Is This Big Risk Lurking in Your Social Security Claiming Math?

What You Need to Know

A recent case study concluded that case study revealed that drawing Social Security benefits earlier than age 70 could be optimal for certain couples.
This conclusion would not hold if one spouse lived even a few years longer than expected, a reader pointed out.
It’s important to consider not only evolving trends in life expectancy but the role of Social Security as a life annuity in advanced age.

ThinkAdvisor published the latest in an ongoing series of Social Security claiming case studies earlier this month, finding the optimal claiming scenario for the sample married couple at hand would be to draw their benefits earlier than the maximum claiming age of 70.

That result, based mainly on the fact that the couple had a highly uneven earnings history and a small but meaningful gap in longevity expectations, surprised some readers, and it sparked a number of insightful discussions with both readers and retirement experts that continued into this week.

Most recently, one Scott D. wrote in to point out the fundamental importance of the longevity expectations that go into such claiming calculations, arguing the conclusions in the case study, while accurate, could also potentially mislead. Social Security projections are only as good as the assumptions fed in, he emphasized, especially the accuracy of longevity projections.

The Case of the High-Earning Husband

The case study in question involves a married couple, Bruce and Debbie, both born in 1962 but with very different work histories. Namely, Bruce is a high lifetime earner, while Debbie did not earn enough credits to be eligible for Social Security benefits from her own work record.

Both spouses have a full retirement age of 67, and given the particulars of their situation, Debbie cannot begin collecting spousal benefits until Bruce files. Finally, Bruce’s assumed longevity is 85, while Debbie’s is 87.

Under such a set of conditions, the case study shows, Bruce’s and Debbie’s optimal claiming approach is not to wait for Bruce to turn 70 before claiming, despite the fact that this approach would deliver the highest monthly benefit for each member of the couple — including after Debbie becomes a widow.

Rather, the optimum claiming strategy would instead involve Bruce filing at age 67 for his full worker benefit of $2,302. Debbie could file at the same time for her full spousal benefit of $1,151, and she would eventually become eligible for a full survivor benefit of $2,302.

Though their monthly checks would be smaller, this approach would result in $788,435 in total lifetime benefits going to the couple, with $499,534 paid to Bruce and $288,901 going to Debbie — adding a projected $15,000 to the age-70 claiming total.

A Misleading Result?

As Scott admitted, the calculator indeed “does not lie,” and in this fairly unique situation, it calculates that this couple would have overall earned $15,000 more for claiming at age 67.

“However,” Scott wrote, “I believe the analysis misses a few very important items that are relevant to the discussion and which lessen the likelihood that pre-70 usage of Social Security is actually advantageous.”