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It Takes Two to Tango with Social Security

April 27, 2022 Alyson Dorosky By Alyson Dorosky

Spouses grapple with many financial decisions throughout their married lives. Bigger diamond engagement ring or house down payment? One child or two? Take that job for more pay but lots of business travel?

Few spouses I’ve met, however, consider filing for Social Security benefits in the same category – a big decision with sizeable consequences. Even some advisors I’ve worked with for years still tell me that Social Security is straightforward and hardly worth getting both spouses on the phone or in the office to discuss.

Big mistake.

Yes, someone’s own retirement benefit amount will be the highest when they turn 70. Yes, their benefit will be the lowest if they decide to file for benefits as early as possible at 62 for retirement benefits or 52 for disability benefits.

But that’s not how you maximize Social Security for married couples. Failing to plan together on when to file can potentially leave thousands of dollars on the table.

Make Sure You Look at All the Factors

First, you need to work with a financial advisor who examines the situation for you and your spouse from all angles because no two situations are identical.

Here’s a Dive Deep into the Sea of Social Security

Recently, I was working with an advisor who was struggling with the case of a couple. The husband had filed for Social Security benefits in 2019. The wife, age 64, had stopped working but hadn’t filed for Social Security.

The question was could she:

The filing strategy the advisor thought applied is called a restricted application. However, due to the Bipartisan Budget Act of 2015, the wife isn’t eligible to file a restricted application because she hadn’t turned 62 before Jan. 1, 2016.

I was able to help the advisor get the answer – and potentially prevent his clients from doing something that would cost them in the long run.

In this case, the wife isn’t entitled to a spousal benefit on her husband’s record because her own benefit is more than 50% of her husband’s Primary Insurance Amount (PIA).

The Social Security planning tool I use evaluated all the possible filing scenarios and:

The result was that the optimal filing age for the wife, in this case, is 65. That’s two years before her full retirement age. We suggested she take 24 months’ worth of reduced benefits to maximize the combined benefits she and her husband would get. If the wife lives longer than her husband, she will then be eligible for survivor benefits on her husband’s record.

The Big Reveal Can Surprise Everyone

This is one example – I admit, a complex one – of a couple’s strategy. This case highlights the importance of getting a wide-angle view of all the options under the more than 2,700 Social Security rules.

Waiting until age 70 isn’t always the answer to maximizing Social Security benefits. Every case is different and unique. Make sure you get the full picture.

Read the original post on TheStreet here.

Alyson is a key member of both the Marketing and Advisor Success Teams at LifeYield. She's been supporting advisors using Social Security Advantage for 3+ years, which makes her an important Social Security author to watch. She writes monthly about Social Security secrets, niche cases and lessons learned supporting clients in the digital era.