Having Cake and Eating It Too
(source: paulickreport.com)

Of course, with a title like that, this post is going to generate some interest and probably some healthy skepticism. But before I get accused of stretching the truth, let me just say that we recently discussed this strategy with a couple that, once implemented, is projected to increase their cumulative lifetime draw from Social Security by over $100,000, assuming they both live to their late 80s.

This particular strategy isn’t right for everyone, but I include it here just as an example of some of the opportunities out there for those who understand how the system works. We analyze multiple options for all of our clients as they get close to taking Social Security.

For this example, I’ll make up a fictional couple: Fred and Wilma. Fred has been working his way up the corporate ladder his entire life, earning an above-average income along the way. Wilma stayed home with their two children in the early years of their marraige, but later went back to school and earned her law degree. Her last twenty years of earnings have been quite good. Both of them are age 66, or Full Retirement Age (FRA) by Social Security standards. Fred’s benefit is just slightly higher than Wilma’s, because of his longer work history. Fred wants to retire and take Social Security now; however, Wilma enjoys working, and plans to work at least until age 70.

The strategy itself is simple: instead of Fred filing on his benefit now and Wilma filing on her benefit at age 70 when she retires, both Fred and Wilma will begin taking now. However, while Fred files to take his own benefit, Wilma files for Fred’s spousal benefit. According to SS rules, this will be 1/2 of Fred’s benefit. Because she is FRA or older, she can continue to work, and her spousal check will not be reduced.. Then at age 70, Wilma can switch to her own benefit, which is now over 30% higher than it would have been at FRA, because she delayed taking it and continued to work.

There are two obvious benefits to this:

  • It allows the still-working spouse to get spousal benefits while still working
  • It increases his/her benefit because he/she is still working and earning delayed retirement credits

Obviously, this only works if one or both spouses wants/needs to continue to work after Full Retirement Age. More details can be found on this and other variations of this strategy in this article from Forbes. Please contact us if you would like to learn more or discuss your situation.