I wrote recently about the benefits of waiting until age 70 to file for social security benefits. But this isn’t the best option for everyone. It’s common for one spouse to make more money, even significantly more, than the other spouse. If this is your own situation, here is what I often recommend for couples to do when it comes to social security:
The spouse that earns less should file for benefits at full retirement age
Currently, the full retirement age for most people is about age 66 or 67. This is a smart time for the spouse who earns less to start taking benefits. That gives them some income in case the other spouse passes away. And, if that does happen, they can also file for their spouse’s benefit amount.
The higher-earning spouse takes social security at age 70
The upside of waiting until age 70 to start taking social security benefits is that you get an 8% increase each year from full retirement age until age 70. That is a strong gain in relation to market performance. So it pays for one spouse to hold off for a few years.
Why should the higher earning spouse be the one to wait? Because they have more money in social security building interest each year.
This acts as a kind of insurance policy for the spouse that earns less, because if the higher-earner passes away and has waited until 70 to take benefits, the surviving spouse can file for a benefit that their spouse was receiving. And at that time, they will receive more money than they would have if their spouse took benefits at 67, thanks to the 8% annual return for waiting to take social security.
Another benefit is that the higher income earner can file and backdate their benefits if necessary. For example, let’s say the higher income earner plans to take social security at age 70. However, they get sick at age 68 and need money to cover medical expenses. In that case, that spouse can retroactively file like they had at 67, and get the money they’ve earned since then.
If you do want to wait until 70 to take benefits but are concerned about needing money before that because of an extreme situation, know that you can still backdate your filing and receive that money.
Do you need help preparing for retirement? Contact me today to set up a meeting to talk about your goals. You can also download my free ebook for physicians for tips and information about getting your finances on track.