Millions of Americans rely on Social Security as a critical part of their retirement income. But according to financial experts, a commonly overlooked mistake could cost married couples thousands of dollars every year—specifically, up to $5,500 annually—due to how spousal benefits are calculated and claimed.
The error primarily involves misunderstanding when and how to claim benefits, especially in cases where one spouse claims early or does not know they’re eligible for spousal benefits. The Social Security Administration (SSA) offers several options for married couples, but timing and strategy are key.
How Spousal Benefits Work
Social Security spousal benefits allow a lower-earning spouse to receive up to 50% of their partner’s full retirement benefit. These benefits are especially important when one spouse either didn’t work or earned significantly less throughout their career.
However, spousal benefits are only available once the higher-earning spouse files for their own Social Security benefits.
What many people don’t realize is that claiming early—before Full Retirement Age (FRA), which is typically 66 or 67 depending on your birth year—reduces both your personal and your spousal benefit. According to the Social Security Administration, if a spouse claims at age 62, the benefit could be reduced by as much as 30%.
The $5,500 Mistake
The $5,500 figure comes from a combination of reduced personal benefits and underclaimed spousal benefits. For example, if someone qualifies for a $1,000 spousal benefit at FRA but claims at 62, they might only receive $700 per month. Over a year, that’s $3,600 lost.
When combined with reductions in their own retirement benefits or poor claiming coordination with their spouse, the loss can climb over $5,500 annually.
“Too many people are unaware of how much they could be leaving on the table,” said financial planner Teresa Ghilarducci, a labor economist and retirement expert. “It’s a permanent reduction, and once you start early, there’s no going back.”
Real-Life Impact
Take the example of Susan and David, a couple from Florida. David earned significantly more throughout his working years and delayed his benefits until age 70 to maximize his monthly payments. Susan, meanwhile, claimed her own reduced benefit at age 62 without realizing she could qualify for a larger spousal benefit once David filed.
Once David began receiving his benefits, Susan’s payments did not automatically adjust. She later discovered she could have received hundreds more each month as a spousal beneficiary, but due to early claiming, she was locked into a lower amount.
“She would have received about $400 more per month if she had waited or coordinated her claiming strategy with David,” said the couple’s financial advisor. “That’s nearly $5,000 per year she’s missing out on, and over a 20-year retirement, that’s $100,000.”
Common Misunderstandings
Experts say the problem stems largely from lack of awareness and confusion about the SSA’s rules. According to the SSA Retirement Planner, spousal benefits must be applied for; they are not automatically added to a person’s account when their spouse begins receiving payments.
Additionally, the SSA won’t necessarily advise people if they’re making a suboptimal decision.
Another layer of complexity is added with the “deemed filing” rule, which automatically applies for both retirement and spousal benefits if you file before FRA. This eliminates the ability to delay one benefit while receiving the other, a strategy many used before 2016.
How to Avoid This Costly Error
To ensure you’re maximizing your Social Security benefits as a couple:
- Check your Social Security statement: You can review your earnings history and estimated benefits by creating a “my Social Security” account at SSA.gov.
- Consult a financial advisor: A retirement planning expert can help model different scenarios and recommend the optimal filing time for both spouses.
- Delay claiming when possible: Waiting until FRA or later increases monthly benefits and ensures the highest possible spousal payout.
- Understand eligibility: Even if you’ve never worked or have limited earnings, you may still be eligible for spousal benefits.
- Use SSA tools: Utilize the Social Security Retirement Estimator to explore how different claiming ages affect your benefits.
Conclusion
For married couples, understanding how and when to claim Social Security is essential. A misstep in strategy—especially claiming too early or not coordinating with a spouse—can lead to a significant and permanent reduction in retirement income. In some cases, the cost could exceed $5,500 per year.
As Social Security becomes increasingly important for retirement security, especially for middle- and lower-income Americans, taking the time to learn the rules and seek professional advice is more critical than ever.
The right approach can mean tens of thousands of extra dollars over the course of retirement.
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