Why Delaying Social Security Is Good for Your Spouse
Waiting until 70 results in a bigger check for the surviving spouse
If you really love your spouse and are the primary earner in your family, delay taking Social Security.
If you die, your spouse will get that bigger check for the remainder of their life.
First a quick explainer on how spousal Social Security benefits work. Social Security will pay a non-working spouse up to 50% of the working spouse’s benefits at full retirement age. While the two of you are alive, you will each receive a check every month. When one of you dies, Social Security keeps paying the bigger check and stops paying the smaller one. You want that remaining check to be as big as possible so the surviving spouse takes less of a financial hit.
People worry that if they delay taking Social Security, they’ll die without getting all the money they put into it. But Social Security isn’t really a savings program. It’s insurance against running out of money in old age.
Say you’re in poor health and worry you may die in a few years. You’re the main earner and your check is the bigger one. The temptation is to start drawing your Social Security benefits immediately to get as much money as possible before you die. But in fact, you should do the opposite to better provide for your spouse after you’re gone.
Bill Reichenstein is a 68-year-old finance professor emeritus at Baylor University and head of research for Social Security Solutions, which offers advice on retirement planning. “If I went to a doctor today, and he said, ‘You have two years to live,’ ” said Reichenstein, “I’d still start taking Social Security at 70 because I want that higher benefit amount for my wife.”
Many Americans, of course, don’t have much choice about waiting to take Social Security. They retire in their early 60s, or they lose their job, and they need the monthly check to survive. That’s understandable. My colleague Carla Fried has written about how to financially make it to 70 without claiming: https://www.rate.com/research/news/more-retirement-social-security-strategy
And Jeff D. Opdyke has written about towns where the average Social Security check, amazingly, covers basic expenses. https://www.rate.com/research/news/best-cities-live-social-security-savings
If you have the resources to delay taking Social Security, it’s generally in your interest to do so. Your Social Security benefit will rise 8% for each year you delay taking it beyond full retirement age. It’s a great deal. Payouts for private annuities don’t rise nearly that much if you delay collecting money.
There may have been a time when you could argue that you could beat guaranteed 8% yearly increases by taking Social Security early and investing the money in the market. But beating them in an age of frothy stock and bond prices will be tough.
In fact, the numbers are compelling enough today that it’s probably worth spending down a chunk of your retirement portfolio so you can delay taking Social Security and maximize your monthly benefit.
The calculation gets more complicated when you factor in spousal benefits. If your spouse wants to claim benefits based on your work history, they can’t start collecting it until you begin receiving your own benefits
Let’s say you and your spouse are both 60, born in 1960. Your spouse plans to claim benefits based on your work history. Your benefit is $3,000 a month at your full retirement age of 67. If you and your spouse both start claiming at that age, you’ll receive $3,000 and they will receive 50% of that, or $1,500. (The actual amounts will be bigger because Social Security rises each year with inflation.)
If you delay taking benefits until age 70, your monthly check will rise to $3,720, once again not including cost-of-living adjustments. But your spouse will receive the same $1,500 they would have received at age 67. In other words, they gain nothing by waiting three years to start drawing Social Security.
In this situation, you have foregone payments totaling $162,000, Reichenstein calculates. In return, you or your spouse will get an extra $720 a month for the rest of your lives. Yes, it will take nearly 19 years before you’ve offset the $162,000 you didn’t collect, but unless you save those dollars, they won’t help you, or your surviving spouse, at age 90.
Some couples might decide to each begin taking Social Security at full retirement age. It’s not a bad decision. But waiting to collect retirement until age 70 isn’t wrong either, especially if one of you comes from a long-lived family.
The calculation changes again if your spouse worked long enough to qualify for some Social Security benefits on their own. Say your spouse will receive $1,000 a month at full retirement age based on their work history, but $1,500 a month based on your work history.
They could start collecting that $1,000 at age 67. When you both turn 70, and you begin Social Security, your spouse could file for spousal benefits. Your spouse would then receive $1,500 a month instead of $1,000. Delaying claiming Social Security in this instance costs you $126,000, not $162,000.
The numbers depend on your age and situation. People born in 1954 or earlier have a full retirement age of 66. People born in 1960 or later have a full retirement age of 67. Those born from 1955 through 1959 have full retirement ages ranging from 66 and two months to 66 and 10 months.