Social Security Spousal Benefit Strategy Guide
Social Security spousal benefits are a great way to maximize your Social Security retirement income. What are Social Security spousal benefits, and how can they be used? What’s the difference between your benefits and your spouse’s benefits? What are survivor benefits? What is your earnings record, and how can you use it to book your benefits?
This article will help you answer these questions and more – including what strategies are available to maximize your social security benefits and how to use your spouse’s benefits to your advantage.
What is Social Security?
Social Security is a monthly retirement benefit that is provided by the government, managed by the Social Security Administration.
These retirement benefits are available to any person who meets certain requirements – including having paid Social Security taxes on their earnings and qualifying for their benefits at their full retirement age according to their year of birth.
When you reach your full retirement age, you can start receiving full benefits. If you want to start receiving benefits early, you can file as early as 62 years old (and one month). Getting your benefits early can result in a reduced amount.
If you delay receiving benefits, there will be an increase in how much you receive each month. You’ll need to make this decision based on factors such as: how much money do I have saved up? How long am I likely to live? What sources of income will I have during retirement?
We’ll discuss strategies later in the article. First, let’s discuss how you qualify for your retirement benefits. After, we will discuss how the spouse’s benefits work.
How do I qualify?
In order to qualify for retirement benefits, you must have worked enough to receive 40 work credits. You can get up to 4 credits per year. For most people, you can get all 40 credits after 10 years of employment.
Just because you qualify doesn’t mean it will be a lot, though. Your retirement benefit amount is calculated based on your highest 35 years of income. If you only worked 20 years, for example, then you would receive 15 years of $0 income.
What is my full retirement age?
Your full retirement age (FRA) is the age when you are eligible for your full retirement benefits. Your age is assigned to you based on when you were born. See the chart below.
- Born 1973 or earlier: FRA 65
- Born 1938: FRA 65 and 2 months
- Born 1939: FRA 65 and 4 months
- Born 1940: FRA 65 and 6 months
- Born 1941: FRA 65 and 8 months
- Born 1942: FRA 65 and 10 months
- Born 1943 – 1954: FRA 66
- Born 1955: FRA 66 and 2 months
- Born 1956: FRA 66 and 4 months
- Born 1957: FRA 66 and 6 months
- Born 1958: FRA 66 and 8 months
- Born 1959: FRA 66 and 10 months
- Born 1960 or later: FRA 67
You can find how much you will receive at full retirement age by going to www.ssa.gov.
How do I qualify for Social Security spousal benefit?
To qualify for the spousal benefits, you must be married and filing a joint tax return with your spouse. You also need to have been married for at least ten years in order to receive full Social Security spousal benefits on the earnings of your spouse.
This spousal benefit is not available if you are a widow or widower. If you are divorced, you don’t qualify for the spousal benefit, but you may be eligible for your ex-spouse’s benefit amount if you meet the requirements. If your marriage at least 10 years, you’re probably eligible, but we’ll address this later in the post.
You do not need to work in order to qualify for a spousal benefit. Only one person must qualify under the guidelines set by the Social Security Administration for the other to qualify for their spousal benefit.
How do I calculate spousal benefits?
If you qualify for the spousal benefit, you will get 50% of your spouse’s benefit. For example, if your spouse is entitled to a $600 payment, then you be able to get a $300 payment, even if you did not work.
Just because you qualified for the spousal benefit doesn’t mean you should take it. If you worked, your retirement benefit might be higher. You can only take one.
What are some strategies for couples?
There are many different social security spousal benefit strategies you can consider. The following are strategies on when you start your benefit. Keep in mind; these strategies can be slightly adjusted to your specific situation.
Before you consider these strategies, make sure you review your benefit amount. Understanding what you may be eligible for by reviewing your earnings record and your spouse’s record can help in determining how to proceed if you still have a few years of work ahead.
The Early Strategy
If longevity is an issue, consider starting as early as age 62. If you both worked and are concerned about longevity, start for your income early. If only one of you qualifies for the social security benefits, or the spousal benefit is higher than what you would have received from your individual benefits, then have one take their individual benefits, and the other take the spousal benefit.
This is typically a recommended strategy for those who do not believe they will live past 79 years old. Please remember, both the spousal benefits and the individual benefits are reduced because the benefits were received before full retirement age.
The Late Strategy
If you plan to retire in your mid to late 60s, it may make sense to delay both of your individual benefits. This assumes you both worked long enough that you both will get a benefit greater than what a spousal benefit could be.
