Title: Uncovered Social Security Secrets Every Married Retiree Should Know

Navigating Social Security retirement benefits can be a breeze, right? Well, not always, especially when you're married. Here are three lesser-known Social Security rules that every married retiree should keep in mind.

1. The magic of when your spouse claims benefits

You might already know that one spouse can claim Social Security retirement benefits based on the other spouse's income record. But did you know that when the higher-earning spouse claims benefits can significantly impact your situation?

For instance, suppose Fred's wife, Wilma, earned more than he did throughout their careers. If Fred's benefits from his own record are lower than what he'd receive using Wilma's earnings history, he can receive up to half of Wilma's Social Security retirement benefit at her Full Retirement Age (FRA).

But what if Wilma claims her benefits before her FRA? Her benefit amount will be reduced, and so will Fred's. Conversely, if Wilma waits until she's 70 to claim her benefits, her retirement benefits will increase, but Fred's spousal benefits will remain the same. The silver lining? Wilma's delayed retirement could potentially boost Fred's survivor benefits if she dies before him.

2. The twists of initial and later claims

Another lesser-known Social Security fact: Lower-earning spouses can initially claim benefits based on their own income record and then switch to spousal benefits (using the higher-earning spouse's income record) later in some situations. By doing this, a married couple might be able to maximize their overall retirement benefits.

Let's revisit Fred and Wilma once more. Suppose Fred is three years older than Wilma. He decides to claim Social Security at his FRA of 67. Wilma, aged 64 at the time, continues working until her FRA of 67 and claims her Social Security retirement benefits. Fred could then apply for spousal benefits based on Wilma's income record and receive higher benefits.

However, it's essential to know that this strategy doesn't work when a higher-earning spouse has already claimed benefits. For example, suppose Wilma claimed her benefits at 64, and Fred claimed his at the same time. Fred's benefits would be based on whichever is higher—the benefits based on his earnings record or 50% of Wilma's benefits (with early retirement penalties applied for Wilma since she claimed before her FRA).

3. The impact of one spouse's work on the other

You might be unaware that one spouse's continued work while collecting Social Security retirement benefits could affect their partner's benefits. Remember the annual earnings test? Whenever a lower-earning spouse receives benefits based on a higher-earning spouse's income record, Social Security will deduct a portion of their benefits if they earn above a specific annual limit.

Let's picture Fred and Wilma yet again. If Wilma, as the lower-earner, receives benefits based on Fred's income record and continues working beyond a specific annual limit, Social Security will deduct from both their benefits, not just Wilma's. The good news? These deductions are temporary and disappear once you reach your FRA, and eventually, the withheld amount will be repaid over time.

References:

SSA (2022). Social Security Retirement Benefits for Spouses. Retrieved from https://www.ssa.gov/oplf/retire-spouse.html
SSA (2022). When to Start Receiving Retirement Benefits. Retrieved from https://www.ssa.gov/benefits/retirement/planes.html
SSA (2022). Early or Late Retirement. Retrieved from https://www.ssa.gov/planners/retire/earlylate.html
SSA (2022). Coordination of benefits. Retrieved from https://www.ssa.gov/pubs/EN-05-10094.pdf
SSA (2022). Retirement Planner. Retrieved from https://www.ssa.gov/benefits/retirement/planner.html
When planning for retirement, it's crucial to consider the impact of when a higher-earning spouse claims Social Security benefits, as this decision can significantly influence the amount of money a lower-earning spouse may receive in spousal benefits.
Managing retirement finances can involve complex decisions, such as whether a lower-earning spouse should initially claim benefits based on their own income record or later switch to spousal benefits using the higher-earning spouse's record, to maximize overall retirement income.