Maximizing Social Security for Both Spouses

DEC 15, 2013
10:32am ET
Comments (2)

This story was orignally published on Sept. 26, 2013. It is part of 12 Days of Wealth Management: The Year in Review.

The number one Social Security strategy is maximizing the two-life benefit, says Bob Stowe of Stowe Financial Planning.

The approach, which is applicable to a married retired couple, is to delay collecting on the greater of the coupleís two benefits the longestóuntil the beneficiary reaches age 70, if possible. The couple should commence the second, or lesser, of the two benefits when the beneficiary reaches full retirement age to maximize the payout, says Stowe, a fee-only financial planner, based in Plano, Texas.


There are two ways this can be done, he says. The first is called file and suspend, where the spouse with the greater benefit claims it, but doesnít draw against it. A couple that can afford to wait would do this when the top earner reaches age 66, but would then allow the benefit to grow at 8% a year, untouched, until it tops out when the recipient reaches age 70. The advantage is that once the high earnerís benefit is claimed, the lower-earning spouse can now collect a spousal benefit of 50% of the top earnerís benefit, which could be more than the lesser-earnerís own benefit.


However, Stowe says, if the second spouse was also a worker and is entitled to a more generous benefit, then he or she would file a restricted application. This would let the second spouse receive the spousal benefit, while allowing his or her own benefit to continue to grow until the second spouse reaches age 70, at which point both spouses can begin collecting the maximum benefit.

In elaborating on this strategy, Stowe makes several other important points:

  • With Social Security payouts, some advisors think in terms of the crossover point. But when the client is a couple, he says, the crossover point doesnít really matter, since the goal is to maximize the two-life benefitónot the crossover point. Because the odds favor one spouse outliving the other, and since the surviving spouse gets the larger of the two benefitsóthatís the one you want to maximize, he says.
  • For a single client, the crossover point could matter. If the client lives to the average age of mortality, then whether the client starts collecting early and receives a smaller benefit for a greater number of years, or starts collecting later and receives a smaller benefit for a fewer number of years, the client will receive the same total dollars either way and itís a wash.


But if the client expects to die early, then it makes sense to begin collecting early. Likewise, a client who anticipates living longer than average should delay collecting until age 70.

  • It used to be possible to begin collecting Social Security benefits, invest the payout, and then pay it back to the Social Security Administration at a later date and start over again at a higher rate. But SSA now limits the timeframe for paying back any benefits that were received to within one year of receiving them, effectively eliminating this strategy.
  • The people who work at the SSA ďare really very helpful,Ē Stowe says, ďand itís very worthwhile for your clients to have a discussion with them,Ē before starting to collect.

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Comments (2)
It should be noted that one cannot File and Suspend OR make a Restricted Application until one has reached Full Retirement Age (FRA), which is age 66 for those born between 1943 and 1954. Moreover, one cannot make a Restricted Application unless one's spouse is receiving retirement benefits on his/her own account.

Also, if one applies for ANY Social Security benefit prior to FRA, one is "deemed" to be filing for ALL benefits. This can result in unintended consequences. If you file prior to FRA and your spouse has filed for and is receiving benefits, you will be filing for BOTH your own AND your spousal benefit. If you want to file before FRA only for your own retirement benefits, your spouse should wait at least one month from your filing date before filing for his/her own benefits.
Posted by John O | Tuesday, October 01 2013 at 6:32PM ET
Sounds wonderful, until you wake up and realize that the fix is in already. Medicare! The one and only guaranteed expense in retirement. Wait for it... Medicare is paid for via deductions from Social Security. Medicare is means tested, and, you guessed it, Social Security income is part of the means tested. Without other planning, many won't see Social Security maximization. Medicare will take it away.
Posted by Robert K | Sunday, December 15 2013 at 7:17PM ET
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