Social Security Spousal Benefits Faqs
Answers to some of the most commonly asked questions financial advisers get on spousal benefits, including when to take them and how benefits for ex-spouses work.
Social Security is incredibly complicated, and it gets even more complex when there are two of you. How and when each of you takes benefits can affect your income as a couple by hundreds of dollars a month, yet, according to Employee Benefit Research Institute’s 2018 Retirement Confidence Survey, only 23% of workers actually try to maximize their benefits by planning when to claim Social Security.
If youre among the 77% who havent planned ahead, I want to inspire you to take action. Because the rules regarding Social Security are so complex, I strongly suggest you talk to an expert about your particular circumstances, but to get you started, Id like to answer a few questions I often hear:
Think About Your Tax Situation
What Uncle Sam gives, he also takes away in the form of taxes. Regardless of when you retire, up to 5085 percent of your Social Security income may be taxable if your modified adjusted gross income reaches certain levels. There is nothing to be done about this simply be aware that your Social Security benefit may bump you up to a higher income tax bracket. See Question 25 for more about taxes in retirement.
Bottom line? The most common error people make when it comes to Social Security is starting to collect their benefit too early. Yes, its tempting to take the money and run. But before you do, carefully weigh your options. On further scrutiny, you are likely to find that you will get the best return on your money by postponing and allowing your monthly draw to increase.
|Consider taking benefits early if:
|Consider taking benefits later if:
|Youre not working and cant make ends meet.
|Youre still working and make enough to impact the taxability of your benefits.
|You are in poor health.
|You are in good health and longevity runs in your family.
|You are the lower-earning spouse and your spouse can wait to file for a higher benefit.
|You are the higher-earning spouse and want to be sure that your surviving spouse receives the highest possible benefit.
Part IV: Maximizing Social Security and Medicare, Question 30
If You’re Not Sure Why You Received A Payment
If you receive a check or direct deposit payment from the Treasury Department and do not know what its for, contact the regional financial center that issued it. Only the agency that authorized the payment can explain why you received it.
If you received a check, look for the RFCs city and state at the top center. Then contact that RFC to find out which federal agency authorized the payment. It will be one of these:
If you received payment byelectronic funds transfer , or direct deposit, follow the directions under Find Information About a Payment.
Use the Treasury Check Verification System to verify that the check is legitimate and issued by the government.
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Changes To Social Security Law
Some changes to the law in recent years have affected how you can collect spousal benefits. If you were born on or before Jan. 1, 1954, you may still be eligible to use a benefits-claiming strategy known as a “restricted application” to increase your benefits.
Younger recipients won’t be able to use this strategy, which was ended by the Bipartisan Budget Act of 2015.
Whats A Restricted Application
Some people are allowed to take a spousal benefit while delaying their own benefits until age 70. For example, if you are eligible, you could take half of your spouses benefit, let your own grow until you are 70, and then switch to your larger benefit.
You may only file a restricted application if you were born before Jan. 2, 1954**. You also must have reached your full retirement age, and your spouse must already be collecting his or her own benefit. For more, read Restricted Application Social Security Strategy Is on Its Way Out.
As you can see, I needed to add footnotes to even the simplest questions, and there are many more exceptions and permutations that can affect your benefits. Even so, I hope Ive answered a few of your questions, and more so, inspired you to plan ahead with your spouse so you can both get the most out of your Social Security in retirement.
*You may be able to take benefits earlier if you are caring for dependent children.
**There are some exceptions for people who are disabled or caring for dependent children.
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More On Social Security And Retirement
- Earning Income After Retiring: Collecting Social Security while working can get complicated. Here are some key things to remember.
- An Uptick in Elder Poverty: Older Americans didnt fare as well through the pandemic. But longer-term trends arent moving in their favor, either.
- Medicare Costs: Low-income Americans on Medicare can get assistance paying their premiums and other expenses. This is how to apply.
- Claiming Social Security: Looking to make the most of this benefit? These online tools can help you figure out your income needs and when to file.
Given the strong public support for the program, it is inconceivable that Congress wont step in sometime before 2035 and put things on an even keel, he says. Its a source of concern, but not something to lose sleep over.
