Many couples' wedding vows include the traditional phrase "for better, for worse, for richer, for poorer, in sickness and in health." Perhaps the words "in retirement" might be appropriate too.
Retirement is an important stage of life for married couples, and knowing how to navigate Social Security as a team can increase their financial security during those years. Here are three Social Security tips that every married couple needs to know.
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1. Understand how spousal benefits work
Arguably the most important thing for married couples to understand about Social Security is how spousal benefits work. Husbands and wives may be able to receive Social Security retirement benefits based on the earnings of their spouses.
The eligibility requirements for spousal benefits are relatively straightforward. First, the spouse whose work history you're claiming benefits based on must already be receiving Social Security retirement benefits. Second, you must be at least 62 or have a qualifying child in your care. For a child to qualify, they must be either under 16 or receive Social Security disability benefits.
A spousal benefit can be up to one-half the amount of your spouse's Social Security benefit at their full retirement age (FRA). If you begin collecting spousal benefits before your own FRA, though, the amount you receive each month will be reduced. For each of the first 36 months before you reach your FRA, the size of your spousal benefit will be reduced by 25/36 of 1%. Before then, your benefits will be further reduced by 5/12 of 1% per month.
What if a spouse is eligible for benefits based on their own earnings? The Social Security Administration will pay them their own retirement benefit if it's higher than the spousal benefit, but will pay the spousal benefit if that's higher.
2. Coordinate when to claim Social Security benefits with your spouse to maximize the amount you get out of the program
You'll definitely want to coordinate when to claim Social Security benefits with your spouse to maximize how much you'll get from the program as a household. The key principle to keep in mind is that the longer you and your spouse wait, the more you'll receive each month -- up to a point, anyway.
For example, consider a case when the lower-earning spouse plans to take the spousal benefit. If the higher-earning spouse waits past their full retirement age to start claiming benefits, the size of their monthly Social Security check will increase for each month they delay, up to as much as 24% if they wait until they're 70. However, their delay won't increase the size of their spouse's spousal benefits because those max out at half of the higher-earning spouse's benefits at their FRA. (Note, though, that it will increase survivor benefits if the higher-earning spouse dies first.)
Ideally, the higher-earning spouse should wait at least until their FRA to start collecting retirement benefits. There's no financial incentive, however, for the lower-earning spouse to wait beyond their FRA to begin receiving spousal benefits. That said, it's possible that by delaying when they begin collecting benefits, the lower-earning spouse could increase the amount they'd be entitled to based on their own work record to a level that would exceed the spousal benefit they'd be entitled to.
There are three basic strategies for married couples in coordinating when to claim Social Security benefits:
- Both spouses claim benefits at their respective FRAs.
- Both spouses claim benefits before their FRAs.
- A split strategy where the lower-earning spouse claims benefits before the higher-earning spouse.
Strategy No. 2 will provide the lowest total monthly benefit -- but you and your spouse will be collecting more checks from the program. Strategy No. 3 is only applicable when the lower-earning spouse is eligible for their own Social Security retirement benefits.
3. You can't file for spousal benefits separately from filing for your own retirement benefits
In the past, a lower-earning spouse could file for spousal benefits but wait to file for their own retirement benefits later. This approach allowed the retirement benefits they were entitled to under their own income history to grow. However, thanks to the Bipartisan Budget Act of 2015, this strategy is no longer allowed.
Under the current rules, you can't file for spousal benefits separately from filing for your own retirement benefits. When you claim Social Security benefits, the program treats it as if you're filing for all benefits you're eligible to receive.
