Today’s CPA To Defer or Not to Defer: Considering Your Spouse in Planning Social Security Benefits
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2015-01
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Korb, P., Williams, J.L., & Gershman, S.A. (2015, January/February). Today’s CPA To Defer or Not to Defer: Considering Your Spouse in Planning Social Security Benefits. Today's CPA, 30-33..
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An arduous decision facing persons considering retirement is when to start collecting Social Security benefits. In planning to maximize Social Security benefits, oftentimes the right decision comes down to whether you will outlive your life expectancy. People can elect to start collecting Social Security benefits as early as age 62, wait until full retirement at age 66, or defer the election until age 70. The longer one waits to start collecting Social Security benefits, the greater the monthly benefits. Those who start collecting benefits at age 62 will receive a 25 percent reduction in benefits, while those who wait until after age 66 will receive 100 percent of their benefits. Those who wait an additional four years will receive 132 percent of their benefits (an 8 percent increase of benefits each year they defer the election up to age 70).
Most tax planning software, including the Social Security online calculator, is based on a recipient’s own benefits. However, the impact of one’s spousal benefits, which is often overlooked, can be an integral component of this decision. Consider the following cases, one that includes just the Social Security benefit recipient, one that includes the Social Security benefit recipient and spouse, and another that includes claiming spousal benefits under the file-and-suspend strategy.