- posted by Richard LaCross, CPA/PFS, CFP®, MST in the Business Blog
For those who are married and who are nearing retirement in the coming years where one spouse is a higher earner and the other spouse is not, there is retirement benefit strategy to keep in mind, especially if it is one of the spouse’s intention is to continue working to age 70 to maximize Social Security benefits.
Here’s how it works by example. Assume the husband is currently 66 at full retirement age for Social Security purposes and the wife is 62 (the youngest age for this strategy) who worked off and on over the years and was the main caregiver for the family. The husband wishes to work to age 70 and the wife would like to retire. The wife’s choices for Social Security benefits are $400 based on her work history or a spousal benefit of $1,250 which is 50% of the husband’s work history ($2,500 x 50% =$1,250). Since the wife is not at full retirement age, her spousal benefit will be reduced to $937.50 ($1,250 x 75%). This spousal benefit even on a reduced basis is over twice as much as the benefit based on the wife’s own work history.
How can the wife receive the spousal benefit if her husband wants to continue to work to age 70? This is where the “file and suspend strategy” comes into play. Since the husband is at full retirement age, the husband files for Social Security benefits, the wife applies for a spousal benefit, and then the husband has Social Security suspend his benefits. At age 70, the husband re-applies for Social Security benefit.
- The wife receives spousal benefits while the husband continues to work to age 70 that are twice as much as the benefit would have been under her own work history.
- The husband is guaranteed a Social Security benefit of at least 132% of the benefit of full retirement age when he files for Social Security at age 70.
- The husband can continue to work and accrue delayed benefits when he re-applies for Social Security benefits at age 70.
- At the Husband’s death, the wife’s survivor benefit will be increased to 100% of the husband’s benefit determined at age 70, if the husband predeceases the wife.
Keep in mind that this strategy is not for all married couples and should be part of your discussion with a Certified Professional. Please contact me if you have any questions, I have experience with these types of situations and am happy to help.