Talk about money: Cashing in: An uncommon Social Security strategy for married couples

The retirement landscape has dramatically changed over the past several years, with declining retirement accounts, savings accounts and home prices. At the same time, medical costs are rapidly rising, life expectancies are increasing and Social Security benefits are not growing at nearly the same pace as inflation. For many — dare I say most? — tough decisions are at hand about postponing or reformulating a retirement that’s no longer affordable.
The state of affairs makes it imperative that we approach retirement with more thought and an intelligent course of action.
Many are realizing that Social Security, as a guaranteed source of income, plays a larger role in their retirement than perhaps they once thought. However, three out of four Americans continue to elect Social Security benefits early. Which brings me to the next point: Is this really the best approach? Newer research says it might not be — especially for married couples. Allow me to explain.
Taking early benefits at age 62 reduces one’s benefit amount to 75 percent of the full retirement benefit. On the other hand, waiting until after one’s full retirement age increases the benefit by 8 percent per year (plus an inflation adjustment), up to a maximum of 132 percent at age 70.
Those adjustments are in theory statistically neutral. If you live to an average age, you get about the same value, whether you collect smaller checks for a longer time or bigger checks later.
However, Social Security rules for married couples usually make it more favorable for the lower-earning spouse to collect benefits early or at the normal age of retirement, while the higher-earning spouse delays benefits until age 70. Why? When one spouse dies, the surviving spouse can choose to keep the other’s benefit. The larger checks will last for two lives, no matter which expires first.
The strategy works because of joint mortality. A 62-year-old man’s single life expectancy is about 81 years, while a woman’s of the same age is about 84 years. But combined, the same couple has a life expectancy of 89-plus years.
Therefore, having the higher check last for both lives makes sense.
Of course, poor health, family history and a whole assortment of other issues need to be considered, but this approach might just be worth a closer look — especially in today’s economic environment.
Orion Melehan is a certified financial planner for LMC Financial Services in Scotts Valley. Contact him at 454-8042 or

or***@lm**********.com











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