An advisor asked about claiming strategies for a couple. The higher earner wants to claim now. But the advisor heard that no one should claim before 70 — unless they are the lower-earning spouse.
There are two distinct camps among advisors. One group staunchly believes the higher earner should always wait until 70 before claiming.
The other camp is more measured. While they, too, can do the math and see that getting 8% per year in delayed retirement credits yields a higher monthly payment, they also consider the facts and circumstances that surround each client — and how their goals change over time.
The Client Couple
In this case, the client couple (we'll call Juan Carlos and Tessa) wanted advice about timing their Social Security claim. Juan Carlos reached his full retirement age (FRA) of 66 and 4 months. Tessa had just turned 65.
He retired 12 years ago, and they have been living off their investments since 2010.
Should they claim now at FRA or continue to wait until Juan Carlos turns 70?
Is The Answer 'Wait Til 70?'
"Yes!" some advisors would say. Instead of receiving a primary insurance amount (PIA) of $3,000 a month, he would get a boost to at least $3,880.
However, Tessa is a dependent wife. She did not earn enough credits to have her own Social Security benefit. She will be eligible for half of Juan Carlos' PIA when she reaches her own FRA of 66 and 6 months, about $1,500 per month.
But until Juan Carlos claims his own benefit, Tessa sits on the sidelines. She cannot claim her spousal benefit until he claims his worker benefit. That means if he waits until 70, she must wait until then as well. She'll be 68 and a half. While his benefit will increase at 8% per year, hers maxes out at her FRA — two and a half years earlier. Spousal benefits do not get delayed retirement credits.
Take a Step Back
When considering this question with your own clients, take a step back. Review the client's current personal situation and their goals. The real answer is more nuanced than simply looking at the math.
For Juan Carlos and Tessa, in the first 10 years of retirement, the markets were favorable, allowing the couple to live comfortably off their investments. With the help of their advisor, their portfolio had grown nicely, even with annual draws to support their lifestyle.
