My wife is 76, born in 1948. She retired at full retirement age and currently collects $1,076 per month. I will be retiring and start collecting at 70 this year (I was born in 1954). When I collect $4,000+ per month does her monthly payment go up to spousal benefit automatically or does it have to be claimed by us? Or is she not eligible for spousal benefit at all? Thanks for what you do.
– Randall
Social Security spousal benefits can be tricky to navigate, and couples that plan carefully can maximize their total benefits received. All married people may be eligible to collect retirement benefits in two ways: based on their own earnings or the based on their spouse’s earnings. The rules for spousal benefits are nuanced and depend on several factors.
If you need help planning for Social Security or developing a more comprehensive retirement income plan, consider speaking with a financial advisor.)
In your case, your wife may be eligible to collect that higher amount if her spousal benefit turns out to be higher than her current benefit. Since she claimed her benefit at full retirement age, the spousal benefit would be 50% of your benefit at your full retirement age (not the delayed, higher benefit). To verify eligibility and request the higher benefit, your wife will need to contact Social Security about switching to the higher monthly payment after you claim your benefits.
What Are Social Security Spousal Benefits?
In general, someone who’s married married or has been married is likely eligible for Social Security spousal benefits. These are retirement benefits based on the work and income history of a spouse (or former spouse’s) rather than your own.
When an individual applies for spousal benefits, they’ll also be effectively applying for benefits based on their own work and income history at the same time. The Social Security Administration (SSA) will pay out whichever of those benefits would give them the bigger monthly payment.
However, a person can claim their own benefits before their spouse claims theirs, and then apply for a spousal benefit later on. The spousal benefit is based on the age at which someone began taking their own benefits. (You may want want to connect with a financial advisor if you need more help navigating spousal benefits or optimizing your Social Security.)
Who Qualifies for Spousal Benefits?
Randall, in order for your wife to be eligible for spousal benefits, you need to have already filed for your own benefits. If that’s the case and your wife is at least 62 years old, she can apply for her spousal benefit. If your wife has a child under 18 who receives benefits on your record or a disabled child who receives benefits, your wife can apply for spousal benefits at any age.
Divorced individuals may also qualify for spousal benefits based on their ex-spouse’s record. In order to be eligible for those benefits:
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They must have been married for at least 10 years
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They can’t be married now
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They have to be divorced at least two years to collect if their ex hasn’t claimed their benefits yet
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They have to be at least 62
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Their own benefits would be less than the spousal benefits
How Are Spousal Benefits Calculated?
The maximum possible spousal benefit that your wife can collect is 50% of what your benefit will be your full retirement age, regardless of when you chose to start collecting your retirement benefits.
However, the age at which your wife collects her spousal benefit can reduce how much she ultimately receives. If it’s before her own full retirement age, the spousal benefit will be permanently reduced to as low as 32.5%.
For example, if your full retirement benefit will be $2,500, the most your wife could claim in spousal benefits would be $1,250 (50% of $2,500). But if your wife decided to start collecting those benefits at age 62, her monthly payment would be reduced to $812.50 (32.5% of $2,500).
Age is not the only factor that can affect spousal benefits. If your wife also eligible to receive certain government pension or foreign employer retirement benefits from a job that didn’t require her to pay into Social Security, that can reduce the spousal benefit as well. Generally, the SSA would deduct 2/3 of those benefits from the spousal benefit as a pension offset.
For example, suppose your wife was eligible to collect $1,250 in monthly spousal benefit payments and a $600 monthly pension payout. The spousal benefit would be decreased by $400 (2/3 of $600) for the pension offset, giving her a payment of $850. Her total, including all retirement benefits, would come to $1,450 ($850 spousal benefit plus $600 pension).
The SSA offers free online calculators that can help you see what your benefit would be based on applying at different ages and whether your payments will be subject to pension offsets. (But if you someone to help you assess when to collect Social Security, this tool can match you with fiduciary financial advisors who serve your area.)
Bottom Line
The rules for Social Security spousal benefits can get confusing, so it pays to do some advance planning. Spouses can work together to maximize their joint Social Security retirement benefits in a way that makes sense for their specific situation. When one spouse initially claims spousal benefits, the SSA will treat that as if they’d applied for their own benefits as well and pay out whichever results in a higher payment. But if a spouse originally files based on their own earnings record and wants to switch to spousal benefits, they can contact the SSA and request that once the other spouse has begun collecting their retirement benefits.
Social Security Tips
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Despite being eligible for Social Security at age 62, claiming your own retirement benefit that early will result in up to a 30% lifetime reduction in the size of your benefit compared to claiming at full retirement age. On the flipside, waiting until age 70 will increase the size of your benefit by 32%. SmartAsset’s Social Security calculator can help you estimate how much your benefit could be based on when you plan to claim it.
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A financial advisor can help you plan for Social Security and build a retirement income plan around your needs. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now. You can also check out SmartAsset reviews.
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Keep an emergency fund on hand in case you run into unexpected expenses. An emergency fund should be liquid — in an account that isn’t at risk of significant fluctuation like the stock market. The tradeoff is that the value of liquid cash can be eroded by inflation. But a high-interest account allows you to earn compound interest. Compare savings accounts from these banks.
Michele Cagan, CPA, is a SmartAsset financial planning columnist and answers reader questions on personal finance and tax topics. Got a question you’d like answered? Email AskAnAdvisor@smartasset.com and your question may be answered in a future column. Questions may be edited for length and clarity.
Please note that Michele is not a participant in the SmartAsset AMP platform.
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