Q: I just turned 59, and my husband will be 63 in February. I was a stay-at-home mom for years and have little work history, so my Social Security credits are few. My husband plans to keep working, but with all the recent changes to Social Security, is there any advantage for him to sign up after his 63rd birthday. — Phyllis in Greensboro, N.C.
A: There are a few strategies that couples in your situation could use to maximize their total Social Security payout. One popular strategy used to be for one person to “file and suspend” benefits at full retirement age, or 66 in your husband’s case. Doing so allowed one spouse to take a spousal benefit while the other (typically the higher earner) left his or her own benefits untouched — and growing 8% a year – until age 70. It was the retirement equivalent of having your cake and eating it too.
Unfortunately, recent changes to Social Security have put the kibosh on this popular loophole unless you are 66 or older as of April 30, says Howard Hook, a certified financial planner and certified public accountant with EKS Associates in Princeton, N.J.
Under the new law, one spouse cannot take spousal benefits if the other spouse has suspended benefits. Similarly, you can no longer collect a spousal benefit while waiting to claim your own. These new rules don’t apply to people who are grandfathered in.
The question now, then, is whether to take Social Security early, wait for full retirement age, or maximize your benefits by holding out until you turn 70. “Much of whether this makes sense to do or not depends on upon how long you both expect to live,” says Hook. Assuming you’re healthy, it generally makes sense to wait as long as possible.
In the meantime, if you’re concerned that Social Security will go “bankrupt,” rest assured that the system itself isn’t going away before you are able to claim your benefits. When people talk about Social Security running out of money, they are referring to the Social Security Trust, notes Alicia H. Munnell, director of the Center for Retirement Research at Boston College.
While that trust provides an important cushion – and is indeed on track to be depleted as early as 2025 by some estimates – three-quarter of Social Security payouts are funded via ongoing tax revenue.