Possibly you’ve heard the recent hype regarding Social Security and how it’s possible to get additional retirement income. It’s actually true—and it’s especially true for married couples.
Social Security is the single largest source of income for the majority of Americans aged 65 and older. For 53 percent of married couples, Social Security income will represent half or more of their total retirement income. After paying into the Social Security system your entire working career, you will finally have the opportunity to reap the rewards of lifetime inflation-adjusted income once you activate the benefits. However, the key is knowing exactly how and when to activate those benefits to take advantage of the maximum payout.
Most of us are familiar with the information provided in our Social Security statements. This statement identifies what our monthly Social Security income will be if we start benefits at one of three ages: 1) at age 62; 2) at Full Retirement Age; and 3) at age 70. Here’s what’s not mentioned in your Social Security statement—that there are additional options including two features that can add an additional $100,000 or more to a married couple’s joint lifetime income.
The two lesser known features of Social Security available to married couples are “File and Suspend” and “Restricted Application.”
File and Suspend involves a strategy when both spouses have reached Full Retirement Age. One spouse files for benefits but then immediately has their payments suspended. This “filing” by one spouse is what allows the opportunity for the other spouse to obtain a spousal income benefit.
Restricted Application involves a strategy where one spouse, at Full Retirement Age or beyond, files a restricted claim for spousal benefits only, thus allowing them to collect benefits based on the other spouse’s (usually the higher wage-earner’s) Full Retirement Age benefit amount.
These two spousal claiming strategies are quite similar, so it’s crucial to know how and when to use each feature for each spouse. One spouse might File and Suspend, while the other spouse files a Restricted Application, thus both spouses end up claiming benefits from the other’s earnings record, all while their own benefit amounts continue to grow.
In both of these strategies, once each spouse turns age 70, they will change their benefit elections to their own (higher) income amount. Each person’s age 70 benefit amount will be different, but for all Americans, the age 70 amount is always the maximum monthly amount we can earn from Social Security.
If you’re thinking this sounds complicated, you’re right; which is why it typically takes Social Security Maximization software to determine the ideal strategy to maximize income for the couple. There are several free Social Security Maximization software programs on the Internet, but the more accurate top-rated versions are offered through advisers.
You only have one chance to plan for the Social Security income that will last your lifetime. Take some time to get it right.