With 79% of workers surveyed by the Employee Benefit Research Institute indicating they will rely on Social Security as a source of retirement income, clients will probably want to calculate the benefit.
Many workers understand the rules about collecting Social Security and have identified the age at which they can receive their full retirement benefit. But married couples have additional options when thinking about their income collectively. The timing of claiming Social Security can make a difference in whether married couples maximize their benefit potential.
Couples have options
When couples retire, a spouse who has not worked, or who has earned less than his or her partner, can apply for a spousal benefit. This benefit may be up to 50% of the partner’s benefit (at full retirement age), or a reduced amount depending on the age at retirement. For those who retire before full retirement age, benefits are reduced, but will increase at later ages up to the maximum.
Couples can claim benefits at different times
A spouse who has reached full retirement age and is eligible for a benefit or a spouse’s benefit, may choose to receive only the spouse’s benefit now and delay filing for his or her own benefit. In the interim, he or she would continue to earn credits toward his or her own retirement record.
The longer workers delay taking their benefits, the higher the monthly Social Security benefit, as delayed retirement credits accrue through age 70. At age 70, workers can file to receive their own benefits at a higher monthly amount.
One spouse can file and suspend payments
A spouse who has reached full retirement age can apply for retirement benefits and immediately request to have payments suspended. In this scenario, the spouse can receive a spouse’s benefit. The partner delaying retirement can continue to earn retirement credits until age 70, and at that time, claim his or her own benefit at the higher amount. Only one spouse can file and suspend payments.
Determining the best time to apply for Social Security benefits also depends on a couple’s financial and tax situation, age difference, and life expectancy. It can be an important discussion to have with clients to help them understand that claiming benefits early can affect not only the monthly benefit amount, but also the benefits received by the spouse, and, ultimately, the survivor benefits.