I’m 63 and still working. My wife, who is 64 ½ and retired, spent most of her working life raising our children at home. She qualifies for Social Security at a current rate of $675 and $845 if she waits until FRA. I plan on working for another two or three years. My Social Security at 65 is $2,785 and $3,295 at FRA. Should she start drawing on her Social Security now and invest it, switching to spousal benefits when I retire? Or should she wait until I retire and draw the full 50% spousal benefit?

– Two Air Force Vets

I suggest waiting in most cases, but that doesn’t mean it’s always the best approach. Depending on your situation, risk tolerance and goals, your wife may want to file for Social Security now. However, there may also be a blended third option depending on when you file that I think you should consider. I’ll explain the tradeoffs and reasons why you might choose one option or the other so you and your wife can decide which route is best for you.

If you have retirement planning questions or need help with another area of your finances, consider connecting with a financial advisor.

Early Filing Reduction

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As you’ve pointed out, your wife will receive a reduced benefit if she files for Social Security before reaching her full retirement age (FRA). That is true of both her own benefit and her spousal benefit. However, those reductions are different so let’s start by clarifying how early filing impacts both types of benefits:

• Primary benefits are reduced by 5/9 of 1% per month for up to 36 months and then by 5/12 of 1% for each additional month

• Spousal benefits are reduced by 25/36 of 1% per month for up to 36 and then by 5/12 of 1% for each additional month

Based on your wife’s current age, I’m assuming she was born in 1960. As a result, she’ll reach FRA at age 67. So, if she is exactly 30 months shy of her FRA:

Keep in mind that she can’t claim her spousal benefit until you file for Social Security. But since her spousal benefit will be higher than her own primary benefit, she would end up switching later, at which point this reduction would apply. (And if you need additional help deciding when to claim Social Security or how to plan for spousal benefits, speak with a financial advisor.)

Filing Now and Investing

If your wife files for benefits now and invests the money, here’s approximately what she might have when she turns 67 based on the following rates of return:

• 2% = $20,781

• 4% = $21,331

• 6% = $21,898

• 8% = $22,484

• 10% = $23,089

However, if she waits until age 67 to file for Social Security, she’ll receive $845 per month – $170 more than what she would collect if she starts now. Then again, if she starts collecting Social Security now and invests those payments, she could have upwards of $23,000 in savings by age 67.

So how do you compare the two options? You can start by thinking about it in terms of a withdrawal rate. How much would you need in savings to generate an additional $170 per month?

If we use the 4% rule as a guide, your wife would need $51,000 to support a monthly withdrawal of $170. Clearly, none of the investment return assumptions above get close to that.

(Calculating potential investment returns can be complicated, but financial advisors often have the tools and expertise to run complex calculations to help you make important decisions.)

Filing Early vs. Waiting

However, there are still a number of scenarios in which your wife may still decide to file for her benefits early, including:

• She has a short life expectancy due to a medical condition or family history

• You absolutely need the money now

• You already have sufficient guaranteed income such as military retired pay, pensions or annuities, and want more immediate cash flow

• You are very aggressive investors and prefer the chance of a higher return even if it means taking on more risk

Then again, waiting until FRA may be more appropriate if:

• You and your wife are risk averse or financially conservative and prefer security

• She expects to live to at least an average age

• You do not have adequate guaranteed income

• You don’t need the money right now

Which Benefit to Choose?

As of right now the only benefit your wife can receive is her own. She won’t be able to claim her spousal benefit until you file, which you clearly understand.

However, filing now results in a steep reduction in benefits. Unless other considerations weigh heavily for you, this may not the best choice. So, she could wait until you file and claim the full spousal benefit, which would be worth $1,647.50 (50% of your full retirement benefit).

But here’s where a blended third option comes in. Let’s lay out the relevant details:

• Her spousal benefit is based on 50% of your FRA benefit regardless of when you file

• She receives that full 50% as long as she files at her own FRA

• If she files early, her spousal benefit is reduced as explained above. The spousal benefit does not earn delayed filing credits, so there’s no benefit for her to wait past her FRA

• She is a few years older than you

The third option is for your wife to file for her own benefit once she reaches her FRA and then switch to her spousal benefit after you file. If she does this, she will not be subject to any reductions.

However, when you file is another point of discussion. You imply that you intend to file when you retire in a few years. You may want to evaluate the benefit of waiting until age 70 to take advantage of delayed retirement credits. Likely, this will maximize Social Security benefits for the two of you, making it an option I’d strongly consider.

(And if you have additional questions related to Social Security and retirement income planning, reach out to a financial advisor and see how they can help.)

Bottom Line

Filing early to invest the money is not likely to provide the same level of income as waiting to maximize your Social Security benefits, and it’s riskier. If financial security in retirement is your goal, I’d give serious thought to having your wife claim at her FRA and delaying your own benefit.

Social Security Planning Tips

• Up to 85% of your Social Security benefits may be taxable depending on your total income. Advanced tax planning strategies, such as adjusting withdrawals from retirement accounts or Roth conversions, can help manage your taxable income in retirement and reduce the tax burden on Social Security benefits.

• A financial advisor with retirement planning expertise can help you plan for Social Security benefits and integrate them with your other income sources. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

• Are you a financial advisor looking to grow your business? SmartAsset AMP helps advisors connect with leads and offers marketing automation solutions so you can spend more time making conversions. Learn more about SmartAsset AMP.

Brandon Renfro, CFP®, is a SmartAsset financial planning columnist and answers reader questions on personal finance and tax topics. Got a question you’d like answered? Email AskAnAdvisor@smartasset.com and your question may be answered in a future column.

Please note that Brandon is not an employee of SmartAsset and is not a participant in SmartAsset AMP. He has been compensated for this article. Some reader-submitted questions are edited for clarity or brevity.

Photo credit: ©iStock.com/LaylaBird, ©iStock.com/JLco – Julia Amaral

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