Maximize Social Security Payments: Married Couples

The rule of thumb, many retirement experts say, is to postpone taking your Social Security benefits for as long as you can until you turn 70. That’s when you can get the highest monthly payout on your lifetime contributions, and should you live to be 100, it could be your best option.

At today’s longevity schedules, a man turning 65 can expect to live to 84 and three months, on average. A woman will live longer, an extra three-plus years to just over 86. But many people are living well into their 90s and some past 100, and will need as much earning power as they can get.

Social Security benefits accrue with each year you wait, until the cutoff point of 70. For example, if you take an early retirement, say at 62, your monthly check will run 75% of what you would have received if you had waited until your full retirement age (FRA), which for many now is 66 years old. If you take it at 66, you get 100% of the FRA; 108% at 67; and 132% at 70.

The Monthly Lowdown

Let’s look at what that means for monthly income. If your benefit, based on annual contributions during your working life, is $1,000 a month at your FRA age of 66, you will only get $750 if you retire at age 62. At age 67, you will get checks of $1,080. At age 70, they jump to $1,320. Do the math for your own situation, but the Social Security Administration (SSA) insists that taking retirement benefits earlier doesn’t necessarily mean a bigger lifetime payout. Of course, it depends on how long the lifetime is, and your genetics and personal lifestyle will partially dictate that.

There are three basic rules you should follow before taking your Social Security benefits, according to Laurence J. Kotlikoff, professor of economics at Boston University and co-author of Get What's Yours: The Secrets To Maxing Out Your Social Security:

1. Be patient.
2. Know all the benefits to which you are entitled.
3. Time your benefit collections to maximize lifetime benefits, remembering that benefits are inflation-adjusted annually.

Strategies for Married Couples

Married couples have options because each spouse may be entitled to their own benefit as well as a spousal benefit. For a majority of double-income couples of the same age, it’s best for the higher-earning spouse to file for benefits at FRA and suspend them until age 70, says Ann Minnium, certified financial planner and founder of Concierge Financial Planning, LLC. "Then the lower-earning spouse can apply for his or her spousal benefit at full retirement age and switch to their own benefit at age 70," she says. This provides some income for both retirees while letting each maximize their own benefits.

"This is a great strategy that many people are unaware of," Minnium says. "Clients and friends are always surprised when I tell them that they can take advantage of both a spousal benefit and their own benefit.”

This won’t work if one spouse files before FRA; the SSA views that spouse as filing for his or her own benefit as well as a spousal benefit.

“So hang in there until full retirement age to give yourself more flexibility and a larger monthly inflation-linked income stream you cannot outlive," Minnium says.

How Long Will You Live?

"Life's real financial risk is not dying, living to 100 and dining daily on Friskies," says Kotlikoff. "To protect ourselves against insurable catastrophic losses, we buy maximum coverage on our cars, homes, and health costs. To get maximum coverage against longevity risk—living far beyond what our savings can support—most of us need to be patient and wait to take our Social Security benefits at their maximum levels."

Use this life expectancy calculator to estimate your longevity.

"Most married couples, but certainly not all, who have high maximum ages of life should wait until 70 to collect their retirement benefits, when it will start at an inflation-adjusted level that's 76 percent higher than starting at age 62," says Kotlikoff.

Lots to Learn

It's a complicated system that can be immensely confusing for anyone who doesn’t study it closely. Kotlikoff refers to rule No. 2: Learn all the benefits for which you may be eligible.

"Everyone knows about Social Security retirement benefits. But not many know about spousal benefits, divorcee spousal benefits, child benefits, child-in-care spousal benefits, child survivor benefits, mother (father) benefits, widow(er) benefits, divorcee widow(er) benefits, and parent benefits,” he says. “That's 10 benefits altogether.”

When it comes to collecting the largest income stream possible, knowledge may well be power.