The 62/70 Solution for Claiming Social Security Benefits

Financial planners usually recommend working longer, and not collecting social security until 70 - so you get the maximum monthly payout.

Forbes magazine recently had an article about new research showing that a 62/70 split can benefit many married couples. The lower earning spouse starts collecting at 62, while the higher earning spouse starts collecting at 70.

For anyone born between 1943 and 1954, the full Social Security retirement age is 66. If you start claiming benefits at age 62, you will only get 75% of the normal benefit. For each year you wait after age 66, you get 8% more, for a maximum benefit at 70 of 132% the normal amount.

This is supposed to be actuarially neutral. In other words, for every $100 that a person retiring at 66 gets, he would only get $75 if he retired at 62, but he would make it up by collecting social security longer. Similarly, the person who retired at 70 would collect $132 for each $100, but it would be offset by the fact that he would collect it for a shorter amount of time.

Actuarial neutrality, however, is skewed by a special rule for married couples - the surviving spouse can take over the dead spouse's benefits (if they are higher) and drop his or her own.

The Forbes article has more info, and a comparison chart showing the benefits difference (in net present value) for a 62 year old couple.