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By Christine Benz | 05-13-2014 12:00 PM

How Married Couples Can Maximize Social Security Income

Single-earner households, dual-income families, and same-sex couples can all benefit from these lucrative Social Security strategies for spouses, as outlined by retirement expert Mary Beth Franklin.

Christine Benz: Hi, I'm Christine Benz for Morningstar.com. Social Security planning for couples can be complicated, but it can also be lucrative. Joining me to discuss some couples strategies for Social Security is Mary Beth Franklin. She's a contributing editor at InvestmentNews, and she's also the author of a ebook about Social Security planning.

Mary Beth, thank you so much for being here.

Mary Beth Franklin: Thanks, Christine. I love talking about Social Security.

Benz: I know you do. Social Security planning gets pretty complicated, especially when you have married couples. I'd like to go through a few different profiles and discuss strategies that might make sense for people with varying earnings histories.

Let's discuss what you call Ozzie and Harriet, the couple where you've got maybe one stay-at-home spouse with no earnings history in his or her name, and then you've got the other spouse who has been the main earner in the family. What strategies might that contemplate?

Franklin: To qualify for Social Security benefit to start with, you need to have essentially 10 years of work history. But if you are married to someone who is eligible for Social Security benefits, then you are, too, just by the fact of being married.

Let's say we have Ozzie and Harriet. Harriet has stayed home raising the kids her whole life. She has no Social Security benefit on her own record, but she can collect as a spouse. The only problem is her husband has to collect first to create that spousal benefit. If he doesn't collect, she can't get anything. Maybe he has listened to this discussion and knows the value of delaying up until age 70 to get a benefit. But that means she can't get anything.

But at 66 Ozzie could file and suspend, telling Social Security, "I'm filing for the purpose of triggering benefits from my spouse. Give her, her benefit, and let mine keep growing, until it's worth more later."

If she is also 66, she would collect a full spousal benefit, which is worth half of his amount. If she is younger, as young as age 62, she can get a spousal benefit, but it is going to be reduced.

Benz: Let's discuss a couple where there is an earnings record for both couples, so they both have a Social Security record, but one part of the couple earns substantially more than the other. What sorts of strategies might they consider?

Franklin: Again, we're assuming they are close in age. And because this is one of the magic strategies, this is the other one called filing a restricted claim for spousal benefits only; you must be 66 to do this. Let's assume for this dual-income couple, maybe the wife was a schoolteacher, and she is sick of these kids. At 62 she's just her taking her benefit; she's retired.

The husband [when he turns] 66 could say, "Well, I want my benefit to keep growing, but now that I'm 66, I can say to Social Security, 'I want to restrict my claim to spousal benefits only. That means, give me half of what she's getting, while my own benefit keeps growing.'"

Now what's really interesting about this, in this scenario, we said, she took her benefits early, so her benefits are reduced. But as a spouse, his benefits are based on half of her full-retirement-age benefit. So even though her benefits are reduced, he's going to get half of her full benefit. He will collect them for the next four years, and when he turns 70, he'll switch to his own retirement benefit that's now worth 132% of his full retirement age benefit. It's a very powerful strategy. Again, it's getting some Social Security income into the household early and a bigger bounce later.

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