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Two Lifetimes, Breadwinners, and Social Security

If you are in a married household in which both spouses work, you might notice that every year one spouse typically earns more than the other – this higher-earning spouse is called the breadwinner. For breadwinners, claiming Social Security benefits has potential consequences that might go unnoticed until it is too late to make changes.

Household breadwinners must realize that their Social Security benefits will be paid out over two lifetimes – theirs and their spouse’s. Upon the death of either spouse in a married household, the surviving spouse either maintains or switches to the higher benefit for the rest of his or her life.

If the breadwinner chooses to take a permanently reduced Social Security benefit by applying prior to full retirement age (FRA), that permanently reduced benefit will be passed on to and received by the survivor for the rest of his or her life upon the breadwinner’s death. On the other hand, if the breadwinner chooses to wait until FRA or later to claim benefits, he or she will pass along a potentially much larger benefit to the surviving spouse upon his or her passing. Every year the breadwinner waits to claim benefits, he or she will earn delayed retirement credits (DRCs) of 8% per year until age 70. Consequently, if the breadwinner can wait to claim Social Security benefits, the surviving spouse will receive a much larger benefit for the rest of his or her life.

Before making a Social Security claiming decision, the household breadwinner should be aware that Social Security is a second-to-die income stream. Accordingly, he or she may want to wait to claim benefits so the surviving spouse will be left with a higher income for the rest of his or her life.

Many breadwinners file for reduced benefits without considering these long-term consequences. Those who regret their decision potentially face two options. The first option is that they can “start over.” Social Security gives claimants a one-time ability to start over within 12 months of claiming benefits. All benefits received, including benefits received by a spouse or children based on the breadwinner’s work record, must be paid back, interest free, to Social Security. Once all benefits have been returned, Social Security wipes the slate clean so the breadwinner can make a more informed, and potentially more beneficial, claiming decision later on.

If the breadwinner has been claiming benefits for 12 months or longer, he or she can no longer start over. However, using the second option, he or she may still suspend benefits upon reaching FRA. Once suspended, this amount will begin to earn valuable DRCs until age 70. Once the breadwinner has turned 70, the suspension is lifted and the benefits will be paid over both lifetimes and resume at an amount that will be at least 24% higher. When a benefit is suspended at a breadwinner’s FRA, all benefits being received from the breadwinner’s work record will also be suspended. In other words, if a spouse or child is receiving benefits based on the breadwinner’s work record, those benefits will also be suspended.

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