For married retirees, Social Security is more than just an individual benefit, it is a coordinated system that can significantly affect household income.
While many couples focus on their own earnings record, there are several lesser-known rules that can either boost or reduce lifetime benefits depending on how and when claims are filed.
Financial commentators at The Motley Fool, cited by The Globe and Mail and Nasdaq, have highlighted several provisions that many married couples overlook. Understanding these rules early can help retirees avoid costly mistakes.
One of the most important provisions involves spousal benefits. A lower-earning spouse may be eligible to receive up to 50% of the higher-earning spouse’s full retirement age benefit. However, this is not automatic.
The higher earner must file for their own retirement benefit before the other spouse can claim a spousal benefit. Timing matters: if the lower-earning spouse files early, the benefit can be permanently reduced.
Another critical rule involves survivor benefits. When one spouse dies, the surviving spouse is generally entitled to the larger of the two benefits.
That means if the higher earner delays claiming until age 70, when delayed retirement credits increase the monthly payment, the surviving spouse may ultimately inherit a larger monthly check. This strategy can be particularly important for couples where one partner has a much stronger earnings history.
Married retirees should also understand how working while claiming benefits can temporarily reduce payments.
If a spouse claims before reaching full retirement age and continues earning above the annual income limit, benefits may be withheld. However, those withheld amounts are not permanently lost; they are recalculated into the benefit once full retirement age is reached.
How coordination strategies can increase lifetime benefits
Strategic coordination is often the difference between maximizing income and leaving money on the table. For example, couples can stagger their filing dates.
One spouse might claim earlier to provide immediate income, while the higher earner delays to increase the eventual survivor benefit.
Because Social Security Administration rules are based on lifetime earnings and age at filing, even a one-year delay can significantly raise monthly payments.
Divorced individuals who were married at least 10 years may also qualify for spousal benefits based on an ex-spouse’s record, provided they remain unmarried. This rule surprises many retirees who assume divorce permanently ends eligibility.
Taxation is another overlooked issue. Up to 85% of Social Security benefits can be subject to federal income tax if a couple’s combined income exceeds certain thresholds.
Coordinating withdrawals from retirement accounts such as 401(k)s and IRAs can help manage taxable income and potentially reduce the tax burden on benefits.
Finally, married retirees should regularly review their benefit statements through the Social Security Administration website.
Errors in earnings records can reduce future payments if not corrected in time.
In retirement planning, knowledge is leverage. For married couples, understanding spousal entitlements, survivor protections and tax implications can translate into tens of thousands of dollars over a lifetime.
Acting early, and filing strategically can ensure that couples receive the maximum benefits available under Social Security rules.