Social Security Planning for a Couple with Similar Earnings History

A reader writes in, asking:

In giving advice to a married couple, you frequently differentiate what the higher-earning-record spouse should do and what the lower-earning-record spouse should do. I’ve not seen you mention what a couple should do where both spouses have nearly identical earning records. How should a married couple apply the typical high-earner/low-earner advice?

  1. Even if there’s only a one dollar difference in their earning records, still follow the higher-earning-record/lower-earning record recommendation that you describe?
  2. Both spouses should follow the typical advice for the higher-earning-record-spouse?
  3. Both spouses should follow the typical advice for a single person?
  4. Or something else?

Or there is no rule of thumb for that situation?

In short, it still makes sense to follow the same general plan as for other couples in which:

  1. You begin the analysis with one spouse filing at 70 and the other filing at 62 (or 62 and 1 month if their DoB is not the first or second of the month),
  2. Then you move the “age 62” date later if you’re concerned about longevity risk, or
  3. You move the “age 70” date earlier if you need the cash flow.

But which spouse should be the one to file early, and which should be the one to file late? Basically, we want to know whose benefit at age 70 would be larger. So if their respective earnings histories are similar, the next thing to look at is the spouses’ respective full retirement ages. For example if the wife has a full retirement age of 66 and the husband has a full retirement age of 67, it’s more advantageous for the wife to delay, because her benefit at age 70 would be 132% of her “primary insurance amount” (because 70 is 48 months beyond her FRA), while his benefit at age 70 would only be 124% of his PIA (because 70 is only 36 months beyond his FRA).

If they have nearly identical PIAs as well as identical FRAs, then the one in better health should be the one to delay (because they’re the one most likely to make it to age 70, to allow the benefit to max out).

If they have identical PIAs, identical FRAs, and roughly identical life expectancies, then it probably doesn’t matter very much which spouse files earlier and which spouse files later.

Of note, the above analysis assumes there are no additional complicating factors.

One complicating factor that would be fairly common is the earnings test. If one spouse plans to work beyond age 62 (and therefore would have their benefit subject to withholding via the earnings test), then that spouse should likely not file any earlier than the date on which they quit work — or in some cases January of the year in which they reach FRA. (The specifics would depend on their level of earnings.)

For reference, all of these factors (and several others) are accounted for by the Open Social Security calculator. The above is just my attempt to explain the general decision making process.

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