62YO Men File Social Security; Wives Pay

My father was never more in love with my mother than on the day he died in 2004, days before their 50^th anniversary.

But he made one bad financial decision that she lives with today: he started up his Social Security benefits at age 62.

He felt he needed the money sooner than later.  He had an inadequate pension from his first career, as an Air Force flyboy, and none from his Rust Belt business that went bust.  But waiting to claim his Social Security would’ve increased the size of his check – and, after he died at 70, the money that’s still deposited into my mother’s bank account every month.

This happens to a significant share of couples, because almost 40 percent of all Americans claim their benefits the same year they turn 62.  But a husband who waits until age 65 can increase his widowed wife’s future benefits by up to $170 a month, according to new research by Alice Henriques, an economist with the Federal Reserve Board in Washington.

What’s interesting about this study of nearly 14,000 older couples is that she teased out how much the husband’s decision was determined by the filing date’s impact on his own benefits, versus the financial impact on his wife’s spousal and, later, her survivor benefits.  Similar research in the past had examined the impact of a filing date on their combined benefits during all their years of retirement.

Henriques was able to show that the husbands, when they made their decisions, took into account the impact on themselves of the claiming date they selected.  But they showed virtually “no response to the large incentives” of having the ability to provide their widowed wives with more income in the future, she said.

So, why are husbands still in the driver’s seat at a time women are working more and earning more?  Because in the majority of two-earner couples, husbands still work for more years and have higher earnings than their working wives.  Under the rules, his higher compensation is used to calculate his benefit – in the vast majority of couples, even if the wife works, his benefit determines his widow’s benefit.

Here’s how delaying increases benefits.  Any worker can file at any age between 62 and 70.   But workers are not entitled to receive their full monthly benefits until they reach Social Security’s Full Retirement Age (FRA) – 65 in the older population Henriques studied; 66 for most baby boomers.

If a husband files at 62, his – and his widow’s – monthly check takes a hit, because he hasn’t reached his FRA.  The longer he waits to file, the more he – and eventually his widow – receives each month.

To read a 2012 article about a study showing that financial advisers to couples usually don’t recommend that husbands delay claiming their benefits if they want to boost the widow’s benefit, click here.

The Center for Retirement Research, which supports this blog, also publishes the “Social Security Claiming Guide.”