The Couple's Advantage: A Case Study of When to Start Collecting Social Security

Abstract

Deciding when to collect social security benefits is a difficult decision, but particularly so for couples. Without being able to analyze the full spectrum of options, couples could be missing out on potential income. In addition, many of these couples are stuck trying to figure out what to do if there is only one earner in the household. This paper focuses on the difference between a single earner and that earner with a spouse that is not otherwise qualified to collect. It delivers real world solutions by using sensitivity analysis for the interest rates, age at death, and gender. Additional analyses focused on the particular life expectancies predicted on the social security web site. Thus, rather than matrices of strategies for different combinations of ages at death, it is possible to identify the best strategies and the NPV differences for the “average” case. This paper explains the strategies and outcomes for calculating the couple’s advantage over the individual earner as well as an in-depth analysis of benefits for a class of couples. The case results in a $136,559 to $384,989 increase in retirement income for couples over singles. This large increase in annual income can single handedly be attributed to both spousal and survivor benefits that couplesreceive but singles do not. Due to the complexity and many details of the couple’s rules, this analysis is presented as a solution to the case rather than as a set of possible case options.