Although the process of applying for Social Security Benefits may seem straightforward, it is a decision that requires careful consideration. There are many intricacies that can directly impact the annual amount an applicant will ultimately receive. Through careful Social Security planning, married couples can especially take advantage of strategies that may increase their lifetime benefits.
Understanding Spousal Benefits
The spousal benefit is equal to 50 percent of the higher-earning spouse’s Social Security benefit upon reaching Full Retirement Age (FRA). If one of the spouses dies, the surviving spouse may collect 100 percent of the monthly amount the deceased spouse was receiving in retirement benefits at the time of his or her death. A surviving spouse may begin collecting the surviving spouse benefit as early as age 60. However, if he or she elects to receive the benefit at 60, the amount will be reduced by 29.5 percent. An exception applies to surviving spouses who are taking care of children who are 16 years of age or younger; in this case, the surviving spouse may begin receiving benefits at any time after his or her spouse dies.
Maximizing the Survivor Benefit
For individuals who delay receiving benefits until after FRA, the benefit amount will increase eight percent each year, reaching a maximum increase of 32 percent between the ages of 66 and 70. Therefore, couples may implement Social Security planning strategies that positively impact the surviving spouse’s future income. Collecting Social Security retirement benefits upon reaching Full Retirement Age can limit the surviving spouse’s future income by forfeiting the annual eight percent delayed retirement credit. For this reason, if a spouse is younger or otherwise expected to live longer, it may be to his or her advantage for his or her husband or wife to elect to receive monthly payments later rather than sooner.
Claim and Suspend
Married couples who wish to receive spousal benefits when one party reaches FRA while still receiving the eight percent delayed retirement credit may do so. The Social Security Administration allows spouses who have reached Full Retirement Age to file a claim for benefits, but to elect not to receive payments, allowing the payments to accumulate until a later date. During this time, the spouse who has reached FRA may continue to work, and the annual eight percent increase as well as cost of living adjustments will be applied to the suspended benefits. In the meantime, the worker’s spouse may apply for spousal benefits and elect to receive monthly payments although the original applicant who triggered the spousal benefit has elected to have his or her payments delayed.
Married couples should consult a Social Security planning professional prior to submitting an application to the Social Security Administration. Gary M. Kaplan, Certified Public Accountant and President of Gary M. Kaplan, C.P.A. is a Certified Specialist in Retirement Planning. Licensed to practice in Florida, Maryland, Utah, Washington, D.C., and New York, Gary is available to advise couples who seek personalized and professional assistance with retirement planning.
