Understanding Spousal Security Benefits
In this article, I am going to be helping you to understand your Social Security Spousal Benefits. So, if you are someone who is getting closer to retirement, this is something you might be starting to think about a little bit, maybe starting to ask some questions or wondering about what are some of the key considerations and the best ways that you can optimize and coordinate your Social Security benefits with your spouses’ Social Security benefits.
I will break it all down and make it super easy and simple for you to understand because it’s actually something we’ve been getting a lot of questions about recently and so I thought I would write an article on Spousal Security Benefits which would help you in understanding that how its work and how you can fully aware of it before filing the same.
Okay, so the first thing we need to understand as it relates to these Social Security Spousal benefits is that when we have a married couple, whether they both worked or only one of them worked or one of them was a high wage earner. Or if they both are high wage earners or any combination of that, essentially the way that the Social Security Spousal benefit works is that if the benefit from the lower wage-earning spouse is not at least half of what the higher wage earning spouse was earning, then they are entitled to a spousal benefit that is going to bring them up to basically being the equivalent of half of the higher wage earners Social Security benefit.
Example to Understand the Concept
So let me give you an example of this because it is going to make a lot more sense. So let’s say that we have a couple and there is one of them that is a little bit higher wage earner and their Social Security benefit at full retirement age, FRA, was $3,000 a month. And we have a lower wage-earning spouse, whether they worked a little bit or they worked a lot or they did not work at all, they will be entitled to, at their full retirement age, be entitled to at least half of that higher wage earning benefit of $3,000.
So basically, they are going to be entitled to get at least $1,500 a month at their full retirement age. So how this works, let’s say we do have a lower earning and let’s say they have a little bit of a benefit on their own. And so one of the things I think that gets a little bit of confusion and a lot of questions that get asked about this is that people do not necessarily understand that the Social Security Spousal benefit is actually calculated independently of their own primary benefit.
So, let’s say they are both 62 years old today and they are exactly roughly the same age as one another and their full retirement age is 67. So, if they both wait till age 67, the high wage-earning spouse turns on their benefit and the lower wage earning spouse turns on their benefit of $1,000, they are going to be entitled to get basically plus $500, so that’s going to bring them up to $1,500 a month and that is going to make them equivalent to that half of what the higher wage earning spouse was.
We can do all kinds of different combinations of that and that is why when we start talking about Social Security strategy, it really needs to be looked at within the context of an overall financial plan and really understanding how all these different moving pieces work and not only just within Social Security but also how it relates to having to take withdrawals out of portfolios and things like that.
What If Higher Wage-Earning Spouse Decides to Wait to Collect their Benefit till Full Retirement Age?
If higher wage-earning spouse decides to wait to collect their benefit till their full retirement age i.e. 67, but lower wage earning spouse decides to turn their benefit on at age 62. So, remember, you can collect as early as age 62 but it is going to be at a reduced amount. And if they waited till their full retirement age, they would get $1,000 a month but at 62 it’s going to have about a 30% reduction which means that they will only get about $700 a month if they begin taking that benefit at age 62.
It is added that by the time they get to their full retirement age, when that primary wage earning or the higher wage earning begins to collect their benefit, they will be entitled to a spousal benefit but it’s not going to bring them all the way up to that $1,500 a month. It’s only going to give them an extra $500 a month bringing them up to a total of $1,200 a month. So, I think that’s something that has in the past created some confusion. People have had a lot of questions about that maybe thinking that as they get up to that full retirement age, they are going to get brought all the way up to that full one half of their higher wage-earning spouse benefit.
Now one other thing I want to mention here as it relates to this is that in order for you to get a spousal benefit, the primary or the higher wage earning needs to have actually filed for and began collecting their own benefit. To make it more simple, if the higher wage-earner decides against turning on that Social Security benefit at age 67 but instead wait till age 70. While in that case, lower wage-earning spouse that began collecting $700 a month at age 62 is going to have to wait until that higher wage-earning spouse begins collecting their benefit. So, these are some very important considerations that you need to keep in mind when you decide about when to collect Social Security benefits and how to best coordinate that.
