Did we leave money on the ground?

I started drawing at age 68, when my wife was nearly 64. We did not claim spousal benefits. My wife continued to work, and reached full retirement age today, 30 months later. My wife's survivor benefit will exceed benefits on her own record. I estimate that had we claimed spousal benefits, they would have been reduced to 40% due to claiming before full retirement age. Her spousal benefit at FRA would have been $1,500. Benefits on her own account will be $1,750 at FRA, and she will now draw that until elegible for survivor benefits.

So, had we claimed early, her spousal benefit would have been $1,200, and over 30 months, would total $36,000. Her earned benefit of $1,750 would be reduced by about $250 (nearly 15%) due to claiming 26 months early. Am I correct in thinking the payback period for this choice is 36,000/250 or 144 months (12 years)?

Hi. Your wife didn't have an option to start drawing spousal benefits early. If she had applied for spousal benefits she would have been forced to claim her own benefits at the same time, and she could only have been paid the higher of the two benefit rates. So, since your wife's own primary insurance amount (PIA) is apparently more than 50% of your PIA, she couldn't have been paid spousal benefits no matter when she applied.

Your wife could have started drawing her own benefits at a reduced rate prior to her full retirement age (FRA), but whether or not that would have resulted in her receiving more lifetime benefits than waiting until FRA to apply depends on how long both of you end up living.

Larry strongly advises people not to base their filing decisions on the type of break-even analysis contained in your question, instead suggesting that people view Social Security as insurance against outliving their income. Therefore, I'm sure he would approve of your wife's decision to delay filing for benefits until her FRA.

Best, Jerry