Married couples: Social Security is complicated and don’t let anyone tell you otherwise. Is either of you (or both of you) close to retirement age? Are you wondering if you should start earlier or later? Before you decide, make sure you understand these two aspects of Social Security: “spousal benefit” and “surviving spouse benefit”. Let’s start with the definitions.
Spousal benefit
The lower earning spouse has a choice: to claim a “spousal” benefit of up to 50% of the higher earning spouse’s benefit or to claim his own earned benefit. The higher earning spouse must be already collecting benefits before the lower earning one can qualify for a spousal benefit. And this spousal benefit will be reduced for every month under full benefit age. For example, if the spouse is already drawing a $1600, the lower earning spouse could qualify for $800 a month at full retirement age; or 75% of $800 ($600) if starting at age 62.
Surviving spouse benefit
A surviving spouse of a retiree drawing Social Security will receive 100% of that pension, with the following provisions:
- The survivor must be full retirement age. If not, the benefit will be reduced based on age.
- If the survivor is insured on her own record and the benefit of the deceased spouse is higher, the survivor will continue to receive her own benefit and also the difference between her benefit and the deceased spouse’s benefit.
Simply put, the surviving spouse will receive the greater of her benefit or the deceased spouse’s benefit, providing she is full retirement age.
Got those definitions? Good! Now for some Social Security strategies.
For clarity’s sake (and because it is this way in most families), I will refer to the higher earner as the man and the lower earner as the woman throughout the rest of this article.
Strategy of waiting
All Social Security benefits are greater when delayed. Because the spousal benefit is dependent on the higher earner’s benefit, the advantages are compounded. Say the higher earning spouse’s benefit is $2,000 at full retirement age. If his spouse also waits until full retirement age to start her spousal benefit, she will draw 50%, or $1,000, for a combined $3,000 monthly benefit. On the other hand, if the higher earning spouse starts his benefit at age 62, it will be reduced by 25% to $1,500. Because 50% of $1,500 is less than 50% of $2,000, this reduction also affects the spousal benefit. But if the spouse starts drawing at age 62, she won’t even receive the full 50% of the $1,500; her benefit will likewise be reduced by 25% from $750 to $562.50 for a combined benefit of $2062.50. Obviously, waiting can make a huge difference.
In the same way, waiting will also affect the surviving spouse benefit. In the above scenario, the surviving spouse benefit drops by $500 (from $2,000 a month to $1,500 a month) when the benefits start early. If you consider this benefit as a form of life insurance, a $500 per month decrease is substantial.
Should Spousal Benefit always be delayed until full retirement age?
Not necessarily. The age differential of the spouses should be considered. For example, if the husband is 70 and the wife is 62, she should consider beginning her spousal benefit at the reduced rate. Why? Because the husband is likely to die earlier and, at that time, her survivor’s benefit (based on HIS pension) would kick in. This is the same benefit she will receive whether she starts at age 62 or not, so she should consider bringing the extra money into the household now.
How to draw Spousal Benefit while waiting
Suppose the husband is full retirement age and wants to wait until age 70 before starting his benefits. Will the wife, who cannot draw the spousal benefit unless her husband has started his pension, need to wait until he is 70? Not if the couple takes advantage of voluntary suspension.
Here is how it works: The husband files for his benefit and the wife files for the spousal benefit. The husband then immediately requests a voluntary suspension of his pension. The wife will be able to collect her spousal benefit while the husband’s future benefit will grow by 8% annually. I like this strategy because the couple is bringing in “bonus” household income while the husband is patiently maxing out both his future pension and his wife’s future survivor benefit.
Another way to claim a Spousal Benefit while waiting
Suppose the husband wants to wait until age 70 to start his pension but his wife also qualifies for benefits based on her own work record. Think through this one with me: she could start her benefit and he could sign up for the spousal benefit while waiting until age 70 to start his own. At that point he switches to his own higher benefit. As in previous examples, this will increase the survivor’s benefit, but will do so while bringing extra income into the household. And the wife could also switch to a spousal benefit based on what the husband’s benefit would have been at age 66. This is very similar to having your cake and eating it too.
One caveat: the higher earning spouse cannot use this tactic if he is younger than full retirement age.
Summary
Social Security can be complicated, but you can make intelligent decisions if you understand these basics. This is your pension that you have paid into all of your working life. Make sure you maximize your benefits.
One more thing: Social Security rules change, so I strongly recommend that you check with the Social Security Administration with all of your questions.
Have you started receiving your Social Security benefits? What strategies did you use? Would you recommend to those who haven’t started yet?