Let me here give you another example that lower wage earning spouse actually has a fairly good benefit on their own, $1,000 a month. But it could be for some people may be that benefit is only $500 a month. So now the considerations have to be, well, does it make sense to continue to delay that because you are getting a higher benefit for that higher wage earner to wait let’s say all the way to age 70 but then that means that the lower wage-earning spouse would not be able to collect that benefit or at least as much of that. Thus, if they are only getting $500 a month as their own benefit, they are missing out on $1,000 a month of a Spousal benefit instead of our first earlier example where it was $1,000 of a Spousal benefit potentially.
Let us continue on with a couple more examples here. Let’s say that we have some discrepancies in age and we are in older spouse and younger spouse kind of a situation. So, let’s say in our first example here that we have a primary wage earner that is going to be younger than the lower wage earner. So let’s say that the primary wage earner is only 62 years old but the lower wage earning spouse is actually 67 years old. So it’s going to be the same thing. Remember, you cannot get a spousal benefit until that higher wage earning spouse actually begins collecting their benefit.
How to Maximize Spousal Social Security Benefit?
So even though that high wage earning spouse could begin collecting benefits which would give a spousal benefit so they could get $1,500 a month instead of just $1,000 a month that they would be entitled to. They are going to be taking a reduction themselves. And again that is going to be about a 30% reduction for taking that benefit early.
To try to get anyone’s benefits maximized, it’s probably going to be that higher wage earning spouse that needs to really maximize that because remember also it’s going to be that survivor benefit as well that is going to be based off of the amount that that higher wage earning spouse was actually collecting and you can grow that benefit all the way to as late as age 70. It is going to give you delayed retirement credits and likely increase of about 8% per year for every year that you delay past your full retirement age.
Now if we reverse the situation and let’s say we had the higher wage earner that was older than the lower wage earner then it kind of gives us a little bit of an advantage there. So let’s say that we had our primary wage earner, higher wage earner at 67 years old right now today, they are at their full retirement age but they are at least three years older than their younger lower-earning spouse. They could again delay their benefit to as late as age 70, earn those delayed retirement credits to really boost up that benefit and then also it would give them the ability for their spouse to catch up during those three years and then begin taking their benefit at their full retirement age. So they would get not only their full benefit but they would also be entitled to their full spousal benefit as well.
So there’s a lot of considerations to keep in mind there as it relates to these social security benefits and really kind of playing around with them a little bit and understanding the relationship and how it works between one person collecting versus the other and what are some of those benefits there. But anyway I hope that all made sense.
I hope you got some great value out of today’s article.
Conclusion
In today’s article we discussed spousal social security benefits at length with some examples to understand the concept that how spousal social security benefits work. In this article, I made it super easy and simple for you to understand Spousal Security Benefits which would help you in understanding that how its work and how you can fully aware of it before filing the same. If you carefully go through the article, you will find all the answers in your mind regarding spousal social security benefits.
FAQs
Q. Can you collect your own Social Security and your Spouse as well?
A. Yes you can collect both and to further elaborate the same, if you are eligible for retirement benefits on your own record, the Social Security Administration pays that amount first. Moreover, if benefit of your spouse is higher, you can expect an additional amount so that the combination of benefits equals that higher amount.
Q. Can You Collect Your Ex-Spouse’s Social Security?
A. The Social Security Administration has set some conditions and to collect the benefits your marriage must have lasted for at least 10 years and the divorced spouse must be at least 62 years old. If you meet all the requirements, you can receive an amount equal to as much as 50% of their ex-spouse’s benefits.
Q. Can You collect Your ex-Husband’s Social Security if he remarried?
A. In case you are divorced, your ex-spouse can receive benefits based on your record even if you have remarried but if your marriage lasted 10 years or longer, your ex-spouse is unmarried and your ex-spouse is age 62 or older.