Social Security Benefits: A Hidden Trap for Married Couples

One spouse wants to retire and the other wants to continue working. But before making this decision it is important to plan ahead to avoid a hidden trap as to Social Security Benefits.

Let’s look at John and Mary’s situation.  John, 64, works full-time, and Mary, 60, has worked part-time for several years after raising a family. If John applied for social security now, his benefit would be $2,000 per month. However, John wants to wait until he is 70 to apply in order to increase his benefit to $2,320. If Mary wants to retire, then they need to know whether her social security would be greater than at least half of what John’s would be at this time.

Under current law Mary is not able to claim a spousal benefit unless John claims benefits first. If Mary’s own monthly retirement benefit is less than $1,000 (half of John’s monthly benefit), then Mary is losing out on social security benefits.

The solution is “file and suspend.” This strategy works best for one-earner couples where one spouse worked full-time and the other spouse did not work outside the home, or did not work long enough to qualify for Social Security retirement benefits.

Once John reaches full retirement age (FRA), he can file for benefits, but then immediately suspend his benefits until a later date. This will allow Mary to claim a spousal benefit while John continues to work and watch his social security benefits grow. When John is ready to retire at age 70, then he can elect to begin taking his social security benefits with the maxed-out amount. Furthermore, Mary will receive half of John’s benefits at the higher amount.

For more information, see Social Security Benefits Calculator.