Kevin McCormally: I am Kevin McCormally of Kiplinger's and I am here with Mary Beth Franklin, the Retirement Editor of Kiplinger's Personal Finance Magazine, to talk about when to take Social Security benefits. Mary Beth, I know when it comes to a married couple, when they take their benefits can have a big impact on the retirement income. What do they have take into account?
Mary Beth Franklin: Well, let's take a traditional couple where the wife has lower lifetime earnings than her husband. She has three ways to collect Social Security benefits: on her own record, as a spousal benefit which is equal to half of what he gets assuming that's larger than her own. And as a survivor benefit if he dies first, she would get 100% of what he got during his lifetime.
Kevin McCormally: What does it matter when each spouse takes benefits?
Mary Beth Franklin: It really does, because most women tend to outlive men, the survivor benefit is really the most important one of all. So, in that case, she would want the husband to wait as long as possible as late as age 70 to get the biggest retirement benefit for himself and then later the biggest survivor benefit for his wife.
Kevin McCormally: What about the lower earning spouse, the wife in this example? When that she take benefits?
Mary Beth Franklin: Actually, she could take it at 62. Even though her benefits, her retirement benefits will be reduced for the rest of her life by 25%, what most people don't realize is, it will not affect her survivor benefit as long as she is at least normal retirement age which is now 66 when she starts collecting those survivor benefit.
Kevin McCormally: So, her own benefits and her spousal benefits if she takes those will be reduced 25% but when her husband dies, she would get a 100% of the benefit he'd been getting.
Mary Beth Franklin: Exactly.
Kevin McCormally: Well, does a wife have to wait for her husband to start collecting benefits before she can take the spousal benefit if that's more than her own Social Security benefit?
Mary Beth Franklin: Normally yes, but there is this little known strategy called file and suspend. The husband can file for his Social Security benefits to enable his wife to get the spousal benefits and then turn around and immediately suspend his own benefits. That way he can continue earning credits and wait until age 70 and get a much bigger check. It's like having your cake and eating it too. She gets benefits early, he waits till later to get a bigger benefit and later a bigger survivor benefit.
Kevin McCormally: Very complicated, Mary Beth, but very valuable. Thank you very much.
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