Welcome to our “Social Security Q&A” series. You ask a question about Social Security, and a guest expert answers it.
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Today’s question comes from Brandon:
“I have a question about Social Security spousal benefits. I’m 66, and my wife is 67. She’s never worked and is not entitled to any Social Security benefits on her own. Is she still eligible for 50% of my benefits when I retire? If she is entitled to benefits, is she entitled to start receiving benefits now, even though I’m planning to wait until 70 to claim?”
When waiting until 70 is wrong
Brandon: You ask a very interesting question. While we often recommend that the higher earner wait until 70 before claiming benefits, this does not turn out to be the optimal strategy in your situation.
When determining when to claim benefits, there is always a tradeoff between getting benefits now and claiming a much higher benefit later, but receiving no benefits now. Indeed, for every year you wait to claim benefits after full retirement age (FRA), your benefits increase by 8%.
In your case, the loss in benefits is much higher than for many people because your wife cannot claim her spousal benefit until you claim. So, it is not just your benefit that you are giving up by waiting, but her spousal benefit as well.
While I did not have your actual benefit numbers, I checked out your situation using our algorithm at Social Security Choices. I put in $2,000 for your benefit at FRA. Since your wife is 67 and is beyond her FRA, she is now eligible to receive a $1,000 spousal benefit, but she will only receive this benefit once you claim.
Your FRA is 66 and 2 months. If you are 66 and 2 months and claim now, you will get a $2,000 benefit and your wife can claim $1,000. If you wait until 70 to claim, neither you nor your wife will receive any of this money until you claim at 70, and your benefits then will be approximately $2,640 for you and $1,000 for her. (Her spousal benefit is based on your benefit at FRA and does not increase if you wait to claim.)
Claiming now is the optimal strategy for you and your wife. With our algorithm, we can see what the optimal strategy is for different life expectancies. In all our life expectancy scenarios, this is your optimal strategy. The scenario in which you pass away first and your wife lives for a long time is usually the situation where waiting until 70 to claim is the best option. But even here, it is best for you to claim now and have your wife receive her spousal benefit.
This is a good example where the general rule of waiting until 70 does not hold. Everyone’s situation is a bit special.
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I hold a doctorate in economics from the University of Pennsylvania and taught economics at the University of Delaware for many years. Presently, I am teaching at Gallaudet University.
Disclaimer: We strive to provide accurate information with regard to the subject matter covered. It is offered with the understanding that we are not offering legal, accounting, investment or other professional advice or services, and that the SSA alone makes all final determinations on your eligibility for benefits and the benefit amounts. Our advice on claiming strategies does not comprise a comprehensive financial plan. You should consult with your financial adviser regarding your individual situation.