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Social Security Tips for Married Couples

Social Security Tips for Married Couples

June 18, 2021

When you think about Social Security, it can feel like an endless puzzle game to determine which Social Security benefits strategy is right for you and your family. When and how you apply for your benefits can result in a difference of tens of thousands of dollars over the span of your retirement.

For couples, navigating this process can feel even more uncertain because partners who coordinate their Social Security benefit strategies are more likely to maximize their benefits than those who don't coordinate their benefits.

We have compiled a list of important factors to consider so that we can help select the Social Security strategy right for you, and make sure you and your family are taken care of for years to come.

Eligibility for Spousal Benefits

Most Americans will claim benefits on their own earnings record, but in quite a few cases it may be equally—if not more—beneficial for them to claim a benefit on their spouse’s record instead.

Known as Social Security spousal benefits, these payments are particularly helpful for nonworking spouses or spouses who historically had a lower income throughout their career. When a spouse applies for spousal benefits, they can receive half, or 50%, of the full benefits amount their partner collects.

Additionally, both of you are automatically entitled to receive whichever spousal Social Security benefit provides the higher primary insurance amount. That means, if you both have a qualifying earnings record but you are the higher earner, your spouse can apply to collect benefits based on your work record.

There are requirements that must be met to start receiving these spousal benefits:

  • You must be married for at least one year
  • You must be 62 years of age or older
  • The spouse that the payments are derived from must be actively collecting Social Security benefits

Be aware, if you begin to collect spousal benefits before your full retirement age, as early as age 62, it may lead to a reduction in payments—up to 30%.

To make the most of your spousal benefits, it is important to weigh all the relevant factors while you decide when, and which, social security benefits to collect.

Survivor Benefits

In the unfortunate event that you or your spouse passes away, the surviving partner is qualified to collect the deceased spouse’s full benefits payment. Referred to as Social Security survivor benefits, these payments are double what you would receive with the spousal benefits.

Even though you can begin to collect these benefits as early as 60 years of age, doing so before your own full retirement age will permanently reduce your monthly payment.

If a surviving spouse chooses to remarry before the age of 60, this will eliminate their eligibility to collect on the deceased spouse’s earning record. A decision like this has the possibility of significantly lowering an individual's Social Security benefit amount. Consider this, a spousal benefit entitles someone to 50% of their new spouse’s benefits, while a survivor benefit would have entitled them to 100% of those benefits.

It is crucial that couples compare all their options before deciding which benefits strategy is right for them in order to avoid losing out on potential income.

Ex-Spousal Benefits

As a divorced spouse, you are still eligible to receive Social Security benefits on your ex-spouse’s earnings record. One common misconception that surrounds ex-spousal benefits is the belief you cannot collect benefits if your previous spouse has since remarried—this is not the case. Even if your ex-spouse has remarried and their current partner is collecting benefits based on their record, you are still entitled to collect based on their earnings record as well.

There are; however, requirements that must be met to qualify you for ex-spousal benefits:

  • The marriage must have lasted at least 10 years
  • Your ex-spouse must be actively collecting their benefits (unless they are at full retirement age and are eligible to receive benefits but are not yet collecting)
  • You cannot be currently married

Taxes on Social Security

For most Americans, their Social Security benefits are subject to income tax. For an individual with a combined gross income of at least $34,000, or a couple filing jointly with a combined gross income of at least $44,000, up to 85% of their Social Security benefits is taxable. Conversely, you won't owe federal tax on your benefits if your total income falls below the taxable thresholds set by the IRS—$25,000.

If you do find yourself owing income tax on your Social Security benefits, there are multiple strategies you can implement in your tax arbitrage plan to minimize the amount you owe.

It can feel daunting, but when you have a strategy for managing withdrawals from multiple accounts— say conventional savings, Roth IRAs, and tax-sheltered accounts —you minimize the taxes you owe on your Social Security benefits. Couples can and should use a tax calculator to help them prepare accordingly.

Talk to an Advisor

Navigating the Social Security landscape doesn’t have to be done alone. Finding a trusted Financial Advisor is the best way to eliminate guesswork and guarantee you create a financial strategy that meets all of your retirement needs. The JL Smith Group specializes in Social Security benefits and prides itself on taking a holistic approach to financial planning that maximizes your life savings to accomplish your unique retirement goals.

A Financial Advisor will walk you through the different approaches and strategies available to find which works best for your unique situation.

If you’re ready to start planning for your future, there is no better time to start than now. Schedule a free consultation with a JL Smith Advisor Group today.