I was recently working with two clients, a married couple, Dan* and Stacey*. Dan is 61, currently works, and plans to retire at age 65. Stacey is 67, retired, but has not filed for Social Security yet. Dan is the primary income earner for their family.
They came to me to find out the best time to file for Social Security benefits. After learning more about them and collecting all of their necessary information, I was able to run a detailed analysis for them.
The optimal and recommended strategy for them was to have Stacey file for her own Social Security retirement benefits now while Dan waits to collect his own retirement benefits at age 70. If Stacey files now, she will receive approximately $400 each month. Although Dan will not be working or earning income from age 65 to 70, they have enough supplemental income from other assets to bridge the gap for those 5 years.
Stacey and Dan were surprised to hear that Stacey should collect now because she will be receiving a smaller payment each month than she would if she waits to file at age 70. However, I explained that once Dan files for Social Security at age 70 (Stacey at age 76), Stacey will be able to switch over to spousal benefits. She will receive the spousal benefit instead of her own retirement benefit because her spousal benefit will be (far) greater as it will be 50% of Dan’s retirement benefit (at his full retirement age). Her benefit will switch from $400 to approximately $1,500 each month. If and when Dan dies before Stacey, Stacey will then switch to survivor benefits, which will be 100% of what Dan was receiving. By having Dan wait until age 70 to file for benefits, they allow his monthly benefit to grow and lock in the highest payment possible.
Dan and Stacey were impressed with the report I provided them. They were extremely grateful to have worked with me and they wished they had met with me even sooner. We quickly learned that if they had made the decisions they were planning on making before meeting with me, they would have missed out on thousands and thousands of dollars each year.
*Client names and identifying details have been changed or omitted.