How much can we get?

A decision based on a single Social Security work record is fairly straightforward and boils down to when to start.  Making the right decision based on the two work records of a married couple requires much more information to initiate an optimized filing strategy that involves contemplating both when and how questions.  

Starting Social Security at age 62 for each spouse is most likely not the best decision.  If either have work related earnings that exceed the earnings threshold, there is a three dollar reduction of Social Security benefit for every dollar of earning in excess of $15,100.  A spouse is eligible to collect 50% of the other spouses Social Security record even having never worked.  This is to provide income for a stay at home spouse who has a limited work history and possibly no Social Security benefits available. The caveat is that the primary wage earner needs to file for his or her own benefit in order for the spouse to collect their 50% benefit.   

When this is done prior to (FRA) full retirement age, the earnings tests apply as well as a benefit reduction that reduces the primary and spousal benefit. The earnings test has a higher earnings threshold and lower benefit reduction in the year that full retirement age is reached.   A strategy is to wait for the primary wage earner to reach FRA to apply for spousal benefits especially if planning to continue working.  The lower wage earner can always start collecting off their record at age 62 and than apply for spousal benefits if greater when the primary wage earner decides to file.  The 50% spousal benefit will not include any deferred retirement credits that accrue after the primary wage earner reaches full retirement age.

Conversely, a higher wage earner still working at full retirement age can start collecting a 50% spousal benefit while delaying and accruing their own benefit.  The primary wage earner can file and suspend their benefits at full retirement age thus opening the door for the 50% spousal benefit and further accruing a larger benefit for them self.  When suspended, the income benefit accrues, providing an 8% annual simple interest delayed retirement credit providing a choice in the future for a larger monthly income benefit up to age 70 or taking the accrued suspended income anytime as lump sum. 

An advantage to waiting to age 70 is that the survivor benefit also accrues to that age and includes all the deferred retirement credits. Taking the lump sum option will set the monthly income back to the date benefits were filed for and suspended. In other words, the 8% deferred retirement credit is forfeited for a big check.  

Should beneficiaries of Social Security file and suspend their benefits when they reach full retirement age if they plan on delaying their Social Security income to a later date? I feel that adding the option of a future lump sum, accruing delayed retirement credits, opening the door for spousal benefits and maximizing survivor benefits are all good things to have going for you and your spouse.  You really need to know what to ask for when filing for Social Security income benefits. 

To learn more about Social Security, please register to attend a free Smart Social Security Webinar on June 25, 2013 at 2:00 PM EST by registering at: WWW4.gotomeeting.com/register/370717695