Social Security Claiming: The Case of the Age and Earnings Gap

This is the latest in an ongoing series of biweekly articles featuring Social Security claiming case studies drawn from the ALM publication “2024 Social Security & Medicare Facts,” by Michael Thomas with support from Jim Blair, a former Social Security administrator, and Marc Kiner, a planning expert with extensive experience in public accounting.

The Scenario: Married, Different Ages, Different Earnings

Greg and Alice are a married couple. Greg is a high earner and Alice is a middle-income earner, and there is over seven years’ difference in their ages. Specifically, Greg was born in 1962 and has an actuarially expected death age of 85, while Alice was born in 1970 and is expected to die past age 87.

According to the general planning wisdom, Greg should consider waiting beyond his full retirement age to take his benefit, as this could meaningfully increase the survivor benefit that is expected to eventually go to Alice. Based on normal life expectancies, Alice will receive widow’s benefits sooner and longer than a surviving spouse who was similar in age to their spouse.

If she survives Greg before filing for any benefits, she will need to reconsider her options to include widow’s benefits.

What the Numbers Say

Under this set of conditions, both spouses have a full retirement age of 67, at which time Greg’s full monthly benefit would be $2,153 and Alice’s would be $1,449. According to the authors, there are as many as nine potentially relevant claiming scenarios to consider for Greg and Alice, and the range in outcomes is significant — with more than $200,000 in additional lifetime benefits projected under the optimal claiming approach.

The least effective approach would be for Greg to file for his worker benefit in September 2024 at age 62. This would result in $1,516 per month, or just over 70% of his full amount. Alice would then file at age 67 in January 2037 for her own full worker benefit of $1,449. With Greg’s assumed longevity, Alice would go on to collect a survivor benefit of $1,516. For the couple combined, this approach would result in $784,359 of lifetime benefits.

A slightly more effective strategy would be for Greg to file in September 2024 at age 62 for the same reduced benefit of $1,516 and for Alice to also file at age 62 in February 2032, when she would get $1,020 per month. The same survivor benefit would kick in, which would result in $790,056 in lifetime benefits.

A similar jump in the lifetime benefit projection comes if Greg acts similarly but Alice waits until age 70 in January 2040 to claim her maximum benefit of $1,796. This would result in $797,652 in total benefit payments.

A much more sizable benefit increase comes if Greg files at age 67 in August 2029 for his full retirement benefit of $2,153. Alice then waits to claim her maximum benefit at age 70 in January 2040, when she’ll get $1,796 per month. Under the assumed longevity conditions, she will then become entitled to a higher survivor benefit of $2,153. This approach delivers almost $90,000 in additional lifetime benefits, for a total of $888,997.