Social Security Strategies: How to Get $90,000 More For Your Spouse

Last Updated May 5, 2011 6:11 PM EDT

Married couples seeking to maximize their Social Security income will need to pull off an intricate foxtrot through a thicket of bewildering rules. Here are few strategies to help you successfully complete this dance.

My yardstick for determining which strategy is best? The total income you'll receive from Social Security over both your lifetime and your spouse's. A related goal is to maximize the income payable for the widow, since it's very common that wives outlive their husbands.

You'll understand the strategies described here much better if you review my prior posts this week on your Social Security income and on your spouse's Social Security income.

You'll also need to do a little homework. First, determine the Full Retirement Age (FRA) for both you and your spouse. Then, determine the Social Security benefits that are attributable to your wage earnings record and your spouse's wage earnings record. You'll want to find out which income is higher for your spouse: the benefit based on your spouse's own earnings, or the actual "Spousal Benefit," which is equal to as much as half of the benefit based on your wage earnings. Both of my prior posts explain these concepts.

Your last bit of homework is to estimate each of your life expectancies; two excellent websites for this purpose are www.livingto100.com and www.bluezones.com.

Now let's look at some strategies that apply the rules described in my prior posts to one common situation.

Suppose the husband has the higher earnings history and is older than his wife. Still, his wife's own wages have been high enough to make the Social Security benefit based on her own wage earnings higher than the spousal benefit she would receive based on her husband's earnings. This is a common situation when both spouses have worked a full career.

In this situation, it might pay for the husband to maximize his Social Security income by delaying the start of his benefits as long as possible, up to age 70. The reason: Most likely he'll die first, and after his death, his wife will receive the Social Security income he was actually receiving, which is higher than her own Social Security income.

So when should she start her own Social Security income? That depends on how long she expects to live and how long she expects her husband to live. Do you remember the two numbers from my previous post -- age 78 and age 82-1/2? (If not, check out that post now). If she estimates that both she and her husband will live until she attains age 78, she'll be "money ahead" if she starts her income at age 66 instead of age 62. If she thinks that both of them will be alive when she reached age 82-1/2, then she'll be "money ahead" if she waits until age 70 to start her income. I realize it's not much fun to think about mortality in this way, but try to focus on the numbers instead of the emotion; you'll be glad you did.

If her husband is several years older than she is, there's an awfully good chance he might die before she reaches age 78 or 82-1/2. If she thinks he'll die before she turns age 78, then starting benefits at age 62 is better for her. If she thinks he'll die later, but before she turns age 82-1/2, then starting benefits at age 66 is the better choice. In both of these situations, she'll be better off starting her income early -- before age 70 -- since she'll bump up to his higher income when he dies.

A Neat Trick

Now let's look at the advantages of the "file and suspend" maneuver. With this strategy, you can file for benefits at age 66 and then immediately suspend those benefits. This lets your spouse begin taking the spouse's benefits based on your earnings record. Note that if she has attained her FRA, she can start the spouse's benefit but delay taking her own wage earnings' benefit. Since you suspended your benefits, you'll still get the increase for delaying your retirement income once you take it. And since your spouse is only taking the spouse's benefits, your spouse's income that's based on his or her own wage earnings record continues to get delayed retirement credits as well.

To illustrate the above ideas, let's look at the example from my previous post -- a person born in 1950 who expects a Social Security income of $2,000 per month at age 66, based on his earnings record. Suppose his wife was born two years later, in 1952, and that she expects a Social Security income of $1,500 per month at age 66 on her own wage earnings' record. They're both careful to take care of their health; actuarial tables suggest he will live into his late 80s and she will live into her early 90s.

They decide that he'll start his Social Security income at his age 70, which increases his monthly payment from $2,000 to $2,640. This amount is payable for his lifetime, and when he dies, this amount continues to his wife for the rest of her life. They also expect him to live beyond her 82-1/2 birthday, so they decide to delay taking her income until she turns age 70. This increases her monthly income from $1,500 to $1,980. At that time, between the two of them, their monthly Social Security income will be $4,620. If he dies first, her income of $1,980 stops, but she'll continue receiving his monthly income of $2,640.

How much does she gain by having them delay the husband's benefits until age 70? Well, suppose he dies at age 88, when she is age 86, and she lives six more years until age 92. His monthly income increased from $2,000 to $2,640 by postponing his benefits until age 70. The extra $640 per month adds up to more than $46,000 for her for the six years that she lived after he died.

Now let's say the husband gets smart and files and suspends his benefits at his age 68. That allows his wife to start the spouse's benefit, based on his earnings record, at her FRA -- age 66. This amount is $1,000 per month -- half of his $2,000 benefit -- and will continue for four years until she starts her own $1,980 monthly amount at her age 70. The four years' worth of $1,000 in spouse's benefits adds up to $48,000 gained by the implementing the file and suspend maneuver.

These two smart moves added more than $94,000 in income for the wife!

Of course, all of the above maneuvers assume you have other sources of income to support yourself while you're delaying your Social Security benefits. I recommend you think about working part time while you're delaying the start of benefits -- this gives you engagement with life that might improve your health and increase your life expectancy. If you really need the Social Security income to meet current living needs, however, the above strategies might not be possible for you.

For more detailed explanations of these rules and additional examples, check out Andy Landis' excellent book, Social Security: The Inside Story.

Whew! This is a lot to consider, and it only covers one situation. It's very likely your situation will be different from the above example, with very different outcomes. But the example shows you the potential gain from taking the time and effort to do the research to work the numbers and decide just when to start Social Security benefits. You might even want to work with a financial advisor, who may be more familiar with the ins and outs of the Social Security system, and consider the circumstances of you and your spouse. As the numbers above clearly illustrate, it will be well worth the cost -- and you can use the extra money to enjoy life, travel, or spoil your grandchildren.

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    For more than 35 years, consulting actuary Steve Vernon helped large employers design and manage their retirement programs. Now he's a Research Scholar for the Stanford Center on Longevity, where he helps collect, direct, and disseminate research that will improve the financial security of seniors. He also delivers retirement planning workshops and has authored Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck and Recession-Proof Your Retirement Years.

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