Up until a few years ago, there were some clever ways to extract extra money from Social Security. Techniques such as claiming Social Security early and paying it back, or unique claiming strategies could put more money in people’s pockets. But most of these loopholes have been closed. There is still one claiming strategy available to couples that may yield ten of thousands of dollars in additional Social Security payments. It’s simply this. The spouse who has the highest income waits until age 70 to claim Social Security.
Now that doesn’t sound like something particularly clever. However, couples have an advantage with Social Security that singles do not. The life expectancy of at least one spouse is about 6 years longer than it is for a single person. By the higher earner waiting to age 70, they stretch out a higher payment for those (on average) 6 additional years. Remember that when one spouse passes, the surviving spouse gets just one Social Security payment, the one of the higher earning partner.
Consider an alternative. If a 65 year old person bought a $100,000 lifetime annuity, they would receive roughly $5,400 a year in income. But if 65 year old couple buys a joint life annuity, then that annual payment drops to $4,600 a year. The insurance company knows that a couple’s joint life is longer than that of any single person, so the annual payouts are less. So in theory, Social Security should also reduce the payout. But they really cannot, due to Social Security’s structure.
Most people take Social Security before age 70. For a single individual it does not make a huge difference. Social Security is calculated to payout the same amount to your life expectancy no matter what age you start at. So a single person may decide to start Social Security at 66, for example, and it works out ok. But for a couple, their total life expectancy is longer than the official Social Security calculation. It’s a way for the couple to get additional income late in life, when it’s really needed.
So my advice to couples is, if you can afford to wait, ‘game’ the system and wait for age 70 to claim Social Security for the higher earning spouse.