Social Security Factors for Married Couples

Mature couple with exercise equipment.
When married, think carefully about how you claim Social Security. Getty Images/Caiaimage

The biggest mistake married couples make in deciding when to take their Social Security benefits is they view the decision as if they were single, which means the main factor the look at is break-even age. Rather than looking at joint life expectancy, only the life expectancy of the person getting ready to claim is considered. For marrieds, looking at the Social Security decision in terms of break-even age and a single life expectancy and is a giant mistake.

Marrieds must look at joint life expectancy and factor in spousal and survivor benefits to make the most beneficial claiming decision. Here are the relevant factors to keep in mind when deciding when to take Social Security as a married couple.

1. Eligibility for Spousal and Survivor Benefits

A married person may claim benefits on his/her own earnings record, but in many cases may also claim a benefit on his/her spouse’s record, called the spousal benefit. The spousal benefit is a great benefit for nonworking spouses or spouses who had lower incomes for many years. Like any Social Security benefit, an individual may file for spousal benefits as early as age 62 but will receive a permanently reduced benefit amount for life by filing early.​

An individual may also claim survivor’s benefits on a deceased spouse’s earnings record. A survivor may claim reduced benefits as early as age 60; however, they will get more if they wait until their own full retirement age (FRA) before claiming.

When both spouses are receiving benefits, upon the death of the first spouse, only the higher of the two benefit amounts being received continues as a survivor benefit. That means it is incredibly important for married couples to maximize the benefit of the highest earner. That will become a survivor benefit.

By claiming early, many couples are making a decision that will harm a long-lived spouse.

2. Impact of Spousal and Survivor Benefits for a Two-Earner Married Couple

There is an advantage to having a spousal benefit for a two-earner married couple. If born January 1, 1954, or earlier, the highest wage earner may claim spousal benefits upon reaching their FRA, leaving the benefit based on his/her own record to accumulate delayed retirement credits through deferral. This higher earning spouse then switches to their own worker benefit at about age 70. This scenario assumes the lower earner files for their worker benefit based on their own earnings record between age 62 and their FRA.

This claim now, claim more later strategy locks in a higher survivor benefit for whichever is the longest spouse to live. When the survivor’s benefit is taken into account, a two-earner couple may find that it is advantageous to delay benefits for the higher earner and start collecting benefits early for the spouse with the lower monthly payment.

Then at the death of the higher earner, the lower-benefit spouse will switch to the higher survivor benefit amount. In other words, the decision to delay the higher earner’s benefit is based on the lifetime of the second spouse to die.

This maximizes lifetime cumulative benefits for a couple where one spouse may expect to outlive the other. It is equivalent to purchasing a second-to-die or joint-life annuity.

Similarly, the decision as to when the lower earner should begin claiming benefits is the lifetime of the first spouse to die. Benefits based on the lower earner’s record will only last until the first spouse dies.

Unfortunately, new Social Security rules that were passed in November 2015 mean that only those born on or before January 1, 1954, can claim a spousal benefit while continuing to let their own benefit accumulate credits. 

For those born January 2, 1954 or later, there is still a benefit to having the higher earner delay - you just won't be able to "double dip" and collect spousal benefits while waiting until age 70.

3. Taxes on Social Security

Another factor overlooked by singles and marrieds alike is the impact of taxes. Retirement income needs to be viewed on an after-tax basis. In his book, A Social Security Owner’s Manual, Jim Blankenship, CFP®, provides a great example in which he shows the after-tax results of taking Social Security early and IRA withdrawals later verses doing the exact opposite, which would be delaying Social Security and instead using IRA money early. The result of delaying Social Security and using IRA money first: $64,000 more after-tax income and $179,000 more in the bank after 28 years in retirement. This isn’t chump change. Taxes matter. This strategy doesn't work for those with large pensions, but for those with no pension or a small pension, it can help your retirement money do more for you.

4. Don’t Forget About the Earnings Test

If you plan on working between age 62 and your FRA then wait until your FRA to begin benefits. Why? The earnings test affects you if you continue to have earned income AND receive Social Security benefits before you reach your FRA. In such a case, your Social Security benefits will be reduced if your total earnings exceed the annual limit. If you have some months where your earnings are high enough that you are not considered to be "retired" than your benefits may be re-calculated when you reach your FRA, but it could take 13 - 14 years to get back the amount that was withheld.

5. Calculate, Then Claim

There is no reason to guess about the best time to take your Social Security benefits. Online Social Security calculators will do the number crunching for you and your spouse, and show you which claiming strategy will result in the most lifetime benefits for a married couple. There is no way I would even consider recommending a Social Security claiming strategy for a married couple without running their scenarios through at least one online Social Security calculator.