Let’s establish something—Social Security is complicated. If you call the Social Security Administration with a question (speaking from experience here), you’re bound to get three different answers from three different people. And who in their right mind wants to visit the Social Security Administration office to inquire about their options? No one. Thankfully, there are a few facts that can help couples better understand their benefit options, and if nothing else allow them to ask more informed questions.
Here we go:
1. If married and one spouse has a benefit less than ½ of their spouse’s, they can draw 50% of their spouse’s benefit. This is very handy when you have one spouse who earned significantly less than the other. But, you won’t see this spousal benefit listed on your benefit statement. Your statement may say you’re only entitled to $500/month, but if your spouse will receive $2,500/month, you are eligible to receive a benefit of $1,250/month.
2. When a spouse passes away, the surviving spouse keeps the higher of the two monthly benefits. The lower of the two benefits falls off, leaving the surviving spouse with the higher payment.
3. For every year you delay drawing your benefits, they increase, creating a higher benefit over your lifetime. This is particularly important when one spouse was a high wage earner. Drawing at 62, as opposed to 66, reduces your benefit by 25%. That’s significant when added up over a lifetime. You can delay up to age 70, with a benefit increase of 8% per year. Delaying does not always make sense, but drawing early can have catastrophic impact on lifetime income for a surviving spouse (see fact #2).
These three facts can help clear up some confusion, but they don’t guide you on when to draw your benefits. It’s important to understand the interplay of your ages with your options, especially in light of changes made by the 2015 Bipartisan Budget Act. Evaluating Social Security options and benefit timing is a key piece of the financial plans we develop for our clients nearing retirement. Our focus is to help our clients make informed decisions based on their personal situations, and to equip them with the information they need to file for their benefits.
Before we go, let’s not forget another important tidbit—you can apply for your benefits online. Let’s all breathe a collective sigh of relief that you don’t have to wait on hold for hours or take a number at the SSA office. Now, we can’t prevent every visit to the SSA office, but if your situation is complex, we’ll arm you with the questions to ask. That’s half the battle.