INmail: Nonworking spouse must wait for husband

Adviser: My clients are a retired married couple who have not yet claimed Social Security. Their CPA suggested that the wife, who has been a homemaker, should start collecting spousal benefits now on her husband’s earnings record while he allows his own benefit to grow to the maximum amount until 70. What are your thoughts?

MBF: At one time, the CPA’s advice would have been spot on, but not anymore. His suggested strategy, known as “file and suspend,” is no longer available.

Only people who were at least 66 years old by April 29, 2016, were able to file and suspend their Social Security benefits to trigger a spousal benefit and then immediately suspend their own retirement benefit, allowing it to grow to the maximum amount. The last group of people who were eligible to use the “file and suspend” strategy turned 70 in 2020 when their suspended benefits would have begun automatically. That claiming strategy is now history.

Under current rules, which were authorized by the Bipartisan Budget Act of 2015, the nonworking wife with no Social Security benefits of her own cannot collect on her husband’s earnings record until he files for his Social Security benefit.

Read more about maximizing Social Security benefits for a nonworking spouse inthis guide.

I generally encourage one spouse in a married couple, preferably the one with the bigger benefit, to delay claiming Social Security until age 70 not only to maximize their retirement benefits but to create the largest possible survivor benefit for the remaining spouse. A survivor benefit is worth 100% of what the deceased spouse was collecting or entitled to collect at time of death — including any delayed retirement credits — of the survivor claims benefits at full retirement age or later.

But that strategy does not always make sense if postponing benefits for the main breadwinner means the nonworking spouse must wait to claim her spousal benefits, which are worth up to 50% of the working spouse’s full retirement benefit amount.

From a cash-flow standpoint, the couple may want to claim benefits before age 70, but if they do, they should be aware that if the husband dies first, his widow’s benefit would be smaller. As their adviser, you need to look at what other sources of income would be available to the surviving spouse.

Mary Beth Franklin, a certified financial planner, is a contributing editor for InvestmentNews.