Social Security Planning: Options for Spouses

social_security_spousesFor the last two weeks we have covered the basics of Social Security options and started discussing the optimal time to claim benefits.  This week we move on to another factor which can broaden the array of Social Security options available to you:  marriage.

Marital status, both past and present, may have a major affect on your Social Security options. Certainly it broadens the field of choices considerably. Married couples, formerly married individuals, and married couples who have been previously married to other partners have many options for receiving benefits based on their own work records as well as their current and/or former spouses’ work records. Optimizing the Social Security retirement benefits that a dual-income family or former dual-income family can obtain depends on several factors, including each worker’s work record, his or her spouse’s work record, his or her former spouse’s work record, whether or not the worker and/or spouse continue working while receiving benefits, and timing of receiving benefits. Survivor’s benefits may be based on either worker’s work record or on both work records combined.

Here are a couple of options available to married couples to maximize their benefits:

File and Suspend. It is necessary for a worker to file for Social Security benefits before his or her spouse can collect the spousal benefit. But what if the spouse wants to start collecting the spousal benefit but the worker wants to delay retirement benefits so that his or her monthly benefit will grow? A worker who has reached FRA can file for benefits, then immediately suspend receipt of those benefits until a later date. This way his or her monthly benefits continue to grow by 8% per year. His or her spouse can then claim the spousal benefit (half of the worker’s FRA benefit). Read more about this option here.

Some Now, More Later. This is an extension of the File and Suspend strategy. A spouse (or former spouse, in cases of divorce or the worker’s death) who has reached FRA but wishes to delay receipt of his or her benefits so as to let them grow 8% per year can receive the spousal benefit as described above. That is, he or she can claim spousal benefits but wait several years before claiming his or her benefits based on his or her own work record. That way the total amount of benefits the spouse receives will be optimized. For more information about this option, go here.

The maximum family benefit is not an individual calculation, nor even two individual calculations. It is a complex calculation based on the choices of a lifetime. Trying to decide which option is best can be a daunting task. Fortunately, there are a couple of options open to those who have come to regret their decisions about when to start taking benefits. For those receiving benefits before the FRA, there is a 12-month grace period in which they can choose to withdraw their claim, repay the benefits received, and reclaim taxes from the IRS and state. For those at or above FRA, it is possible to temporarily suspend benefits and later resume them at a higher interest rate. This can be done as many times as the worker chooses. In the latter case, the spouse can go on receiving spousal benefits while the worker’s benefits are suspended. You can learn more about these options here.

Articles from the Center for Retirement Research at Boston College go into great detail about these choices and suggest which scenarios will work best based on relative incomes of the spouses. See http://crr.bc.edu/, http://fsp.bc.edu/social-security-claiming-guide/, and https://www.socialsecuritytiming.com/ for more information. And if you are feeling overwhelmed and want assistance with navigating the array of Social Security options, get in touch with us at Elder Law of East Tennessee. We’ll help you find out which options are best for you.

Next Monday, the final installment in our Social Security Planning series:  “Taxation.”