You probably weren’t thinking about it when you said your vows, but increasing the value of your Social Security is a very good reason to get married.
Almost anyway you look at it, couples get more Social Security benefits as both halves of the couple can claim at different times and they may be eligible for spousal benefits that can significantly increase the amount of a lower-earning spouse’s benefit.
Gallup pollsters say that nearly 60% of retirees rely on Social Security for a major portion of their income. So, taking advantage of the rules that make Social Security attractive for couples really is smart retirement planning.
Here are four ways to get more.
1. Get a Job
Back when many women stayed home and didn’t work much, it made sense for a woman to expect to take half of her higher-earning husband’s Social Security. Today, many couples still do this, of course, but this is a lousy plan because the spousal half is pretty puny. It is roughly half of what the higher-earning spouse gets, but no more than what the higher-earning spouse was entitled to at his or her full retirement age – currently 66, but rising gradually to 67 for anyone born after 1954.
If you claim a spousal benefit in 2017, the most Social Security will pay you is $1,343 a month, but Social Security says the average spousal benefit is only $711.
Look at it this way: The average worker Social Security retirement benefit in 2017 is $1,386, but it could be as much as $2,687 at full retirement age for a high earner (and climb at a guaranteed 8% a year for someone who waits until age 70 to claim). If both members of a couple work, they each are entitled to more substantial benefits. At full retirement age, a high-earning couple could pull in as much as $5,374 per month in 2017. That’s $64,488 this year. Even if you both only qualify for average benefits, your joint take will be $2,772 a month or $33,264 per year compared to an average worker and spouse benefit total of $2,097 a month or $25,164 a year. Totally worth it.
2. Beware the 0 years
While a person only needs to work 40 quarters or 10 years to qualify for basic Social Security retirement payments, when it comes time to calculate a benefit, Social Security averages the top 35 years of earnings. If you don’t have 35 years of earnings, it will add in a zero for any missing year or years.
A rough way to calculate what erasing a 0 year will do for you is to go to the My Social Security website and see how much Social Security you’ll be entitled to at full retirement age. Multiply that number by 3%, and you’ll see what you’d gain in a month – $39 for an average recipient. The Center for Retirement Research at Boston College recently studied this issue and came up with an even more generous calculation of increased benefits for working longer. The center found that women who work just one more year increase their benefits by 8.6%, while men’s benefits increase by 7.8%, mostly because they tend to have fewer lower-earning years to replace.
Any way you figure it, erasing a few years of 0s can be a significant amount. “If you do it for three years, it is 10% of the total payments,” says Andrew Murdoch, president of Somerset Wealth Strategies in Portland, Ore. “You have to work the formula.”
Erasing a 0 requires earning a minimum $5,200 in earnings in 2017. That’s 620 hours of work at $8 – 33 hours a week. If you make more, you’ll get a bigger bang for your buck. If both halves of a couple work part time for a few years, you’ll double your reward. This works no matter what your age – even if you are already collecting Social Security – because the agency reviews benefits and adjusts for additional work credits annually.
3. Later Isn’t Necessarily Better
“Age 70 isn’t necessarily the right age for everyone,” Murdoch says.
The difference between retiring at 62 and 70 is currently 132% of the benefit you’d get at 62, but the bonus for waiting will decline gradually for people born after 1954 when full retirement age starts to rise from 66. Social Security charts how much.
Given this change and other issues like health, Murdoch cautions couples to slow down and think hard before waiting. The incremental reward for delay could be small and wiped out for a surviving spouse.
One Social Security benefit goes away after a person dies, and the surviving spouse gets to keep the higher of the two benefits. “It is common to have a 65-year old husband and a 60-year-old wife,” Murdoch says. “He is probably going to die before she does, and she will take over his higher benefit. This is an especially important consideration if the higher-earning spouse has a life-only pension or if they have no pension at all,” Murdoch says.
4. Getting Divorced Could Pay Off
Because both halves of a couple married for at least 10 years before they divorced can – under some circumstances – be entitled to continuing spousal benefits even after remarriage, taking a 4-year break from marriage could enhance your total Social Security benefits, says Laurence Kotlikoff, a professor of economics at Boston University and owner of Maximize My Social Security, a company that specializes in helping people maximize their benefits.
According to Kotlikoff, divorced couples can collect two full spousal benefits starting at age 66 if they get divorced just before age 64 (because they have to be divorced at least two years in order to collect on this benefit) and then remarry at age 70, when each can revert to their own full benefits.
“If we’re talking about a high-earning couple, there might be something like $100,000 here,” he estimates. If “they got divorced and lived together and got remarried at age 70, they could pick up an extra $100,000.”
Until Congress changed the law in 2015, this maneuver didn’t require divorce, but now it does.
Kotlikoff says he found this “secret” in the Social Security operating manual. He says this passage also helps people who are remarrying and want to continue to collect benefits based on the work record of his or her deceased spouse. This is particularly good for people who were previously married to high earners.
“You have to be divorced for two years and then remarried to someone who is collecting benefits based on the work record of a living or dead ex-spouse [to whom one was married for a decade or more]. Otherwise, Social Security will end spousal benefits when you remarry.”
If you run the numbers and this appears to work for you, he advises printing out this part of the manual and taking it to the Social Security office because the rule is so obscure.