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You write, “And the wife could also switch to a spousal benefit based on what the husband’s benefit would have been at age 66. ” You’ve answered one question I had: A spouse can start Social Security, and later switch to a spousal benefit, if that’s advantageous, once her spouse files for his own SS. But why can she only get a spousal benefit based on his benefit at age 66, if he has waited until age 70 to begin collecting? Shouldn’t her spousal benefit be based on his higher, age-70, benefit?
Lowrie,
Your question makes perfect sense. I got much of my information from this Kiplinger article: http://www.kiplinger.com/features/archives/2009/09/krr_boost_your_social_security_benefits2.html?kipad_id=x.
This article gave the age 66 that I used in my post.
After I got your question, I went to the Social Security web site to read about maximum spousal benefit, only to learn that I couldn’t find anything about a spouse drawing a spousal benefit from a husband or wife who waits until they are 70 before starting. So I took a deep breath and called the Social Security office to learn that a spouse can indeed draw 50% of her spouse’s benefit if he waits until age 70, as long as she is full retirement age. Therefore, it seems that Kiplinger could be wrong, unless there is some sort of penalty for starting earlier and then switching to a spousal benefit.
Clear as mud? Like I said, this stuff is complicated.
Thanks Joe; I too have been fishing the muddy waters since I wrote you, and haven’t come up with anything definitive; I think you may have the critical factor– the spouse having already begun taking a SS benefit of her own, several years before switching to the spousal benefit; it seems possible that doing so “starts a clock,” tying her eventual spousal benefit to her (or her husband’s?) age at that initial time.
I didn’t have the courage to call Social Security, but I went to their website; the closest I could find to this question was “Benefit amount when receiving from multiple records,” which says in part, “Your wife can start receiving reduced retirement benefits on her own record at age 62. If the amount she receives on her own record is less than what she would be entitled to as a spouse, she would receive a higher spouse’s benefit when you start receiving benefits. However, because she began receiving Social Security before reaching full retirement age, she will receive a reduced benefit rate that is less than the full 50 percent amount for as long as she remains entitled to spouse’s benefits.”
Fine; but what it doesn’t address is: what if your wife is not 62 but 66, full retirement age, when she first applies for her own SS? Would she still get a reduced spouse’s benefit, when she later switches? That one, I still have no answer on!
Lowrie
I just received a response directly from Social Security. Along with a great deal of extraneous material, there was this nugget:
“Your spouse cannot receive spouse’s benefits until you file for retirement benefits… A spouse receives one-half of the retired worker’s full benefit unless the spouse begins collecting benefits before full retirement age (FRA). In that case, the amount of the spouse’s benefit is permanently reduced by a percentage based on the number of months before he/she reaches full retirement age.”
From that, I would infer that if the spouse _is_ FRA when she starts collecting benefits, then when her husband later begins collecting, she would receive a full (i.e. 50%) spousal benefit, if that is larger than her own benefit. But “inferring” is not quite the same as “knowing”!
Lowrie,
My head is spinning but I am going to believe until proven otherwise that Kiplinger was wrong when they said that the lower earning spouse, when switching to a spousal benefit at the time when her higher earning husband starts his benefits at age 70, will receive 50% of what he would have received at age 66.
The Social Security office told me on the phone that a spouse, at FRA, would receive 50% of her spouse’s benefit even if he waits until age 70. This validates the inference you made from the nugget you got from Social Security.
Still murky but maybe not muddy. Keep me posted if you learn anything different.
By dint of a lot of ferreting last night, I believe I have the answer–from the Soc. Sec. website, in fact. It hinges on two definitions.
The first is Primary Insurance Amount, as in: “The spousal benefit can be as much as half of the worker’s “primary insurance amount,” depending on the spouse’s age at retirement.” (If the spouse has reached her full retirement age, she gets the 50%.)
The “primary insurance amount” (PIA) is the benefit a person would receive if he/she elects to begin receiving retirement benefits at his/her normal (or full) retirement age. At this age, the benefit is neither reduced for early retirement nor increased for delayed retirement.
The second definition is for Normal/Full Retirement Age. For me, it was 65 and 10 months; for most folks now reading, it’s 66.
So, bottom line: If a spouse of Full Retirement Age chooses to take a spousal benefit, she gets 50% of what the worker was (or even _will_ be, if he’s younger than 66) entitled to at his Full Retirement Age; and it doesn’t change from that. I think it might be inflation adjusted–that would make sense–but it doesn’t grow with age, like deferred benefits do. So, Kiplinger was right.
