Happy Valentine’s Day, Honey—Do You Want Flowers or Social Security Benefits?

All the questions in today's column come from husbands who are asking questions about benefits for their wives.Simon Godfrey/Unsplash

I suppose it’s normal for husbands to give some extra thought to getting something for their wives around Valentine’s Day. And if my emails are any indication, these guys weren’t just thinking of getting them some flowers or candy. They were thinking about giving them spousal benefits from Social Security.

(And before I go on, let me be politically correct. I was just trying to be cute with those opening lines. I totally understand that a husband doesn’t “give” spousal benefits to his wife. The law says she is due those benefits, and the guy really has no say-so in the matter. Still, all the questions in today’s column come from husbands who are asking questions about benefits for their wives.)

Q: I am 65 and retired and I’m thinking about taking my Social Security now. My wife is 67 and she gets her own Social Security benefit, but it’s much smaller than mine. If I take reduced benefits now, will that reduce what my wife is due in spousal benefits?

A: It won’t reduce what she is due in benefits while you’re alive. But that reduction you take for early retirement will carry over to any widow’s benefits she would be due if you die first. Or to put that another way, your wife’s spousal rate is based on your full retirement age benefit. But her widow’s rate is based on your reduced retirement benefit.

You didn’t give me any benefit amounts, so I will make up some numbers to give you an example of what I mean.

Let’s say your full retirement age benefit is $3,000 per month and your age 65 benefit is $2,700. And we'll say that your wife is currently getting $1,000 in her own retirement benefit.

So, if you take benefits now, you'll start getting $2,700 per month. And as I said, your wife’s spousal rate is based on your FRA benefit. So, she is due 50 percent of $3,000, or $1,500. So, she will keep getting her $1,000 retirement benefit and she will get an extra $500 off of your record to take her total benefits up to that $1,500 level.

But if you die before she does, her widow’s rate will be based on your reduced benefit amount. For example, if you died next year, her widow’s benefit would be $2,700 per month. So, she‘d keep getting her $1,000 retirement benefit, her $500 spousal benefit would stop, but she’d start getting $1,700 in widow’s benefits to take her up to that $2,700 rate.

Q: My wife and I are both 62. I am still working. My wife isn’t. I plan to wait until my full retirement age (66 and 10 months) to start my Social Security when I will be due $3,400 per month. My wife’s FRA benefit would be $1,500 and she is due $1,100 if she takes her benefits at 62. That’s what she wants to do. But I am telling her to wait until her full retirement age when she can get half of mine. What do you think we should do?

A: As I always tell people, I’m not a financial planner. So, I can’t tell you what to do. But I can give you the Social Security numbers and let you guys decide. Let’s go over both options I'll call “husband’s plan” and “wife’s plan.”

Husband’s Plan: Neither of you would get any Social Security benefits for about the next 5 years. And then at age 66 and 10 months, you‘d start getting $3,400 per month and she’d start getting $1,500 per month of her own benefits and an extra $200 in spousal benefits to take her up to the $1,700 level spousal rate she is due (half of your $3,400 benefit).

Wife’s Plan: Your wife would start getting $1,100 per month now. She'd get that for the next 4 years and 10 months. That’s 58 months at $1,100 per month or $63,800. Then when you both reach full retirement age and you file for your Social Security, here is how they will figure what she will be due in spousal benefits on your record. They will take her full retirement rate, or $1,500 and subtract that from one half of your full retirement rate, or $1,700 ($3,400 divided by 2 equals $1,700). The difference, or $200, will be added to her reduced retirement benefit. So, your wife would start getting $1,300 per month when you reach full retirement age.

So, under your wife’s plan, she‘d get $200 per month less beginning at her full retirement age compared to your plan. ($1,500 spousal rate under your plan compared to $1,300 spousal rate under your wife’s plan.) But remember, under your wife’s plan, she’d get $63,800 in her own retirement benefits between now and your full retirement ages.

So, if you go with your plan, it would take you guys 319 months, or more than 26 years, to make up the money you'd lose by not going with your wife’s plan.

As I said, I’m not a financial planner. But I think your wife is a very smart woman!

Q: I am my full retirement age—66 and 4 months. My wife is 62. I’ve paid the max into Social Security all my life. My wife has worked outside the home for only a short time and isn’t due anything on her own Social Security record. I’m not in the best of health. I’m trying to figure out what to do about Social Security. My goal is to make sure my wife gets the highest widow’s benefit possible. So, what should I do?

A: Well, if your goal is just to make sure your wife gets the highest widow’s benefits, then you'd want to wait until 70 to file because you will get about 130 percent of your full retirement rate. And your wife would get the same when you die.

And just so you know, if you should die before reaching age 70, your wife’s widow’s rate would be based on what you would have been due at the time of death. For example, if you die at age 69, your wife would get about 120 percent of your full rate.

But here is something you might want to think about. If you filed for benefits now, you‘d probably get about $3,345. (You said you’ve paid the maximum amount into Social Security all your life and that is the current maximum full retirement age benefit.) And at age 62, your wife would be due about 30 percent of that, or about $1,000 per month. So combined, you’d be due $4,345. Between now and age 70, you would get about 42 Social Security checks. That’s a total of $182,490 you'd be throwing away by waiting until 70 to file.

So, do you think you and your wife would want that $182,490 over the next three and a half years? Or would you rather wait until age 70 so your wife gets that extra 30 percent per month once you’re gone?