Couples are generally entitled to Social Security benefits based either on their own work records or through spousal benefits. A spousal benefit allows one partner to claim up to 50% of the other spouse’s retirement benefit.
While this is widely known, the real financial advantage often lies in how and when these benefits are claimed. Timing and coordination are crucial, as they can dramatically affect lifetime income.
Case Study: John and Linda’s Retirement Strategy
John and Linda, a couple from Chicago, began evaluating their Social Security options as they approached age 62. Both had long work histories and a variety of claiming options. Initially uncertain, they researched strategies and sought professional advice.
Their ultimate decision was to pursue delayed claiming, a lesser-known but powerful approach that enhanced their long-term financial stability.
The Overlooked Strategy: Delayed Claiming
Delayed claiming means postponing the start of Social Security benefits beyond full retirement age (typically 66 or 67, depending on birth year). For each year benefits are delayed, up until age 70, payments grow by about 8% annually.
For couples who anticipate longer lifespans, this strategy can yield significantly higher lifetime benefits.
How John and Linda Maximized Their Benefits
After reviewing their financial situation and life expectancy, John chose to delay his benefits until age 70, locking in maximum monthly payments. Linda opted to claim her spousal benefit at her full retirement age of 66, then switched to her own benefits at 70.
By aligning their claiming strategies, they secured higher long-term income while maintaining financial flexibility in the short term.
Planning and Consultation: Key Steps to an Effective Strategy
John and Linda’s case illustrates the importance of professional guidance in navigating Social Security. Financial advisors who specialize in retirement strategies can help couples:
- Compare immediate versus delayed claiming scenarios
- Factor in life expectancy and health conditions
- Align benefits with broader financial goals and retirement plans
The Role of Life Expectancy in Decision-Making
Life expectancy is a pivotal factor in choosing a Social Security strategy. If one or both spouses expect to live well into their 80s or 90s, delayed claiming often provides the best long-term advantage.
However, if health concerns shorten the expected lifespan, earlier claiming may make more sense. Couples should consider health history, family longevity, and financial needs when deciding.
Additional Considerations and Benefits
Delayed claiming provides more than just higher monthly benefits:
- Survivor benefits: A higher benefit for the surviving spouse, offering added security.
- Tax efficiency: Potential for reduced tax liability in retirement.
- Inflation protection: Higher base benefits that grow with cost-of-living adjustments.
However, these advantages must be balanced against the need for income in the near term. For couples who need cash flow earlier, delaying may not always be feasible.
A Path to Financial Security
While not universally ideal, delayed claiming offers couples a powerful way to maximize Social Security income and strengthen financial stability. John and Linda’s thoughtful approach demonstrates how proper planning can lead to a more comfortable and secure retirement.
For couples approaching retirement, evaluating all available strategies and seeking expert advice is essential. By weighing risks, benefits, and personal circumstances, couples can make informed decisions that support long-term financial well-being.
FAQs
What is the benefit of delaying Social Security benefits?
Delaying Social Security past full retirement age increases benefits by about 8% per year until age 70, resulting in significantly higher lifetime income for many retirees.
How do spousal benefits work for Social Security?
A spousal benefit allows one spouse to receive up to 50% of the other spouse’s full retirement benefit. This can be especially helpful if one spouse had lower lifetime earnings.
Can both spouses delay Social Security benefits?
Yes. Both spouses can choose to delay benefits, but often one spouse claims earlier while the other delays. This balance provides income now while still maximizing long-term benefits.
How does life expectancy affect Social Security decisions?
Life expectancy plays a critical role. Couples who expect to live into their 80s or beyond typically benefit more from delayed claiming, while those with shorter expected lifespans may benefit from claiming earlier.
Should couples consult a financial advisor before making a decision?
Yes. A financial advisor who understands Social Security strategies can help couples model different scenarios, factoring in income needs, health, and retirement goals for the best outcome.
