The 3 Social Security Claiming Strategies for Couples

June 5, 2017 | Paul R. Ruedi CFP®
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Choosing when to claim Social Security is something that can have a material impact on a couple’s lifestyle in retirement.  Deciding between taking a lower benefit sooner or a higher benefit later is something that can cause a lot of people to go in circles when choosing who claims and when they do it.  With so many options and trade-offs when claiming, how can people possibly know which one is right for them?  

Though intuitively it seems like delaying social security provides a “free” increase in the amount of benefit, there is a cost to this increase that most people overlook.  This cost is the years of Social Security payments people miss out on while they are waiting to receive higher benefits.  If you consider the amount of foregone payments as an “investment” and the additional benefit received by delaying as your “return” it really gets down to a simple math problem.

For a person to benefit from delaying he or she must have a long life expectancy, long enough to receive so many payments at a higher benefit amount that the total amount they are paid in benefits over their lifetime is increased, even though they missed out on payments while they were delaying.  But when it comes to couples, we are now dealing with two life expectancies which might seem quite complicated.

Fortunately, in spite of all the moving parts, the options couples have for claiming social security are actually less complicated than most would think.  There are really only 3 basic options:

- Both delay

- One delays, the other does not

- Neither delay

Though we aren’t big fans of rules of thumb, there are some general guidelines for which of these options make sense for couples depending on their personal situation.

When both should delay 

This option really only makes sense for a couple when both are in extremely good health.  This means they are both likely to live long enough to at least break even on the payments they missed out on by delaying.  Keep in mind, they must both live long enough to benefit from the increases, or else they would likely be better off if only one person had delayed.

When only one person should delay

In my experience, this is the option that makes sense for most people, because the odds of both members of a couple being in good enough health to benefit from delaying are pretty slim.  Generally speaking, whoever has the higher benefit should be the one who delays because that will maximize both the higher earner's retirement benefit, as well as the survivor benefit.

When both should start early

If both members of a couple are in poor health, they should take their benefits early.  This makes sense as neither is likely to live long enough to break even by delaying and should enjoy spending the money now while they still can.

Final thoughts

Rules of thumb can be useful starting points, but they may or may not apply to your particular situation.  When it comes to Social Security, there are also additional considerations regarding qualifying for subsidized health care and the potential for Roth conversions and harvesting capital gains while a couple’s taxes are low.  With so many moving parts, most people find it helpful to talk to a financial advisor to get an understanding of how different claiming strategies will impact their lifestyle.

If you would like to meet with one of our financial advisors for a complimentary analysis of your Social Security claiming options, you can do so by clicking here.