This strategy suggests you delay your individual benefits to 70 years old to maximize your individual benefits. Each year past your full retirement age, your benefits can grow by around 8%. They do not grow past 70 years old, so once you hit that milestone, make sure to start getting your benefits.
The Spousal Benefits Strategy
For those who had one main income earner in the household, consider the split strategy. This strategy focuses on your spouse’s benefits. At full retirement age, have the higher income earner file and suspend their benefit. Next, file to start getting the spouse’s benefit. The spouse’s benefit does not grow after the full retirement age, so there is no sense in delaying.
The two parts to this strategy are to first, not leave money on the table. Don’t wait to take your spouse’s benefits (or your spousal benefit) after your full retirement age. The second is to delay the main income earner’s benefit so it can grow as much as possible. The survivor benefit allows the surviving spouse to keep the higher income amount. By delaying the greater, it locks in the best income stream for life.
When should you consider maximizing your Social Security benefits?
One of the most common ways to maximize your benefit is to wait until age 70 to start your benefits. This lets your benefit grow the maximum possible amount. After 70, it won’t grow anymore, so there’s no sense in waiting.
The downside to this strategy is it can dwindle your assets while you wait, assuming you retired early. For example, if you retire at 60 years old, and you want to wait until 70 years old before you start getting your benefit, that leaves you with 10 years of income that could come from your benefit (assuming you get payments between age 62 or later).
Consider when you want to retire and how your overall retirement is affected by when you start taking your benefit. It’s important that spouses talk about this strategy together and both understand what the impact of delaying the benefit can mean for them financially later on in life.
When it may not make sense to maximize your benefit
There’s a saying that goes, “if you file too early, your income could be hurting, and if you file too late, you could be hurting your estate.” We just covered what happens if you start late. What happens if you start early?
When you file at age 62, you receive a discounted benefit. Keep in mind, if you don’t think you’ll live past age 79, starting your benefit at 62 may actually be maximizing your benefit.
For those who want to maintain their assets as much as possible and want to retire in their early 60s or sooner, starting your Social Security benefits early on can help alleviate pressure from your assets in providing income.
If you start your Social Security benefits early, make sure you are not working. If you are working and try taking your benefits before full retirement age, the Social Security administration may discount your benefits even further. Proceed with caution.
How is Social Security Taxed
Social Security is taxed depending on how much taxable income you had in the current year.
If you are a single filer with a taxable income of $25,000 or less for the year, your benefits will not be taxed. If you file jointly and have taxable income exceeding $32,000, up to 50% of your benefits may be subject to taxation. If you have taxable income greater than $34,000 when filing jointly, up to 85% of your benefits may be subject to taxation.
What happens when a spouse passes?
In any strategy, consider allowing whoever has the higher benefit to delaying their benefit as long as possible, age 70 if possible. When a spouse passes, the surviving spouse will take the higher benefit. This is called the survivor benefits.
This makes a good argument for making sure one of your benefits grows as much as possible. Look at your earnings record and your spouse’s record. This can help you determine what your best outcome for your retirement benefit and your spouse’s benefit is.
If I am divorced, is my benefit based on my work history or the work history of my ex-spouse?
Both! If you are divorced and have not remarried, you may qualify for the entire benefit amount of your ex-spouse. If your marriage lasted at least ten years and your ex-spouse is eligible to receive retirement benefits or disability benefits, then you are also eligible.
Don’t want to talk to your ex-spouse? No problem. It does not matter if your ex-spouse has filed or not. You can start your benefit when you want and keep him/her out of the picture. You should not have to connect with your ex-spouse for any reason to get your benefits.
Go to the Social Security Administration website at SSA.gov and see what your retirement benefits could be based on the projected benefit of your ex-spouse. You may not be able to see everything about your ex-spouse’s record, but you can get some context as to what you could get.
Final thoughts on your Social Security strategy
The Social Security Administration is a great resource when looking at your benefits and trying to determine what is right for you. It is important to consider your spouse’s benefits just as much as you want to consider your own benefits.
If you are already receiving benefits and feel that you want to adjust your strategy, you can suspend your strategy and pick it up later. It may require you to pay back what you have received in order to correct any mistakes.
In most situations, filing for your benefits at age 62 or age 70 is not always the best. Most people will find their idea filing date somewhere in the middle.
When you look at your Social Security spousal benefit strategy, you have to make sure that you take your personal situation into account. If you are still feeling lost, consider talking to a Socia Security benefits specialist to help you along the way.