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“I’m 66 and done working. My wife is 58. Everybody says take Social Security now and enjoy it. Is that right?”
Let’s say that’s Walt, and his wife is Ann. They’re an example, not real people, but plenty of couples with an age gap face this exact question. And many of them answer it as if only one person’s life is on the line.
I’ve been a CPA since 1981, and this is one of the most expensive Social Security mistakes I know of. When the older spouse claims early, the younger spouse can pay for it for decades.
Here’s why. If Walt dies first, Ann’s survivor benefit is tied to Walt’s check. Social Security’s own publication says, “If the worker who died was getting reduced benefits, we’ll base your survivor’s benefit on that amount.” (1)
Going the other way, once he reaches full retirement age, waiting raises Walt’s check by 8% a year until 70, (2) and a widow is “entitled to the same increase that had been applied to the benefit of your deceased spouse.” (3)
And Ann is likely to need it longer. On Social Security’s latest life table, a 66-year-old man has an average life expectancy of about 17.4 more years, and a 58-year-old woman about 26.4. (4) Here are the 5 numbers I’d show Walt before he files.
1. His full retirement age is 67
For anyone born in 1960 or later, full retirement age is 67, and claiming at 62 cuts the benefit by 30%. (5) Walt was born in October 1960 and just turned 66, so he’s 12 months short.
Say his full-retirement-age benefit is $2,800 a month. Social Security trims “5/9 of 1% per month for the first 36 months” of an early claim. (6) By my math, claiming now, 12 months early, cuts Walt’s check by about 6.7%, to roughly $2,613.
Waiting until 70 adds three years of 8% credits, (2) or 24%, for $3,472.
2. The gap is about $859 a month
That’s the difference between $3,472 and $2,613. It’s Walt’s raise for waiting. More important, it’s the raise Ann keeps if she outlives him (assuming her own retirement benefit is smaller than his).
A surviving spouse at full retirement age or older “generally gets 100% of the worker’s basic benefit amount,” Social Security says. (1) So the bigger Walt’s check, the bigger Ann’s floor for the rest of her life.
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3. Walt alone breaks even at about 82
If Walt waits, he gives up 48 months of $2,613, or about $125,400. At $859 more a month, my math says it takes about 146 months, a bit over 12 years after 70, to catch up. That’s around age 82.
With his average life expectancy around 83, (4) that’s close to a coin flip for Walt alone. That’s why people tell him to take it now. They’re only doing half the math.
Quick aside — most internet financial advice comes from people who weren’t alive during the last recession. I’ve been writing about money for more than 35 years. Want rock-solid advice? Sign up for the free Money Talks Newsletter. Takes 10 seconds. No fluff. No spam.
4. Ann’s side could be worth about $93,000
Using the same life-table averages, (4) Ann’s life expectancy runs about nine years past Walt’s. At $859 a month, that’s about $10,300 a year, or roughly $93,000 over nine years, by my math, before cost-of-living increases.
Averages are just averages. But for a couple eight years apart, the odds tilt toward Ann collecting a survivor check for a long time. One caution: if Ann claims survivor benefits before her own full retirement age, she gets between 71% and 99% of the worker’s basic benefit amount. (1)
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5. The backup plan for Ann
What if Walt dies at 68, before he ever files? The credits he’d earned still count. The Social Security Handbook says the widow of a worker who “had received or was eligible for” delayed retirement credits is entitled to the same increase. (3)
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My honest take
If Walt is in poor health, or if they truly can’t cover the bills until 70, claiming earlier can be the right call. This isn’t a black and white rule.
But when a husband is the older spouse and the higher earner, his claiming decision is really a decision about his wife’s income in her 80s. Make it together.
The biggest Social Security check in your house may end up belonging to the person who outlives you.
Sources: 1. Social Security Administration; 2. Social Security Administration; 3. Social Security Handbook; 4. Social Security Administration, Office of the Chief Actuary; 5. Social Security Administration; 6. Social Security Administration, Office of the Chief Actuary
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