14 May Social Security strategies when a spouse is ill

 Q. My husband is ill, and he doesn’t have much time left. Neither of us has taken Social Security. I’m 61 and he’s 63. He wants to know if there’s something we should do before he dies to make sure I get the biggest monthly checks.

A. We’re very sorry to hear of your husband’s illness, and we hope he surprises you and all the doctors with a recovery.

Social Security benefits are very specific, so it’s tough to give a specific answer for you without knowing more.

“The strategies used to maximize lifetime social security benefits are so complex that even when we know our client’s specific details, we use special software to find the optimum solution,” said Laura Mattia, a certified financial planner with Baron Financial Group in Fair Lawn.

She said with both of you being below full retirement age, if either of you take benefits now, before your full retirement age, your benefits will be reduced, Mattia said.

It’s also important to note that spousal retirement benefits provide a maximum benefit of 50 percent of the other spouse’s primary insurance amount (PIA), while a surviving spouse’s benefit provides a maximum benefit of 100 percent of the deceased worker’s retirement benefit, Mattia said.

“So the quick answer is that there is nothing that he could do to increase the amount that you will receive in the future,” she said. “There are things you can do in the future so you should explore your different options when you are ready to consider claiming benefits.”

Mattia said if your husband passes prior to you turning 62, there is a provision where you will be able to collect benefits immediately because you are over the age of 60, but again, your benefits will be permanently reduced.

“The way that you will be able to maximize your lifetime benefits is if you take one of your benefits early, while you allow the other benefit to continue to grow,” she said. “One strategy is to take his benefits early and wait until 70 to take your benefits when it grows to its maximum value.”

Mattia said you could wait until your full retirement age to take your unreduced survivor benefits, and then allow your benefits to grow to age 70. Alternatively, she said, you can take your benefits when you turn 62 and then take your survivor benefits at full retirement age when those benefits are the largest. A lot of this depends upon the size of each of your benefits at FRA so it is important to crunch the numbers.

We got some hypothetical examples from Stephen Craffen, a financial advisor with Stonegate Wealth Management in Oakland, who used the names “Sam” and “Sarah” for some illustrations.

“We tried two approaches using some sophisticated software that helps sort through hundreds of Social Security claiming strategies to find the one that provides the most benefit to you based on a certain fact pattern,” Craffen said. “Since the best strategy is dependent on many factors, we decided to simplify these examples a bit by only varying two: Sam and Sarah’s full retirement benefit amounts. We left your life expectancies the same in each example.”

In the first example, Craffen assumed Sam would receive $2,100 a month at his full retirement age, and Sarah would receive $1,500 per month.

If Sam’s life expectancy is one year, and Sarah’s is to age 100, then the following is the preferred strategy:

“Sarah begins benefits based on her earnings record in the estimated amount of $1,125 in January 2016 at age 62,” Craffen said. “In January 2020, Sarah switches to survivor benefits in the estimated amount of $2,434.”

In a second example, Craffen assumed Sam would receive $1,500 at his FRA and Sarah would receive $2,100. In that case, with the same life expectancies, this strategy would yield the biggest benefit:

“Sam begins benefits based on his earnings record in the estimated amount of $1,242 in June 2015 at age 63 and 5 months,” Craffen said. “In February 2016, Sarah begins survivor benefits in the estimated amount of $1,258. Sarah switches to benefits based on her earnings record in the estimated amount of $3,511 in January 2024 at age 70.”

As you can see, the changes in expected benefits makes a big difference in choosing the most profitable strategy.

“Other variables that might alter the best strategy for you include, current or future employment, taxes, other assets you have, etc.,” Craffen said.

He recommends you consider hiring an advisor who has specialized software to help you formulate a Social Security claiming strategy that may maximize your total benefit and also fits in with your overall planning.

Here’s a different look at how to maximize benefits when one spouse is ill. Also, here’s what was suggested to one widower, and also what was recommended for one widow.

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This story was first posted in May 2015.