Before you start claiming your benefits, think about how this decision will affect each one of you
The #1 Thing Couples Should Know About Social Security
by Brian Doherty, Grandparents.com
Married couples have an extremely important financial decision to make as they enter retirement. However, often times, couples don't think through how the decision will affect each person independently.
The decision I'm referring to is the age that the higher-earner (usually the husband) decides to claim his Social Security benefits. His monthly benefit is ultra-important during his lifetime, but it can also be critically important to his wife's wellbeing after he passes away.
Based on a recent study by Pew Research Center on families with children, husbands are the family's higher earner nearly 75 percent of the time. As a result, husbands also typically receive the larger Social Security benefit. In 2012, according to the Social Security Administration, the average annual Social Security income received by women age 65 and older was $12,520 as opposed to $16,398 for men of the same age.
This is an important consideration because after the first spouse passes away, the surviving spouse is entitled to the bigger Social Security benefit, their spouse's or their own. This is called the Survivor Benefit. Women have a longer life expectancy than men and husbands are an average of three years older than their wives, which means that more often than not, the wife will outlive her husband.
Just to restate it again: When one spouse dies, the one left is only going to receive one check from Social Security, the Survivor Benefit. The surviving spouse can continue to receive the bigger Social Security check, which is often the husband's, in the form of a Survivor Benefit.
In fact, of all the millions of Survivor Benefit checks that Social Security sends out every month, approximately 80 percent of them are sent to women. Even though the widow continues to receive the bigger of the two checks, she still experiences a 33% to 50% reduction in her Social Security income. This is because the household has gone from receiving two monthly checks, one for each person, to only receiving one check as a Survivor Benefit.
For most married women, the Survivor Benefit is going to play a critical role in maintaining their standard of living after their husband dies. Unfortunately, too many women struggle to make ends meet. The major reason why this happens is because their husband made a poor Social Security claiming decision by claiming his benefits as early as possible, at age 62, instead of delaying to age 70.
Claiming early not only locks in the smallest Social Security benefit for the rest of his life, but it also potentially becomes the smallest Survivor Benefit possible for his wife after he passes away.
Husbands making better Social Security claiming decisions can greatly reduce the likelihood that their wives will struggle financially after they die. Once again, assuming the husband has the bigger Social Security benefit, if he delays claiming it as long as possible, he could maximize the size of his regular benefit, which will also maximize the size of the Survivor Benefit. In fact, the husband could leave his wife with a Survivor Benefit check that is as big as two checks in one. Maximizing the size of the Survivor Benefit would be one of the greatest gifts one spouse could give another.
Reviewed February 2018
Brian Doherty is author of Getting Paid to Wait.
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