9/8/2010 1:00 PM ET|
6 ways to get more Social Security
Marriages -- even former ones -- can have significant financial advantages. Here's a look at how having said 'I do' can win you more in retirement benefits.
Couples who are currently married, or who have stayed together at least 10 years, tie together their working records -- and the resulting Social Security checks -- as long as they both shall live.
In the case of Social Security payments, the result is often better for the couple than it would have been for a single person. Spouses have Social Security claiming options that single people don't. Here are a few ways couples can boost their Social Security benefits:
1. Utilize spousal payments. Spouses are entitled to a Social Security payout of up to 50% of the higher earner's check (if that amount is higher than benefits based on his or her own working record). Retired couples in which one spouse didn't work or had low earnings have the most to gain from this provision.
However, low-earning spouses must wait until the full retirement age, as the Social Security Administration calls it, to collect the full 50%. Benefits are reduced for spouses who collect before their full retirement age. (For baby boomers born from 1943 to 1954, the full retirement age is 66.)
For example, a low-earning spouse whose full retirement age is 66 would be eligible for only 35% of the higher earner's benefit at age 62. The spousal benefit does not increase above 50% of the higher earner's benefit if claiming is delayed beyond the full retirement age.
2. Claim and suspend. The low-earning spouse cannot receive spouse's benefits until the higher earner files for retirement benefits. Workers who have reached their full retirement age may apply for retirement benefits and then request to have the payment suspended. Claiming and suspending payments allows the lower earner to claim a spousal benefit and the higher earner to continue working and earn delayed retirement credits until age 70.
"This would tend to maximize their lifetime benefits and, more importantly, maximizes the survivor's benefit," says Andrew Biggs, a resident scholar at the American Enterprise Institute and a former deputy commissioner of the Social Security Administration. "You will ensure you will have a higher benefit when you need one, which is when you are a widow later in life."
Social Security checks increase by 7% to 8% for each year of delayed claiming between your full retirement age and age 70. After age 70, there is no additional benefit for waiting to collect your due.
3. Claim twice. Spouses in dual-earner marriages who have reached their full retirement ages can claim Social Security twice: first as spouses, then using their own work records. A person may choose to sign up for only the spousal benefits at full retirement age and continue accruing delayed retirement credits on his or her own Social Security record. That person can then file for benefits based on his or her own work at a later date and receive a higher monthly benefit, thanks to the delayed retirement credits.
For example, a man planning to retire at age 70 could claim a spouse's benefit based on his wife's earnings at age 66 and then claim again based on his own working record when he exits the work force at age 70. High-income couples with relatively equal earnings gain the most using this strategy, according to calculations by the Center for Retirement Research at Boston College.
4. Include family. Social Security recipients who have children under age 16 or who are disabled can secure additional Social Security payments for the child and a spouse caring for the child, even if the spouse is under age 62. Each child is eligible for up to 50% of the retiree's full benefit. However, payments to family members are capped, typically at 150% to 180% of the retiree's benefit payment. If the total benefits due to the retiree's spouse and children are above this limit, their benefits will be reduced. The retiree's payout is not affected.
5. Take advantage of eligibility for ex-spouses. A former spouse may be eligible for benefits if the marriage lasted at least 10 years. The divorced spouse must be age 62 or older and unmarried. The amount of benefits an ex-spouse claims has no effect on the benefits the worker and his or her current spouse can receive.
6. Boost the survivor's benefit. Widows and widowers are entitled to the higher earner's full retirement benefit. A surviving spouse can begin receiving Social Security benefits at age 60, or at age 50 if he or she is disabled. Benefits are reduced by up to 28.5% if claimed before the recipient's full retirement age. The surviving member of a dual-earner couple also can claim a reduced benefit on one working record and then switch to the other.
For example, a woman could take a reduced widow's benefit at age 60, then, when she reaches full retirement age, claim 100% of the retirement benefits based on her own working record. Most survivor benefits are paid to women because wives generally are younger than their husbands and live longer. A spouse can increase the monthly survivor's benefit by 60% by waiting to sign up for Social Security until age 70.
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