Most understand that waiting to claim Social Security benefits can result in higher monthly payments. However, many don’t know that there are other ways to maximize their benefits, some of which depend on their marital status.
Understanding the strategies for maximizing your Social Security retirement income benefits should be prefaced with a review of the three basic forms of retirement benefits:
- The Worker Benefit: This is the benefit you receive based on your own personal earnings history, and for which you become eligible after 40 quarters of work.
- The Spousal Benefit: This is the benefit paid to your spouse. For non-working spouses, this is 50% of the working spouse’s benefit. For working spouses, it is the greater of the benefit earned from his or her earnings or 50% of the worker’s benefit.
- The Survivor Benefit: This is the benefit paid to the surviving spouse, which is paid at a rate equal to the greater of his or her own current benefit, or the deceased spouse’s current benefit.
The first and most obvious strategy for maximizing your Social Security benefit is to simply wait to reach age 70 before beginning to take benefits. By waiting until age 70 to receive benefits, your monthly payments may increase by 32%, not including any cost of living increases that may be added to this amount.
Benefit Maximization Strategies for Married Couples
Married couples have one claiming strategy that may be helpful in getting the most from Social Security, called File and Suspend.
File and Suspend: This strategy permits a spouse to claim his or her spousal benefit based on the working spouse’s earnings record, while the worker continues to accrue delayed retirement credits. Under File and Suspend, the higher-earning spouse files for benefits and then suspends them. This allows the lower-earning spouse to claim a spousal benefit, typically 50% of the higher-earning spouse’s benefit. The higher-earning spouse will accrue delayed retirement credits which, upon attainment of age 70, the couple can begin using to receive the highest possible amount.¹ A recent law change will eliminate the availability of this strategy as of April 30, 2016.
Benefit Maximization Strategies for Divorced Spouses
For divorced spouses, you can file a restricted application for a spousal benefit once you reach full retirement age, as long as your former spouse is 62 or older at the time of your application. You can then delay receiving benefits under your own work record, allowing your delayed retirement credits to build. At age 70, you can switch over to your worker benefit, assuming it is higher than the spousal benefit you’ve been receiving.
Benefit Maximization Strategies for Widows and Widowers
Remember, there is no spousal benefit for a widow/widower, but he or she does qualify for a survivor benefit that is equal to 100% of the deceased spouse’s benefit (versus the 50% spousal benefit if the working spouse is still alive). This survivor benefit is available at age 60.2
If you are widowed and also have worked for 40 quarters, you will have a worker benefit and a survivor benefit. This presents you with several choices. One choice is to file for the benefit that provides you the greatest monthly benefit amount.
Another choice may be to start your worker benefit at age 62 and then switch to the survivor benefit once you reach full retirement age. This option is advantageous in instances where the widowed spouse did not accumulate the same level of benefits as the deceased spouse. Choosing this option allows the surviving spouse to take the higher survivor benefit amount. Because there are no delayed retirement credits earned on survivor benefits, there is no advantage to waiting past full retirement age to apply for survivor benefits.
A final choice is to consider starting the survivor benefit at age 60 and then switching to your own worker benefit at age 70. This strategy allows you to begin receiving income based on the survivor benefit as early as possible and provides you time to build up the maximum worker benefit.