How married couples can squeeze the most out of Social Security

The New Year is a great time to review some basic Social Security-claiming rules. And based on the many questions I have received from financial advisers over the past few weeks, it seems there is some confusion about what married couples can and can’t do.
Several readers noted that while it makes sense for the larger-earning husband to file and suspend his Social Security benefits as a way of triggering spousal benefits for his lower-earning wife, why wouldn’t the husband also claim spousal benefits based on his wife’s earnings record?
Because he can’t.
He either can file and suspend in order to allow his own benefits to grow until they are worth more later or file a restricted claim for spousal benefits only, but not both.
The Social Security Administration addresses this question on its website. “If your current spouse is full retirement age, he or she can apply for retirement benefits and then request to have payments suspended,” according to the SSA website. “That way, you can receive spouse’s benefits and he or she can continue to earn delayed retirement credits until age 70.”
However, the SSA site also notes: “Only one member of a couple can apply for retirement benefits and have payments suspended so his or her current spouse can collect benefits.”
Delayed retirement credits are worth 8% per year for each year you postpone collecting benefits beyond your full retirement age, up to age 70, boosting benefits by up to 32% plus any intervening cost-of-living adjustments.
The agency offers another option: “If you have reached full retirement age and you are eligible for [both] a spouse’s benefit and your own retirement benefit, you may choose to receive only [your] spouse’s benefits. If you do that, you can delay applying for your own retirement benefits until a later date to take advantage of delayed retirement credits.”
But the SSA site adds: “If both you and your current spouse are full retirement age, only one of you can choose to receive spouse’s benefits now and delay receiving your own retirement benefits until a later date.”
Richard G. Bertsch, president of Focus Wealth Advisors, wrote to me with a similar question about one of his clients, a married couple ages 62 and 64.
The 64-year-old husband’s Social Security benefit at age 66 will be $2,090 per month. The wife has a full retirement age benefit of $822 — substantially less than her spousal benefit of $1,045.
“Can the husband who plans to suspend his benefit until age 70 still file for spousal benefits once his wife reaches age 66?” Mr. Bertsch asked.
No. The husband can either file and suspend or file a restricted claim for spousal benefits only. But he can elect one claiming strategy and she can choose the other. Given the amount of their benefits, it’s a close call.
Scenario 1: The husband does nothing and his own benefit automatically grows by 8% per year until he claims at age 70. At 66, his wife claims her own benefit of $822 per month. At that point, the husband could file a restricted claim for spousal benefits only and collect half of her benefit — $411 per month — for two years for a combined Social Security household benefit of $1,233 per month ($822 + $411 = $1,233).
At 70, he would switch to his own maximum benefit of $2,759 per month ($2,090 x 1.32) for a total household Social Security benefit of $3,581 per month ($2,759 + $822).
Or, Scenario 2: At 66, the husband files and suspends, collecting nothing for four years. Two years later, when the wife turns 66, she files a restricted claim for spousal benefits only and collects half of her husband’s primary insurance amount worth $1,045 per month.
When each turns 70, they switch to their maximum benefits: $2,759 for him and $1,085 for her ($822 x 1.32) for total monthly income of $3,844.
As you can see, Scenario 1 gives the couple slightly larger monthly income for two years ($1,233 vs. $1,045) but Scenario 2 results in higher combined income in the long run. Both would secure the same maximum survivor benefit of $2,759 per month if he died first.
So which claiming strategy would you choose? Personally, I’d focus on the long-term benefit of Scenario 2 since longevity is one of the biggest challenges today’s retirees face. And a bigger benefit will create a bigger base for future cost-of-living adjustments.