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Social Security Spousal Strategies


Married couples have many choices about when to start taking their Social Security benefits.  But a mistake can lock you into lower monthly checks for the rest of your life.  With last week’s Supreme Court ruling on same-gender marriage, the number of people this effects has grown. 


Let’s some examples of spousal benefits between a married couple who have both worked enough to qualify for their own benefits.  Jamie and Alex are the same age, 62.  Alex is the higher earner.  Their full retirement age (FRA) is 66.  Jamie’s benefit at FRA is $2,000, and Alex’s is $2,400.


Alex can claim spousal benefits which are based on Jamie’s work record.  While receiving benefits, Alex’s own benefits continue to grow.


From age 62-70, waiting to start benefits boots your checks by about 8% a year.  You can’t start benefits before 62, and there’s no benefit premium for starting after 70.


Waiting until FRA for free spousal benefits can be good.  Say Alex and Jamie reach FRA.  Jamie starts benefits then and receives $2,000 a month.  Alex claims the spousal benefit, which is 50% of Jamie’s benefit, $1,000 a month.


This goes on for 4 years.  By waiting, Alex’s own potential benefit increases by 32% to $3,168 a month.(these numbers do not reflect inflation adjustments).


Both Jamie and Alex will get benefits adjusted for cost-of-living increases, as long as they live.  After one spouse dies, the survivor will receive the higher benefits.  The survivor will not receive both only the higher of the two.


Different scenario:


Let’s look at a slightly different scenario.  Jamie is 66, and Alex 62. 


If Alex claims a spousal benefit before reaching FRA,  Social Security will act as if Alex claimed her own benefit as well.


At age 62, you get 75% of the amount you would be eligible for at FRA.  So Alex would get $750 a month, 75% of the $1,000 that would have been available at 66.  But Alex’s own benefit then would be $1,800, which is 75% of the FRA benefits of $2,400 FRA a month, which is 75% of the $2,400 benefit.  Social Security would send the larger amount of $1,800 a month.


Alex would get that $1,800 a month for the rest of her life.  If Jamie dies before her, Alex would get the $2,000 a month benefit as a survivor, that would have been Jamie’s FRA amount.


Is Alex better off waiting until 66 to claim her own benefit?  Or should she claim a spousal benefit at 66, then her own expanded benefit at 70?


The short answer is that if there is a need for the money, she should collect.  The same goes for married couples if both spouses are in poor health, and life expectancy is short.


If you don’t need the money right away, you can wait for yearly benefit hikes of about 8%.  If either spouse expects a long life span, waiting for larger checks makes sense.


Let’s look back at Alex and Jamie.  If Alex starts receiving her own benefit early at age 62 of $1,800 a month, she would collect $172,800 by age 70.


If instead, Alex waits until age 66 to start spousal benefits, after four years of $1,000 per month, she would have received $48,000.  So she would be down by about $124,800 at age 70.


Then Alex would switch to her monthly benefit of $3,168( $2,400 increasing 8% for 4 years).  Going forward, Alex’s checks would be more than $16,000 larger than in the first scenario, every year the rest of her life after age 70.  By age 78, Alex would be ahead of the game.  Her edge would grow as long as she lives.  These numbers do not include the cost of living increases, and the numbers get magnified when the cost of living gets factored in.


You own numbers may vary, based on your earnings history, and your spouse’s.  I can run you a customized scenario using your specific benefit numbers.


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