08 Sep Planning Social Security benefits with an ill spouse

Q. My husband is ill, and neither of us has taken Social Security. Would I receive more if we file and suspend his benefits, or should I want for survivor’s benefits? He is 66 and I am 59.

A. We’re sorry to hear about your husband’s illness.

You’re smart to want to plan ahead.

Married couples can maximize their joint lifetime income by coordinating when they receive their Social Security benefits, said Laura Mattia, a certified financial planner with Baron Financial Group in Fair Lawn.

Mattia said there are several possible strategies to maximize the benefits that will go to a surviving spouse.

With the file and suspend strategy, the spouse of full retirement age — let’s say the husband like in your case — would file for benefits, allowing the wife, who must be at least 62, to apply for a spousal benefit. The husband then asks Social Security to suspend his benefits, Mattia said.

“The wife still receives spousal benefits, but the husband’s benefits accrue delayed retirement credits until he reapplies for benefits, presumably at age 70 since these assets will grow 8 percent for each delayed year,” Mattia said. “This is a great strategy to increase the value of future survivor benefits.”

Mattia said there are various versions of this strategy and the optimum strategy can be determined by the nuances of your personal situation.

One negative to applying for benefits at 62, prior to reaching full retirement age, is that you don’t have an option of taking only the spousal benefit which would allow your own benefit to grow, too, she said.

“Instead you are automatically applying for both your own benefit and the spousal benefit because you are eligible for both,” she said.

The second negative is that spousal benefits are penalized for early distribution at a higher rate than your own benefits, so the overall amount is permanently reduced considerably, Mattia said.

“However if your husband’s life expectancy is limited and you fully anticipate that you will be eligible for survival benefits in the near future, this may be a moot point,” she said. “In this case your primary objective should be to allow your husband’s benefits to accrue delayed retirement credits for a maximum survival benefit.”

This strategy does that, while allowing you to receive some income when you turn 62.

As with all things Social Security, there is one other that may come up in your research, Mattia said.

“There is a provision in the regulation to allow anyone who files and suspends to reinstate their benefit, effective for any month of the suspension period, resulting in either a lump-sum full or partial payout,” she said. “Of course you don’t want to do that since you will be foregoing the delayed retirement credits.”

It is important to note that your husband is the only person who can request that lump sum payment, so you as the widow will not be in jeopardy of someone trying to collect on your survival benefits, Mattia said.

“You will receive the survivor benefits based on what your husband would have received at the time of his death,” she said.

Consider meeting with a professional who understands your personal situation before making a final decision.

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This story was first posted in September 2015.