2 Social Security strategies for 1 couple to optimize benefits

Q: My wife hasn't worked for the last 12 years. She'll be 62 this November. I'll be 65 in September. Should she wait until she is 66, or should she collect early retirement at 62? I can't afford to retire yet, or for the next several years (we have a large mortgage payment). I wasn't planning on retiring until 70, if my work can hold out that long, or they get tired of me, or I die, of course. Any guidance you can give me toward retirement or health care for that matter, would be greatly appreciated. — Dave Clemens, Meadowview, Va.

A: It’s likely that your wife will have substantially less Social Security benefits based on her own work record, says Sterling Raskie, a certified financial planner with Blankenship Financial Planning.

The good news: Since you were born before 1954, both you and your wife can optimize your Social Security benefits. Raskie presented two scenarios to consider;

Scenario A: Your wife can file for her own benefits at age 62 and receive 75% of her primary insurance amount (PIA). She can collect this amount until your reach your full retirement age (FRA) at age 66. Then, you can file a restricted application based on your wife’s record and receive half of her unreduced PIA while continuing to delay his benefit to age 70. Then, when your file for your own benefit at age 70, your wife then receives half of your PIA but at a reduced amount (since she filed for her own benefits at age 62) due to the new deemed filing rule in the Bipartisan Budget Act of 2015.

Scenario B: Dave’s wife can wait to file for her own benefit until Dave reaches age 66. She will receive a slightly higher benefit (around 80% vs. 75% in the above scenario). Dave’s filing for a restricted application for half of his wife’s PIA and delaying his own benefit is the same as in scenario A.

What to do? “Assuming that the dollar amount between 75% and around 80% is negligible, you and your wife may want to consider Scenario A and start receiving the money sooner than later,” says Raskie.

You might also consider using a Social Security calculator such as that found at AARP or Financial Engines to see how these scenarios play out in real dollars.

As for the question about health care, assuming that you have health coverage through your employer, you may want to continue doing so and keep your spouse covered on your plan as well, says Raskie. “And when you reach age 65 you can apply for Medicare and have that be secondary to your employer’s health insurance plan,” he says. “By the time you retire at 70, you and your wife will both qualify for Medicare. Should you die before your wife reaches age 65, she may consider COBRA through your employer or shop for an insurance plan in the Marketplace.”

For more, read How Medicare works with other insuranceFind out which insurance pays firstCOBRA: 7 important facts, and visit HealthCare.gov

Finally, if you and your wife have enough equity in your home, you may want to consider a reverse mortgage or home equity conversion mortgage (HECM). “This allows them access to their home’s equity to supplement retirement income if needed now, or let the interest grow on the amount of equity available,” says Raskie.

FYI: You qualify for the reverse mortgage and HECM programs since you are over age 62, says Raskie. Note too that most, but not all, reverse mortgages today are insured by the Federal Housing Administration (FHA), as part of its HECM program.

For more, read Home Equity Conversion Mortgages for Seniors and Are there different types of reverse mortgages?.

Robert Powell is editor of Retirement Weekly, contributes regularly to USA TODAY, The Wall Street Journal and MarketWatch. Got questions about money? Email rpowell@allthingsretirement.com.


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