Congress could put Social Security back into financial balance with new tax revenues, benefit cuts or a combination of both. The Democratic-controlled House is advancing a plan that would put Social Security back into balance over the next 75 years by increasing payroll tax rates by 0.1 percentage point annually through 2043, reaching 14.8 percent for that year and later. The bill also would apply payroll taxes to earnings over $400,000, starting in 2020. The bill would expand benefits modestly.
The legislation, sponsored by Representative John B. Larson, Democrat of Connecticut and chairman of the Ways and Means Social Security Subcommittee, has 211 co-sponsors in the House.
When And How To Apply
The key to getting the maximum Social Security benefit is in knowing your specific benefits as individuals and in timing when you file as a couple.
You can first apply for Social Security if you are no more than three months away from age 62. But your benefits increase significantly if you wait until you reach full retirement age, which can be 66 or 67, depending on your year of birth.
To apply for spousal benefits, go to the Social Security Administration website. There you will find links to apply online and numbers to call to apply over the phone or to make an appointment at your local Social Security office.
The website also has lots of information about how to maximize the amount you can collecting. SSA also offers an online calculator to estimate your potential spousal benefit.
David Levine is an award-winning writer and editor whose work has been featured in the New York Times, New York Daily News, Sports Illustrated, American Heritage, U.S. News & World Report and others.
David has covered health, health insurance and health policy topics among many others since 2017. He earned a Bachelor’s Degree in English from the University of Rochester and currently lives in Albany, New York.
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When Am I Eligible
Depending on when you were born, you will be eligible for full retirement benefits as early as age 65 or as late as age 67.
- If you were born before 1938, your full retirement age is 65.
- If you were born from 1938 to 1942, the age ranges from 65 and two months to 65 and 10 months.
- If you were born from 1943 to 1954, its 66.
- If you were born from 1955 to 1959, it ranges from 66 and two months to 66 and 10 months.
- If you were born in 1960 or later, its 67.
You canopt to receive Social Security as early as age 62, but if you do, your monthly benefits are permanently reduced. For example, if you take benefits at 62 and your full retirement age is 66, then your benefits are reduced by 25%.
If you postpone taking benefits past your full retirement age, then you will be rewarded with a higher benefit: 8% for each year up to age 70 , when benefits max out and there is no further incentive to delay signing up.
Claiming Early Or Late
Your spousal benefit is based upon your partner’s “normal” benefit amount. But the amount you receive will depend upon when you begin to claim it.
You can claim spousal benefits as early as age 62, but you won’t receive as much as if you wait until your own full retirement age. For example, if your full retirement age is 67 and you choose to claim spousal benefits at 62, you’d receive a benefit that’s equal to 32.5% of your spouse’s full benefit amount.
The amount increases with each year you delay. At your full retirement age you’d be eligible for the maximum, which is 50% of your spouse’s full benefit.
Notably, spousal benefits are not reduced if the spouse is caring for a child who qualifies under the age or disability rules. Spousal benefits can never exceed 50% of the other spouses full benefit. So, there is no incentive to file for spousal benefits later than your own full retirement age.
An ex-spouse may be eligible for spousal benefits even if the former spouse hasn’t retired yet.
The File And Suspend Strategy
Prior to 2016, workers could file for benefits , then suspend their own benefits in order to maximize their credits for deferred filing. This so-called file and suspend strategy meant that a lower-income partner could take advantage of spousal benefits while the primary earner accrued delayed retirement credits, thereby increasing their benefit amount.
However, this “have your cake and eat it, too” loophole was closed with the Bipartisan Budget Act of 2015, which took effect in April 2016.
While it is still possible to file for benefits and then suspend payments temporarily, any other benefits that would normally be available on your account are no longer payable during such suspensions.
Your Most Burning Questions On Social Security
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People have lots of questions about Social Security: Will it still be around when I retire? How much will I get? How does the spousal benefit work?
Thats not surprising.
No government program is more important to so many Americans. This year, Social Security is expected to pay $1.1 trillion to 69 million recipients of retirement and disability benefits and Supplemental Security Income. Nearly all Americans pay into the program and can expect to receive a benefit at some point in their lives. And it is the largest retirement income source for a majority of older households.
The New York Times recently invited readers to submit their questions about Social Security. Today, were responding to some of the most frequent ones.
Is Social Security financially secure? Should people in their 60s who can afford to wait to claim benefits wait until they can get the highest monthly benefit, or should they consider signing up now because the program may not be there in 20 years?
