What Mahaney would like Americans to understand is that no matter who dies first in a marriage, the smaller benefit will drop off while the larger benefit will live on.
“One strategy is to take the smaller benefit first at 62 and delay the larger benefit to 70 years old to allow it to grow,” says Mahaney. “There’s an enhanced value to the higher benefit because it gets paid across two lives like a joint survivor annuity.”
However, he says, the spouse and survivor benefits decline if the recipient collected before full retirement age and they do not grow like other individual benefits do after a person’s full retirement age.
“Married couples have more complex situations than single individuals,” says Michael Graci, the director of investment and retirement education at BlackRock. “They have their own benefits and there’s the complication of survivor benefits, spousal benefits and differences in longevity.”
For example, a single person who collects Social Security benefits at 62 must be 77 or 78 years old to break even (breakeven is the age at which the total Social Security income from two retirement options would be the same). But for a married couple, the calculation changes from breakeven date to a breakeven range.
“The breakeven range is different for married couples because the typical breakeven analysis doesn’t take into consideration whether the client is married, the amount of their spouse’s benefit, the difference in age and the longevity differences between spouses,” Graci says.
“Knowing that the spouse will receive the higher of two benefits when you defer collecting, only one of the spouses has to outlive the average life expectancy for that decision to have paid off,” says Kisner who is co-author of A Good Financial Advisor Will Tell You.