Claiming Social Security is always complicated. If you are married, this decision becomes next-level complicated. Many couples don't understand how to optimize combined Social Security benefits and, as a result, they end up leaving a substantial amount of money on the table.
So, why is it so hard for couples to make the optimum Social Security claiming choice?
Here are some of the key reasons why married couples often fail to get the most monthly or lifetime income from Social Security, despite the fact that these benefits are an important source of inflation-proof income.
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Why couples have such a hard time optimizing Social Security
Couples often end up struggling to make sound choices when it comes to their Social Security benefits claims because:
- Many people don't realize that coordination with their spouse is important: Social Security retirement benefits are initial benefits based on each person's work record. As a result, couples may not really take the time to check in with their spouse during retirement planning about how each person's individual Social Security claiming choice will affect the couple as a whole.
- Couples don't understand the complex rules governing how different kinds of benefits interact. For example, if you want to claim spousal benefits based on your spouse's work record, you need your spouse to claim retirement benefits first. You may be tempted to have a higher-earning spouse claim retirement checks to unlock spousal benefits for the lower earner, without thinking about how this could affect survivor benefits in the future. Sadly, it would shrink those benefits, causing big problems if the higher earner dies first.
- It's difficult even for individuals to make optimal claiming choices: Data has repeatedly shown the best age to claim benefits is 70 for the majority of retirees, but people still claim at a younger age anyway. Since even individuals have a hard time understanding and making optimal claiming choices, it becomes even harder when there are two benefits to think about.
What should you do to optimize your Social Security benefits as a couple?
While it is understandable that many people struggle to optimize combined Social Security benefits, it's also a problem since these benefits are so important in helping you make ends meet without draining your retirement plans too quickly.
If you want to leave more money in your 401(k) or IRA so you can reduce the chance of your accounts running out, be sure to create a strategy with your spouse regarding how to make the most of your combined benefits.
One common strategy involves the lower-earning partner claiming benefits first, bringing in some Social Security income, and allowing the higher earner to delay and grow a bigger Social Security check. This strategy is worth looking into.
You can also work with a financial professional to understand all the different options for claiming as a married couple, so you can find the best one to meet your needs.