That would mean immediate, across-the-board benefit cuts, but the pain would be felt most acutely by todays younger workers and low-income retirees.
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Think About The Current Interest Rate Environment
Every year that you delay collecting Social Security between the ages of 62 and 70, your monthly benefit will increase between 623 and 813 percent. If you were born between 1943 and 1954, and your FRA is 66, the numbers look like this:
|Beyond age 70
Now compare these rates against the return you could get from a risk-free investment like U.S. Treasuries or an insured savings account. Clearly, the lower the prevailing interest rates, the more you stand to benefit over the long run by delaying Social Security. This is particularly true when you think about what economists call real interest rates, or the rate you earn after inflation.
As an example, lets say youre 64 and trying to decide whether to tap into your 401 savings or collect Social Security. If part of your 401 is invested in Treasuries, in 2013 youre effectively earning no interest after inflation. Youll get a better return by withdrawing those funds and allowing your Social Security benefit to grow.
Or lets say that youre considering buying a commercial annuity that will pay you for life. By instead choosing to delay Social Security, you are in effect buying an inflation-adjusted annuity from the U.S. government. The primary difference is that you most likely get a better rate. The lower the prevailing interest rates, the better the deal.
Some Answers To Common Questions On Social Security Disability And Spousal Benefits
Have a question about saving for retirement or your personal financial situation? Whatever the question, Barrons Retirement can try to help. Email , and we might look to financial pros for answers.
Q: I had to take disability benefits at 59, and Im now 65. Will my monthly benefit change at full retirement age, or will I forever be on disability? Can I work part time without adversely affecting my income?
When you reach your full retirement age, a few months before turning 67, your benefits automatically will switch from disability benefits to retirement benefits, and the monthly check will be for about the same amount, according to Wade Pfau, professor of retirement income at the American College of Financial Services.
You may work while receiving disability benefits, but payments will stop if youre engaged in what the Social Security Administration, or SSA, calls substantial gainful activity. In 2022, that level is defined as earning more than $1,350 a month, or $2,260 if youre blind.
If youre receiving disability benefits, youre entitled to a trial work period of up to nine months to test your ability to work. During this time, you can make more than the capped amount without losing benefits, according to the SSA.
Once you reach full retirement age and transition to retirement benefits, theres no limit on how much you can earn while still receiving your full benefits.
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When Should You Claim Spousal Benefits
While this is a personal decision, you cant claim spousal benefits before age 62. If you opt for sometime after reaching age 62 and before your full retirement age, youre likely to see your benefits reduced.
And if you wait until after your full retirement age, benefits wont increase. The wage earner may benefit from delaying benefits until age 70, but the spouse applying for benefits wont.
For those looking to max out their spousal benefit, one course of action is obvious.
The best strategy to claim Social Security retirement benefits as a spouse is to wait until you reach normal retirement age, 65 to 67, depending on birth year, says Lindsay Malzone, a Medicare expert at website MedicareFAQ. Unless you currently care for a qualifying child, you will receive a reduced benefit if you have not yet attained normal retirement age.
But there are exceptions to this general rule, especially if you believe your longevity is an issue.
We usually start by considering health: How long did the same-sex parent live and whats the current health situation for both partners, Ward says. Those with long expected life spans and good health are usually best off waiting until the maximum benefit is available. Those with shorter life expectancies or poor health may be better off starting sooner. Those with a terminal illness can file as of six months ago and start receiving payments immediately and collect a check for those missed payments.
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Report The Death Of A Social Security Or Medicare Beneficiary
You must report the death of a family member receiving Social Security or Medicare benefits. The Social Security Administration processes death reports for both. Find out how you can report a death and how to cancel benefit payments. In addition to canceling SSA and Medicare benefits, find out what other benefits and accounts you should cancel.
If I Claim Early Retirement Benefits Do My Spouse’s Benefits Get Penalized
No, your claiming early retirement benefits does not reduce the amount of your spouse’s spousal benefits or your child’s dependents benefit amount that they can collect on your work record. Your claiming early retirement benefits will reduce your retirement benefits or your spousal retirement benefits based on your spouse’s work record.
But, your collecting early retirement benefits does reduce the eventual survivors benefit that your spouse could collect based on your work record, if you die before your spouse.
Note well, though: your claiming early retirement benefits doesn’t affect the amount of the survivors benefits you can collect based on your spouse’s work record, if your spouse dies before you.
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