Allworth Advice: What a big spousal age difference means for your Social Security strategy

Question: C.A. in Kenwood: I’m 60 and 8 years older than my wife. We’ve been married for 30 years. I’ve been the one to work during most of our relationship while she hasn’t (though she’s had some part-time work). I want to retire in a few years, so I’m just wondering when I should take Social Security and if our age difference plays into the decision.

A: Yes, your age difference definitely will play into this decision. As does the fact that it sounds like your Social Security benefit will be significantly higher than your wife’s benefit on her own work record.

As you think through your strategy, there are two different types of Social Security benefits for married couples to keep in mind. First is the ‘spousal’ benefit. Once your wife reaches her full retirement age (FRA) of 67, she can receive 50% of however much your benefit will be at your full retirement age (no matter when you started claiming). For example, if your full benefit at your FRA (also 67) is $1,000 a month, she can claim a spousal benefit at her FRA and receive $500 a month. If she claims before her FRA, that amount is permanently reduced; if she claims after her FRA there’s no increase. So, when it comes to the spousal benefit, everything really depends on your wife’s age at which she’ll claim this benefit.

The second type of benefit is the ‘survivors’ benefit. And this is where your age difference really matters. Because your wife’s survivors benefit will be 100% of the amount you’re claiming when you pass away if she claims this benefit at her FRA (she could claim as early as 60, but the amount would be reduced). So, generally speaking, it can make sense for you to wait as long as possible to claim your benefit. This is because you’ll get an eight percent increase in your benefit every year you wait to claim past your FRA (up until age 70). With this approach, you’ll be setting your wife up to get the biggest benefit possible for the rest of her life. 

The Allworth Advice is that we suggest seeking guidance from a fiduciary financial advisor to take a more thorough look at your particular situation. Because there are additional factors to consider before you actually start claiming, including both of your life expectancies, other sources of retirement income, if you plan to work at all during retirement, etc. An advisor will be able to sort through all these details and provide a tailored strategy.  

Q: Crystal from Ludlow: I want to buy a house but my credit score is 670. How can I boost it?

A: This is a great question. Because with all the talk over the last year about ‘historically low’ mortgage rates, the only people actually able to take advantage of these rates are the folks with higher credit scores – typically around 740 and up.

First, check your credit report for free at annualcreditreport.com. Look for errors. If you find any, contact the credit reporting agency to correct (or dispute) them ASAP. Second, make it a priority to pay all your bills (especially credit card bills and loans) on time and, ideally, in-full. Missed or late payments can negatively impact your score for years. Set-up automated payments if you haven’t already. And third, don’t use too much of your available credit at any given time (this is called your ‘credit utilization ratio’). Aim to keep it under 30%. This means, for example, if you have $10,000 in credit, you should use no more than $3,000 of it every month.

Here’s The Allworth Advice: Once you’ve increased your score and are ready to apply for a mortgage, don’t make any other big-ticket purchases, take out any other loans, or open any new credit cards. A lender doesn’t want to see changes to your credit history right before loaning you a large chunk of money. Good luck! 

Every week, Allworth Financial’s Amy Wagner and Steve Sprovach answer your questions. If you, a friend, or someone in your family has a money issue or problem, feel free to send those questions to yourmoney@enquirer.com.

Responses are for informational purposes only, and individuals should consider whether any general recommendation in these responses is suitable for their particular circumstances based on investment objectives, financial situation and needs. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional adviser of his/her choosing, including a tax adviser and/or attorney. Retirement planning services offered through Allworth Financial, an SEC Registered Investment Advisor. Securities offered through AW Securities, a Registered Broker/Dealer, member FINRA/SIPC. Call 513-469-7500 or visit allworthfinancial.com.