March 14, 2014

Judith Ward Judith Ward, CFP®, is a senior financial planner and vice president of T. Rowe Price Investment Services.

Generally speaking, when both spouses wait to start taking their Social Security benefits at age 70, they can receive the maximum amount. This strategy ensures the greatest possible income stream from Social Security while both spouses are living and for the surviving spouse. Waiting until age 70 will give you the greatest benefit amount, but a compromise approach could be just as favorable.

Many individuals may be uncomfortable with the idea of waiting to collect benefits. I can certainly understand this sentiment. As a matter of fact, most investors I talk to hope to retire before age 70, relying on income sources such as Social Security, pensions, and withdrawals from their investments. They may not want to spend more from their portfolios in order to wait to receive their Social Security benefits.

Consider a "Wait-and-Take" Approach

Married couples who do not want to wait until age 70 to collect benefits may want to consider a "wait-and-take" approach. Recent T. Rowe Price analysis suggests that the decisions of the historically higher-earning spouse have the most impact on a couple's retirement income stream. This may sound obvious; but quite frankly, we have found that couples tend to make the decision of when to collect Social Security benefits independently of one another and in isolation of other retirement income sources.

The higher-earning spouse could plan to start taking Social Security benefits at age 70, while the lower-earning spouse could begin whenever he or she chooses to retire, at age 62 or older.* This means you may have to draw more from your investments for a short time period if retiring prior to age 70, but you can decrease those withdrawals once the higher-earning spouse's Social Security benefits begin. In other words, you get a stream of predictable income earlier, you get flexibility around your retirement ages, and you are still able to maximize some Social Security benefits. This can result in a higher income stream throughout your retirement together and for whichever spouse survives.

Use the T. Rowe Price Social Security Benefits Evaluator to explore your options.

Make the Decision Together

While waiting to take Social Security benefits until age 70 will result in a larger income stream for the rest of retirement, many investors may want more flexibility in when to begin. Married couples should make these decisions together, with other retirement income sources and goals in mind. Ultimately, your choice about when to start taking benefits could affect your quality of life for years to come.

*If you and/or your spouse can wait until Full Retirement Age, you may be able to include spousal benefits in your strategy.