In our previous post on Social Security retirement benefits, we looked at a few factors that might determine when someone should start receiving Social Security benefits. One of those factors centered on a spouse’s age and potential benefit, which we’ll examine a bit more closely in this piece.
For the questions and scenarios below, we’ll assume the full retirement age is 66. You can determine what your full retirement age is using the Social Security Administration’s table here.
What is a Social Security Spousal Benefit?
A spousal benefit is equal to 50% of your spouse’s Social Security retirement benefit, as calculated at their full retirement age. If your social security retirement benefit based on your earnings record is greater than the spousal benefit, you will get paid the higher amount when filing for Social Security.
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Hypothetical example: Bob and Sally are both 66 and decide to file for Social Security retirement benefits. Bob’s primary insurance amount (PIA) is $2,000, while Sally’s is $900. Sally in this case would receive the spousal benefit of $1,000, since it is higher than the $900 retirement benefit based on her earnings record. In this same example, if Sally’s PIA was $1,100, she would receive that amount instead of the spousal benefit of $1,000.
What Happens if My Spouse Begins Receiving Benefits Early?
The earliest someone can begin receiving Social Security retirement benefits is age 62. When it comes to spousal benefits, however, it is important to note that in order for your spouse to be eligible for the spousal benefit, you have to be eligible or already receiving retirement benefits.
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Hypothetical Example: Bob is 60 and Sally is 62. Sally would be eligible for her retirement benefit, but not her spousal benefit. Sally is not eligible for her spousal benefit until Bob turns 62.
If you’re at an eligible age or are receiving benefits, and your spouse wants to apply to receive spousal benefits before their full retirement age, then the amount of his/her benefit will be permanently reduced by a percentage based on the number of months up to her full retirement age.
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Hypothetical Example: Bob is 66 and Sally is 62, and his PIA is $2000 while hers is $700. If Sally applies for the spousal benefit, she will receive less than the $1,000 spousal benefit, since she is applying early (before age 66). In this case, her spousal benefit would be reduced by 25%, so she would receive a $750 monthly benefit.
What if I Want to Delay Receiving my Social Security Income, but I Want My Spouse to Start Receiving their Spousal Benefit?
If you are at full retirement age, you can “file and suspend Social Security,” meaning you can apply for retirement benefits and then request to have payments suspended. That way, your spouse can receive a spouse's benefit and you can continue to earn delayed retirement credits until age 70.
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Hypothetical Example: Bob and Sally are 66, and Bob’s PIA is $2,200 while Sally’s is $900. Bob can file for retirement benefits and then request to have his payments suspended, which will allow Sally to begin collecting her $1,100 spousal benefit while also allowing Bob to wait until age 70 to collect a larger monthly benefit.
Are there Strategies to Help Maximize Social Security Benefits My Spouse and I Receive?
Yes. Deciding when to take social security depends on a variety of factors, some of which we laid out in our Social Security retirement benefits piece. However, above and beyond that, there are different methodologies that can help a married couple get more out of their Social Security benefits, if applied correctly.
Navigating Social Security can be complicated, and unless you’re an expert you will likely need financial planning services to help you make an informed decision. If you want to find out today whether there is a more effective way to approach your Social Security retirement benefits, call one of our Wealth Managers at 1-800-541-7774 for a consultation.
By Gabriel F. Burczyk
Gabriel is the President of WrapManager, Inc. and Chairman of WrapManger's Investment Policy Committee.
Sources:
Social Security Administration - Benefits for Your Spouse
Social Security Administration - Benefits By Year of Birth
Additional Disclosure: WrapManager, Inc. is not a tax advisory firm. We recommend you contact your tax attorney or CPA prior to utilizing any of the tax-related strategies mentioned or discussed.
