Social Security Factors for Married Couples

Mature couple with yoga exercise equipment walking in park

Caiaimage / Getty Images

Married couples often make a big mistake when it comes to deciding when to start taking their Social Security benefits. They view the decision as if they were single, which means the main factor they consider is their break-even age. Instead, they should be looking at the joint life expectancy of both partners. For married people, only considering monthly checks in terms of a single life expectancy can become a very costly mistake, and one you can't alter once it's made.

Married couples must factor in items such as spousal and survivor benefits to make the most beneficial claiming decision. Keep the following in mind when deciding when you should take Social Security as a married couple.

Key Takeaways

  • Married couples have several factors to consider in deciding when each spouse should begin taking their Social Security benefits.
  • In many cases, one spouse may be able to claim spousal benefits on the other spouse's Social Security earnings and delay taking their own benefits.
  • Married couples should seek to maximize the benefit of the highest earner because that will become the surviving spouse's benefit.
  • The longer either spouse waits to take benefits (up to age 70), the higher the couple's final Social Security earnings will be.

Eligibility for Spousal and Survivor Benefits

A married person may claim benefits on their own earnings record, but in many cases, may also claim a benefit on his or her spouse’s record, called the spousal benefit. The spousal benefit offers a tremendous 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 if they file 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 receive more money if they wait until their 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 makes it incredibly important for married couples to maximize the benefit of the highest earner because that will become the survivor benefit. By claiming early, many couples have made a financial decision that will harm the surviving spouse.

Spousal and Survivor Benefits for Two-Earner Married Couples

There is an advantage to having a spousal benefit for a two-earner married couple. If born on January 1, 1954, or earlier, the highest wage earner can claim spousal benefits upon reaching their FRA, leaving the benefit based on their record to accumulate delayed retirement credits through deferral. This higher-earning spouse can then switch to their 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 spouse lives the longest. When taking the survivor’s benefit into account, a two-earner couple may find it advantageous to delay benefits for the higher earner and start collecting benefits early for the spouse with the lower monthly payment.

Estimating a Spouse's Passing

Upon the death of the higher earner, the lower-benefit spouse can then 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 delay maximizes cumulative lifetime benefits for a couple where one spouse may expect to outlive the other. This method equates to purchasing a second-to-die or joint-life annuity.

Similarly, the decision about when the lower earner should begin claiming benefits depends on 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, Social Security rules 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 benefit accumulate credits. 

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

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. Up to 85% of the Social Security benefits you receive can be taxed, though never 100%. With this in mind, there is a clever tax arbitrage strategy that people can implement if they also have an IRA. With Social Security benefits having a maximum tax of 85%, that means each after-tax dollar from Social Security is worth more than each dollar you withdraw from your IRA.

To take advantage of this arbitrage, individuals and couples should first begin taking IRA withdrawals before starting to take Social Security benefits. They are essentially delaying the start of their Social Security to maximize its benefits and minimize the minimum distribution amounts that IRAs require in your early 70s. 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 work harder for you.

Don’t Forget the Earnings Test

If you plan on working between age 62 and your FRA, then wait until your FRA to begin taking benefits. Why? Because the earnings test affects you if you continue to collect earned income as well as 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're no longer considered "retired," your benefits may be re-calculated when you reach your FRA—and it could take 13 to 14 years for you to get back the amount that was withheld.

Calculate, Then Claim

You don't have to guess when it comes time to determine 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 greatest lifetime benefits for a married couple.