits for couples is one of the most complex areas of Social Security planning. The rules are confusing and must be followed carefully to maximize benefits.

Some Basics

In addition 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 Full Retirement Age (FRA) benefit but is subject to a 30% reduction if started early at age 62.

There is no benefit to delay a spousal benefit beyond age 66 (FRA for folks born between 1943 and 1954). Spouses are not allowed to receive spousal benefits simultaneously. One at a time is it. Finally, in order for spouse A to receive a spousal benefit, spouse B must have filed for or be receiving his/her own benefit.

Let’s consider some of the factors influencing the when-to-start decision:

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 is generally advantageous to wait until age 66 (FRA) but not a month longer!

Usually, it is better for the high earner to delay his/her own benefit until age 70 in order to enhance that benefit. The rationale is to maximize the survivor benefit for the household. There is a 50% chance that one of the spouses will survive until age 93. Regardless of who dies first, the survivor is entitled to the higher of their two benefits. The household is then guaranteed that maximum benefit for the remaining lifetime of the survivor.

In this case, 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 age 66 (FRA). If you are not working, the same two factors are important, but here the consideration can include starting as early as age 62.

Significantly Different Ages

If the older spouse is also the higher earner, it is almost always better for that spouse to delay benefits until age 70. Again, the primary motivation is to maximize the survivor benefit since the younger spouse will likely survive. The younger lower-earning spouse might consider starting benefits at age 62 if not working or age 66 (FRA) if working until then. These benefits generally would be the higher of spousal or own.

If the higher earner is instead the younger spouse, the optimal strategy is not as straightforward. Here, a detailed analysis is needed, based on the difference in ages, income histories, and other factors.

How CNB Can Help

The above examples are general rules of thumb but should never be used without consulting first with a trusted financial planner. These examples are offered to illustrate that couples have choices and that spousal and survivor benefits must be considered in addition to one’s own benefits.

While Social Security personnel are helpful in answering questions about the mechanics of various options, they are not equipped to help you determine optimal strategies.

This is why I now integrate Social Security planning into retirement planning when working with clients. It is crucial.

This material is provided for general information purposes only and is not a recommendation or solicitation to buy or sell any particular security, product or service. Past performance is not indicative of future investment results. Any investment involves potential risk, including potential loss of capital. Before making any investment decision, please consult your legal, tax and financial advisors. Non-deposit investment products are not bank deposits and are not insured or guaranteed by Canandaigua National Bank & Trust, or any federal or state government or agency and are subject to investment risks, including possible loss of principal amount invested.