Social Security and Spousal Benefits

In my last Social Security post, I tackled the question of when to elect Social Security benefits. The question of when to start Social Security benefits is tricky — with one of the biggest factors in that decision involving spousal benefits.

Depending on the age at which benefits are filed, currently or previously married individuals have an option to take their own benefit or their spousal benefit if they qualify. That’s why it’s critical to know 1) if you qualify for spousal benefits, and 2) when it makes sense to take them.

Spousal benefits allow a spouse (typically the lower-earning spouse) to claim his or her own benefit prior to full retirement age and receive an additional amount based on 50 percent of the other spouses’ full retirement age benefit. Spousal benefits are reduced if claimed prior to the recipient’s full retirement age (FRA).

Take a look at the example below. Assume Sam and Ann are both 62 and their full retirement age is 66. Sam earned more during his working years, so his individual Social Security benefit is greater than Ann’s.

Two Scenarios of Spousal Benefits

At age 62, Ann’s spousal benefit is $724. That is half of Sam’s benefit at FRA, and reduced because Ann hasn’t reached her full retirement age yet. However, her individual benefit is just $675, so at age 62, Ann would receive more due to the spousal benefit. For those who file prior to FRA, there are limits to the spousal benefit options. Spouses who are eligible for their own benefit, and who elect to file prior to FRA, must file for their own benefit first. If their own benefit is more than the calculated spousal benefit, then they are limited to receiving their own benefit amount.

Now, what if Ann decides to wait until she reaches her full retirement age of 66? At that point, she can file a “restricted application,” deferring her individual benefit and taking a spousal-only benefit of $1,035. As a bonus, her individual benefit continues to accrue delayed credits, so she’ll benefit from this down the road.

Then, at age 70, Ann can file for her individual benefit of $1,180. This is known as the “Claim Now, Claim More Later” strategy. I’ll cover this in more detail in a future post.

This is just one example of how careful examination of spousal and individual benefits can make a big difference in your retirement income plan. Consult your financial professional for more details, or visit the Social Security Administration online.


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