With Treasury yields near 4.5%, one couple is rethinking when to claim Social Security. The higher earner's delayed claim to 70 offers a significant survivor benefit, a feature that bonds cannot replicate. High yields ease the funding gap to 70, but interest income can trigger Medicare surcharges and taxability on Social Security benefits. Pre-Social Security years for Roth conversions often provide more long-term value than chasing higher CD yields. Many financial advisors prioritize sales over client wealth, so seeking a fiduciary advisor is crucial. Advisor.com's free matching tool pairs clients with vetted fiduciaries in under three minutes.
The key decision for married couples is when the higher earner claims Social Security, as it directly impacts the survivor benefit. Delaying until 70 increases the benefit by approximately 8% annually, providing a locked-in, inflation-adjusted income for the longer-living spouse. This is a unique advantage of Social Security, as bonds offer fixed returns until maturity. For couples with a significant earnings gap, delaying the higher earner's claim is a form of cheap longevity insurance for the survivor.
However, the lower earner's claim decision is more personal. High yields make funding the gap to 70 easier, with short-term T-bills and I-bonds providing attractive interest rates. Yet, interest income can trigger Medicare surcharges and taxability on Social Security. Before making a decision, couples should consider managing taxes and spending during the bridge years. Roth conversions in low-income years can be more valuable than chasing higher CD yields.
The article emphasizes the importance of personalized financial planning. Every couple's situation is unique, and factors like health, earnings gap, pensions, and essential income needs influence the decision. A careful analysis using a spreadsheet or consulting a fee-only planner can provide significant value. Many Americans are unaware of their retirement readiness, and Advisor.com's matching tool offers a free consultation with a fiduciary advisor to address various financial aspects, including taxes, estate planning, and retirement strategies.
