Millions of Married Couples Are Getting Social Security Advice That Could Backfire

You'll often hear that claiming Social Security benefits early is one of the biggest retirement mistakes you can make. But for people in poor health, it can often be good advice.

Claiming Social Security before reaching full retirement age (FRA) will result in permanently reduced benefits on a monthly basis. But if you don't end up living a long life, you may end up with more Social Security on a lifetime basis by filing early rather than waiting.

But while taking Social Security benefits early due to poor health may be wise if you're single, if you're married, it's a decision you could end up sorely regretting.

What happens when you claim Social Security early

You're allowed to file for Social Security benefits once you turn 62. But if you don't wait for FRA to arrive, your benefits will face a permanent reduction.

If you were born in 1960 or later, your FRA is 67. If you file for Social Security at 62, you'll be looking at monthly checks that are 30% lower than what you'd get by filing five years later. For a $2,000 monthly benefit, you're looking at $1,400 a month instead if you claim Social Security at 62 versus 67.

Why filing early can make sense for people with poor health

While claiming Social Security will reduce your benefits on a monthly basis if you file early, it won't necessarily result in less lifetime income from Social Security. Starting those monthly checks at a younger age could make it possible to collect more individual payments if you don't end up living a long life.

That's why people in poor health are often advised to claim Social Security early, despite the automatic reduction in monthly checks.

Let's imagine you reduce a $2,000 monthly benefit to $1,400 by filing for Social Security at age 62 instead of 67. If you live until age 72, you'll collect $1,400 a month for 10 years, giving you a total of $168,000. If you wait until 67, you'll collect $2,000 a month for five years, giving you a total of $120,000. So clearly, in this scenario, the early claim pays off financially.

Being married changes the equation

Even though claiming Social Security early could make sense if you have poor health, that advice does not necessarily work as well if you're married. And the reason is that if you're married and you're the higher earner in your household, your spouse could end up with smaller survivor benefits if you file early and they outlive you.

Imagine you file for Social Security at 62 and then pass away at age 72, at which point your spouse is only 67. If they live until 97, that's 30 years of potentially reduced survivor benefits they may be looking at by virtue of your early claim.

In our example, filing at 62 versus FRA reduces your monthly benefits by $600, or $7,200 a year. If your spouse's survivor benefits are reduced by $7,200 a year for 30 years, they could end up missing out on $216,000 in Social Security. And if you don't have a lot of household savings, that could make for a dire situation.

It's important to look at the big picture

Being married can make filing for Social Security more complicated. That's because you have to account for your spouse's financial needs as well as your own. But it's important to think about whether survivor benefits are likely to come into play in your household and let that help guide your decision.

If your spouse is older than you or in even worse health, survivor benefits may not be as much of a concern, even if you're the higher earner. If your spouse is likely to pass away first, they may not get survivor benefits.

The tricky thing is that you can't see into the future and predict what will happen. But as a general rule, if you're the higher earner and your spouse is both younger and in better health, it's best to frame your Social Security filing decisions around their financial needs as well as your own.

Bottom line

Social Security may end up being a big part of your household's retirement plan. If you're married, it's important to consider your own financial needs as well as your spouse's.

The advice to file early when you're not in great health still stands if it's just you living under that roof. But once there's a spouse involved, the math can change in a pretty big way. Be mindful of that so you don't claim your Social Security benefits at the wrong time. The last thing you'd want is to leave your spouse not only on their own, but with an inadequate amount of money to live on.