Coordinating benefits with a spouse is a common talking point in discussing how and when to apply for Social Security benefits. These spousal coordination discussions often revolve around maximizing your retirement benefits as soon as possible, which is a common and reasonable concern.

But this view ignores an important detail: one spouse will likely outlive the other. The steps that maximize benefits during your lifetime may not maximize benefits for the surviving spouse.

It’s understandable why so many beneficiaries overlook this grim reality, and it’s more than our dislike of reminders of our mortality. Social Security is often discussed as a retirement program, referred to as one leg of the “three-legged stool” of retirement income. But considering Social Security should be a safety net – not your primary income. Thinking of it that way can help you make decisions that will help protect your spouse when they are are most likely to be financially vulnerable.

So what do you need to know about the three-legged stool and the safety net viewpoints? And how those differences can affect your Social Security benefit coordination with your spouse?

The Three-Legged Stool

After World War II, retirement planning was often called a three-legged stool built on Social Security benefits, an employer pension, and personal savings and investments. Following this three-pronged income plan, workers would, theoretically, be well prepared for retirement.

To break this down, we’ll set aside the fact that very few workers in the 21st century can count on an employer pension. Even so, this metaphor makes a big assumption that you will be relying on Social Security benefits for roughly a third of your financial needs.

Even if you can safely assume that your benefits will be a large part of your retirement income needs, what does this calculation of your retirement income do in the case of survivor benefits? Survivor benefit amounts vary widely, which is why it is important to understand exactly how they are calculated.

Understanding Survivor Benefits

Survivor benefits are equal to the greater of two amounts: the benefit that the deceased spouse was receiving, or the primary retirement benefit of the surviving spouse. Survivor benefits are one of the few Social Security benefits that are not subject to deeming. That means that a beneficiary can claim a survivor benefit while allowing their unclaimed retirement benefit to gain delayed retirement credits.

The operative word here is “unclaimed.” If both spouses have already claimed their retirement benefits, then Social Security will give the surviving spouse whichever benefit (primary or survivor) is larger. In this situation, there is no chance to allow your primary benefit to keep growing.

 

 

If both spouses delay their retirement benefit as long as possible, that increases both the retirement benefit each spouse will receive, as well as the potential survivor benefit to their widowed spouse.

If the Three-Legged Stool Comes Up Short

Let’s take a look at an example: Letitia and Harry are looking forward to retirement in a few years. Letitia has always made less money than Harry and is a few years younger than him.

Harry, who is currently 61, would like to begin taking his benefits at age 62. His full benefit, if he waits until his full retirement age, would be $1,300. But since he only needs about $1,000/month from Social Security benefits to make up the final third of his retirement income needs, he’s considering filing for benefits at age 62, since his benefit will be reduced to $975, which is close enough. However, if Harry were to wait until age 70 to receive his benefits, they will grow to $1,716 with delayed retirement credits.

Letitia is eligible for a benefit of $1,000 as of her full retirement age. If she delays her benefits until age 70, her benefit will increase to approximately $1,266 each month.

If Letitia and Harry are simply looking at their immediate retirement income, including Harry’s pension (which does not have a survivor benefit), their savings, and Social Security, it would make perfect sense for him to apply for benefits when he turns 62. But if the couple considers what would happen to Letitia if Harry were to pass away, the numbers are less rosy.

If Harry were to pass away after Letitia reaches her full retirement age, she is eligible for whichever benefit is greater: a survivor’s benefit equal to Harry’s retirement benefit, or a retirement benefit based upon her own earnings. The difference will depend upon when each spouse takes his or her own retirement benefits. Here’s a basic breakdown of what Letitia will receive if Harry dies after she reaches full retirement age:

 

Age Harry Takes His Retirement Benefit	Harry’s Retirement Benefit Amount	Age Letitia Takes Her Retirement Benefit	Letitia’s Retirement Benefit Amount	Letitia’s Survivor Benefit Amount
62	$975	Full Retirement Age	$1,000	$975
		70	$1,266	$1,266
Full Retirement Age	$1,300	Full Retirement Age	$1,000	$1,300
		70	$1,266	$1,300
70	$1,716	Full Retirement Age	$1,000	$1,716
		70	$1,266	$1,716

Waiting for Benefits is a Safety Net for Your Spouse

As you can see, the longer Harry waits to take his retirement benefit, the better off Letitia will be if he predeceases her. This is true even if he dies without taking his retirement benefit, as long as Letitia waits until full retirement age to take her survivor benefit.

If Harry dies before his full retirement age without having taking retirement benefits, Letitia’s survivor benefit will equal Harry’s full benefit of $1,300. If Harry dies without taking benefits between his full retirement age and his 70th birthday, Letitia’s survivor benefit will be equal to Harry’s full benefit, plus whatever delayed retirement credits he earned after his full retirement age.

Rather than count on a specific dollar amount from Social Security to make up the third leg of their retirement income stool, Harry and Letitia are better off viewing their benefits as a bonus to their other retirement income. If Harry can find a way to hold off on taking his benefits, he will be providing a more secure safety net for Letitia in the event of his death.

Social Security Was Never Meant as a Retirement Plan

President Franklin D. Roosevelt signed Social Security into law in the wake of the Great Depression. It was meant as a social safety net to keep the most vulnerable among us from falling into poverty. It pays to keep the safety net metaphor in mind while planning your benefits with your spouse. Recognizing that you or your spouse may become widowed and need Social Security to get by can help you make the claiming decisions that can protect you from a vulnerable financial future.

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This information is not intended to be legal or tax advice. The author can provide information, but not advice related to social security benefits. Clients should seek guidance from the Social Security Administration regarding their particular situation. Social Security benefit payout rates can and will change at the sole discretion of the Social Security Administration. For more information, please consult a local Social Security Administration office, or visit www.ssa.gov.