You have a lot of decisions to make about retirement. And, if you are married, you have nearly twice the number of choices — plus the complications of competing priorities and sometimes differing goals and expectations.
Your Social Security decisions can profoundly impact your spouse today, tomorrow and long after you are gone…
The good news is that married couples also have a greater number of options for getting the most out of Social Security. In fact, it is relatively simple to maximize your payout from the Social Security Administration to help insure you can afford retirement for as long as you and your spouse live — no matter how long that turns out to be.
Why When to Start Social Security is Such an Important Decision
Most people think that saving enough for retirement is the most important aspect of preparing for your future. However, guaranteeing the maximum amount of retirement income is probably your best move.
Things can and do happen to savings. It is fairly common for people use up these reserves. Medical costs, unexpected emergencies and twists in the stock market can dramatically change your fortunes.
Guaranteed retirement income — income that you will receive every month no matter what and for as long as you live — can be the key to a secure retirement. Social Security is one of the best sources of guaranteed retirement income. This is why maximizing your Social Security income is a good move.
The Single Smartest Social Security Decision Married Couples Can Make
If you want to try to get as much money as possible out of Social Security and you want the highest amount of retirement income for as long as each you and your spouse live, then you probably want to do the following:
Financial advisors say that many retirees get this wrong and it can hurt them down the road.
Why Delaying the Higher Earning Spouse’s Benefits Is a Good Move
Delaying benefits is a good Social Security decision for anyone — you just get more money every month the longer you wait to start getting payments.
However, if you are married, you may have an additional incentive to delay benefits. If one of you dies before the other then the surviving spouse will get to make a choice about which Social Security benefit to receive. (A surviving spouse is entitled to just one benefit — not both.)
Bad News: The bad news is that collecting just one Social Security check each month after the death of a spouse can mean a significant income drop for the survivor — a financial stress to pile onto the the grief of loosing your partner.
Good News: The good news is that the surviving spouse can potentially switch to a higher benefit.
- If the high earner lives longer, he or she gets to keep collecting his or her own high payout.
- If the lower earner lives longer, he or she will be entitled to switch from their own benefit and start claiming the deceased’s maximum benefit.
When you choose to start the higher earner’s Social Security benefits has major financial implications for a long time into the future — for both you and your spouse.
When Should the Lower Earning Spouse Start Benefits?
It is far less important what the other spouse does. Early is fine if that’s what is desired. (Although delaying benefits to increase your monthly paycheck is usually a good move for most everyone.)
Experts recommend following these rules of thumb for anyone trying to make a Social Security decision for themselves — not factoring in spouses and spousal benefits:
- Don’t take Social Security at age 62 unless you have a very short life expectancy.
- If you think that you will likely die before 80, start Social Security sometime between ages 65 and 67.
- If you think that you will live beyond 85, delay the start of Social Security until you are 70.
Delay and Go for the Big Delay Payoff — The Numbers
You can start receiving a Social Security retirement benefit as early as age 62. But there’s a huge carrot for retirees who patiently wait. Between the age of 62 and 70 you earn a higher benefit for every month you wait to start collecting your benefit. Delay all the way to age 70 and the payout will be about 77% more — more than double — than the benefit you are entitled to take at age 62.
Let’s take a look at how this might play out for a 60-year old earning $100,000 this year. The chart below shows an estimated monthly payout for three different ages*:
- Age 62 monthly benefit*: $1,667
- Full Retirement Age — 66 in this case but the full retirement age ranges between 65 and 67 — depending on when you were born — monthly benefit: $2,359
- Age 70 monthly benefit: $3,104
*The amounts are shown in today’s dollars. Adjusted for inflation, the payouts would be: $1,794 if started at age 62; $2,820 at the Full Retirement Age; and $4,154 at age 70.
Could the Right Social Security Decision Enable You to Have a Secure Retirement?
Perhaps the best way to explore how to make the best Social Security decision is to use a reputable retirement planning calculator.
If you don’t know already, begin by getting a quick estimate of your Social Security benefits at different claiming ages. Then, circle back to the NewRetirement retirement planning calculator. This reliable system automatically adjusts Social Security income to the higher earning spouse at the longevity of the other and it is easy to try different scenarios and compare results.
Start with one strategy, then try something different — this system automatically tells you how your cash flow, out of money age, net worth and future estate change with each tweak to your plan.
Immediately see how your finances change:
- With different Social Security start ages and benefit amounts
- If you and your spouse live a long time or not
Switch any detail of your retirement finances — income, savings, rate of return, inflation and so much more — and see what happens.
Model different Social Security income scenarios and the impact on your retirement plan
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