I hope this helps.
Lowrie,
Your next assignment is to read the entire Health Care Bill and explain it in three paragraphs.
I think I get what you are saying. The PIA is an actual amount while the FRA is the optimum age for the PIA.
If the maximum spousal benefit is based on 1. her being FRA and 2. the pension of her husband at FRA, was the Social Security rep I spoke with on the phone wrong when she told me that a FRA spouse could draw 50% of her husband’s benefit if he waits until age 70 to start?
Hi. I’m following you on Twitter for the GRABBBR Contest.
It depends.
If the SS Rep meant, the FRA spouse can draw 50% of her husband’s benefit *at age 70*, then I think the rep was wrong. If she took the tunnel vision approach, and meant merely, the FRA spouse draw 50% of her husband’s benefit *from when he was FRA*, regardless of when the spouse starts, age 70 or any other–then that’s true, but not very useful.
I subscribed to your RSS Feed via email for the GRABBBR contest.
Joe, do you know what happens if one spouse is disabled and receiving disability benefits? Also, I’ve lived in trailer parks at various times in my life which tend to have a lot of older folks and I’ve known more than one elderly couple “living in sin” since their SS benefits would be affected. I always thought only one person could get it, so it’s good to know the second spouse would get at least 50% of what is due.
Mrs. Accountability,
I refer you to this link: http://www.socialsecurity.gov/pubs/10029.html#part7.
As I read it, a spouse can receive spousal benefits from his/her spouse’s disability benefit in a similar way that the spousal benefit is received on their husband/wife pension.
Specifically, this portion of the SS web site (in reference to disability benefits) reads:
“Certain members of your family may qualify for benefits based on your work. They include:
* Your spouse, if he or she is 62 or older;
* Your spouse, at any age if he or she is caring for a child of yours who is younger than age 16 or disabled;
* Your unmarried child, including an adopted child, or, in some cases, a stepchild or grandchild. The child must be under age 18 or under age 19 if in elementary or secondary school full time; and
* Your unmarried child, age 18 or older, if he or she has a disability that started before age 22. (The child’s disability also must meet the definition of disability for adults.)
NOTE:
In some situations, a divorced spouse may qualify for benefits based on your earnings if he or she was married to you for at least 10 years, is not currently married and is at least age 62. The money paid to a divorced spouse does not reduce your benefit or any benefits due to your current spouse or children. ”
I hope that helps. I don’t know of any instances where “living in sin” is helpful with drawing SS benefits, but I don’t doubt that those cases exist. Like I said in the post, Social Security is complicated.
Joe, in regards to “living in sin” – if I’m understanding your post correctly, Husband would get $2000 and Wife – also eligible for $2000 – would only get $1000. These couples I knew years ago had met after they’d retired, and had already been getting the maximum each. If they married, instead of getting $4000, that would have dropped to $3000. Sorry for the confusion in not explaining that better. Or am I still confused?
Mrs. Accountability´s last blog ..Friday Finds June 25th, 2010
Mrs. Accountability,
I think you are still confused. The first sentence in my post under the heading Spousal Agreement reads, “The lower earning spouse has a choice: to claim a “spousal” benefit of up to 50% of the higher earning spouse’s benefit or to claim his own earned benefit.”
The spousal benefit does not penalize anyone, but could possibly benefit the lower earning spouse if she is drawing less than 50% of her spouse’s benefit on her own record.
For example, if Husband draws $2,000 on his record and Wife draws $2,000 on her record, they get $4,000. But, if the Wife could only draw $500 on her record, she would get $1,000 (50% of her spouse’s benefit) assuming she is full retirement age.
In my understanding, being married can help but not hurt the Social Security benefits. I always leave this caveat: I am not a Social Security expert, just a blogger who has read and tried to understand how it works. If anyone reading this can point out anything I have missed, please do!
I AM 73,STARTED COLLECTING SS@62..I AM NOW SEPERATED FR WIFE OF 14YRS.SHE IS 55 AND COLLECTS SSI OF $620.OO PER MONTH.SHE WAS ABLE TO GET THE PA COURT TO PLACE A LIEN ON MY SOCIAL CHECK.SHE GETS $605.00 FR THAT.HER TOTAL INCOME IS $1225.00! I GET $625.00 FR SS.WHAT CAN I DO? HELP
TOM
Tom,
I am not an attorney. If the PA court made a determination to place a lien on your check, that sounds pretty “final” to me unless you could hire an attorney to appeal that decision.
Sounds like the best thing you could do is reconcile with your wife.