Since I began writing this Social Security retirement income planning series on September 27, 2010, several of my posts have discussed strategies for maximizing one’s benefits. In the case of married individuals, the various strategies have taken into consideration maximization of benefits during the couple’s lifetime.
What many people don’t realize is that when they make a decision regarding the start date of their Social Security benefits, which can be anywhere from age 62 to age 70, in addition to fixing the amount of their benefit, they are also potentially establishing the amount of their spouse’s monthly payment in the event that they die before their spouse.
Contrary to the general rule whereby you can qualify for a retirement benefit equal to the greater of your benefit or 50% of your spouse’s benefit as early as age 62, as a surviving spouse you can receive a widows or widowers benefit equal to 100% of your spouse’s benefit as early as age 60 assuming that you were married for at least 10 years. As a surviving spouse, beginning at age 62, you would be entitled to collect the greater of (a) your widows or widowers benefit or (b) your benefit based on your earnings record.
Similar to non-survivors, if you start collecting at an earlier age, your benefit will be reduced. The amount of a survivor’s benefit reduction will be a fraction of a percent for each month before the survivor’s full retirement age (“FRA”). The exact amount of the reduction is determined by the survivor’s year of birth; however, it’s approximately 30% across the board if benefits begin at age 60 and 20% assuming an age 62 start date. You may refer to Social Security Administration’s survivors chart to determine the amount of your benefit reduction.
If you’re married, you’re not dependent upon your Social Security benefit to meet your expenses, and you aren’t sure whether to collect your Social Security benefits beginning at your FRA or delay your start date to a later age up to age 70, the amount of your spouse’s benefit in the event of your death should be an important consideration. Per the November 15, 2010 Wait Until 70 to Collect Social Security? post, if you were born in 1943 or later, you will receive an 8% increase for each year that you delay your start date after your FRA, up to approximately 32% if you wait until age 70.
As an example, per the November 15th post, my annual projected benefit would be $39,384 at age 70, or $9,684 greater than my projected FRA benefit of $29,700. Assuming that my wife’s benefit based on her earnings record is projected to be less than my benefit, and assuming that we’re not dependent upon my Social Security benefit to meet our expenses, it would make sense for me to delay the start date of my benefit beyond my FRA in order to increase my spouse’s widows benefit in the event that I die before her. Maximization of my wife’s widows benefit would be in addition to potentially maximizing my cumulative Social Security benefits during my lifetime depending upon how long I live.
If you’re married, always remember when choosing a Social Security start date that, in addition to determining the amount of your benefit, you may also be determining your spouse’s Social Security benefit amount fate in the event that you predecease your spouse, you were married for at least ten years, and the amount of your spouse’s benefit based on his/her earnings record is less than your benefit.
Robert Klein, CPA, PFS, CFP®, RICP®, CLTC® is the founder and president of Retirement Income Center in Newport Beach, California. Bob is also the sole proprietor of Robert Klein, CPA. Bob applies his unique background, experience, expertise, and specialization in tax-sensitive retirement income planning strategies to optimize the longevity of his clients’ after-tax retirement income and assets. He does this as an independent financial advisor using customized holistic planning solutions based on each client’s needs and personality.