The Barbell Approach to Social Security

Couples in retirement often face a dilemma: Should they take Social Security early, or should they delay to full retirement age, or even age 70, to maximize their payouts? The "Barbell Strategy" offers a creative middle ground, balancing immediate cash flow with long-term financial security. Having one spouse claim benefits early while the other waits until age 70 to maximize their benefit ensures stability in the present and protection for the future since a surviving spouse only keeps one Social Security benefit, whichever is largest.

How the Barbell Strategy Works

1. Early Claiming for the Lower-Earning Spouse
   The spouse with the smaller Social Security benefit claims early—at age 62 or when they retire. This provides immediate income, easing financial pressure during the early years of retirement and reducing the need to withdraw as much from other savings.

2. Delayed Claiming for the Higher-Earning Spouse
   The spouse with the larger benefit delays claiming until age 70. By waiting, their monthly benefit grows substantially, thanks to delayed retirement credits, resulting in the highest possible payout for both their lifetime and the surviving spouse’s.

Since Social Security benefits grow between age 62 and 70 on a percentage basis (6% per year until full retirement age and then 8% until 70), the penalty for the smaller beneficiary claiming early is not as significant, and the benefit toward the larger beneficiary waiting is substantial.

Example)

• Jane: Higher earner, expected monthly benefit at 70: $3,125

• Bob: Lower earner, expected monthly benefit at 65: $1,042

If Jane passes away first, Bob will receive her larger $3,125 benefit as the survivor. This ensures financial stability for Bob, who may outlive Jane by several years.

This approach makes the most sense for couples where one or more of the following factors apply -

(1) There is a substantial difference in benefits between the two spouses.

(2) There are enough investment assets and other income to live on while waiting for the larger benefit to start.

(3) There are no significant health concerns for the high-earning spouse (in some cases, waiting to maximize survivor benefits can still make sense).

This balanced approach to Social Security offers couples a way to hedge against some financial unknowns while protecting both spouses against the risk of a substantial loss in income when one spouse passes away.

Happy Planning,

Alex

This blog post is not advice. Please read disclaimers.