What Are Social Security Credits And How Are They Earned
Social Security credits determine eligibility and benefit amounts in retirement. In 2022, earning $1,510 in income qualifies as earning one Social Security work credit.2 You are eligible to earn up to four credits per year. Most people need 40 credits to qualify for Social Security benefits though younger individuals require fewer credits for disability benefits or for their family members to receive survivors benefits.
How Is My Social Security Benefit Amount Calculated
Another common Social Security benefits question is how payments are calculated based on your lifetime earnings. To account for changes in average wages each year, the Social Security Administration indexes your income using the national average wage index.
The SSA calculates your average indexed monthly earnings based on the 35 years in which you earned the most. A formula generates your basic benefits, otherwise known as your primary insurance amount. This primary insurance amount is what you would receive at your full retirement age. If you were born between 1955 and 1959, full retirement age is between age 66 and 67. For those born in 1960 or later, full retirement age is 67.5
Who Is Entitled To Survivors Benefits From Social Security
How Social Security Can Help You When a Family Member Dies SSA.gov/benefits/survivors
Social Security is a key source of financial security to widowed spouses. About 7.8 million individuals aged 60 and older receive Social Security benefits based, at least in part, on a deceased spouses work record. These surviving spouse beneficiaries are overwhelmingly women.
These beneficiaries include 3.6 million people who are eligible only as widowed spouses. Another 4.2 million who are entitled to benefits based on their own work records but whose deceased spouses benefit amounts were higher than their own, will receive higher benefits as individuals .
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Important Facts About Social Security Spousal Benefits
- Length of marriage is important
- You may be eligible for up to half of your spouses retirement benefit amount
- Other benefits could reduce spousal benefits
- You must wait until your spouse collects benefits before claiming spousal benefits
- Length of marriage is important
- Its possible to claim spousal benefits even if you also worked yourself
- You can claim spousal benefits even if youre divorced
- Widows and widowers can claim spousal benefits
- Spousal benefits dont grow by deferment
Social Security spousal benefits can be a major financial help during retirement, whether you never worked at all or if you worked but werent the higher earner in your household so it literally pays to familiarize yourself with how spousal benefits work. In general, the Social Security Administration allows a non-working spouse to draw a maximum spousal benefit equal to 50 percent of the higher-earning spouses Social Security retirement benefit amount, though there are some parameters you should be familiar with.
There are several important things to keep in mind when claiming spousal benefits the key points are outlined below.
Benefits For Your Children
When you qualify for Social Security retirement benefits, your children may also qualify to receive benefits on your record. Your eligible child can be your biological child, adopted child, or stepchild. A dependent grandchild may also qualify.
To receive benefits, the child must:
- Be 18 or older and disabled from a disability that started before age 22.
Benefits stop when children reach age 18 unless they are disabled. However, if the child is still a full-time student at a secondary school at age 18, benefits will continue until the child graduates or until two months after the child becomes age 19, whichever is first.
Benefits paid for your child will not decrease your retirement benefit. In fact, the value of the benefits they may receive, added to your own, may help you decide if taking your benefits sooner may be more advantageous.
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How Much Should You Expect To Get From Spousal Benefits
Spousal benefits are capped at half your spouses benefit at full retirement age. If waits beyond that to claim, the spousal benefit cannot grow further, says Claire Toth, managing principal and senior wealth strategist at New Jersey-based Peapack-Gladstone Bank.
Toth is referring to the strategy of a retiree not claiming benefits until past full retirement age in order to claim a bigger monthly benefit. Social Security will boost your benefit substantially if you delay filing until as late as age 70. Its one way to juice your payout without working more.
However, if you file before full retirement age, your spouse will likely receive a permanently reduced benefit. Benefits may be reduced so that the spouse receives as little as 32.5 percent of the retirees benefit. The spousal benefit is reduced by about seven-tenths of 1 percent for each month before full retirement age, up to 36 months. If you exceed the 36 months, Social Security will dock about four-tenths of 1 percent for further months. The math can be complicated, but Social Security provides a tool to help you calculate your spousal benefit.
The exception to this rule of filing early is if a spouse is caring for a child under age 16 or one who is disabled, in which case the benefit is not reduced. In fact, this spouse could claim the spousal benefit at any age if theyre caring for a child who also receives benefits.
Ask Larry: Will My Benefit Increase If I Continue Working
Ask Larry
Economic Security Planning, Inc.
Today’s Social Security column addresses questions about the potential of continued income to raise benefit rates, who can take spousal benefits before retirement benefits and when they can do so and eligibility for divorced spousal benefits. Larry Kotlikoff is a Professor of Economics at Boston University and the founder and president of Economic Security Planning, Inc.
Have Social Security questions of your own youd like answered? Ask Larry about Social Security here.
Will My Benefit Increase If I Continue Working?
Hi Larry, I took early retirement at 62 I am still working. I plan to keep working for a number of years still. Will this increase my retirement benefit rate? Thanks, Harold
Hi Harold, Continuing to work and pay into Social Security could potentially increase your benefit rate. Whether or not your additional earnings would increase your benefit rate though, depends on how much you earn in relation to what you earned in past years.
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How Does Social Security Spousal Benefits Work
When it comes to Social Security retirement benefits, being married has its advantages.
Depending on your situation, taking spousal benefits may help you maximize how much in benefits you and your spouse receive.
However, how much youll receive depends on a number of factors, including:
- The amount of your spouses benefit
- Whether you have other retirement benefits available to you
If you have not worked or do not have enough Social Security credits to qualify for your own Social Security benefits, you may be able to receive spousal benefits.
You qualify for spousal benefits if:
- Your spouse is already collecting retirement benefits.
- You have been married for at least a year.
- You are at least 62 .
Furthermore, if you are divorced and your marriage lasted at least 10 years, you may be able to get benefits on your former spouses record.
Finally, If your spouse or ex-spouse is deceased, certain family members may be able to receive monthly benefits, including:
- A widow or widower age 60 or older
- A surviving divorced spouse, under certain circumstances
- A widow or widower at any age who is caring for the deceaseds child who is under age 16 or disabled and receiving benefits on their record
What Happens To Our Benefits When One Of Us Dies
As a surviving spouse, you can receive 100% of your deceased spouses benefits once you reach your full retirement age, or reduced benefits as early as age 60. If you had been taking the 50% spousal benefit, it would stop and you would begin receiving survivors benefits. Again, if you claim benefits including survivors benefits before reaching your full retirement age, they will be reduced and may be subject to the earnings test.
Your benefits could also be reduced by the Government Pension Offset if you receive a retirement or disability pension from a federal, state or local government based on your work in which you did not pay Social Security taxes.
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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 Bachelors Degree in English from the University of Rochester and currently lives in Albany, New York.
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Benefits For Your Divorced Spouse
If you are divorced, your ex-spouse can receive benefits based on your record if:
- Your marriage lasted 10 years or longer.
- Your ex-spouse is unmarried.
- Your ex-spouse is age 62 or older.
- The benefit that your ex-spouse is entitled to receive based on their own work is less than the benefit they would receive based on your work.
- You are entitled to Social Security retirement or disability benefits.
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Social Security Spousal Benefits: Top 5 Questions
Question #1:Answer:Question #2:Answer:Question #3:Answer: Question #4:Answer: Question #5:Answer:Ms. Craddock has been an instructor with NITP since the year 2000. She started her career with the Social Security Administration before moving to the US Office of Personnel Management. At OPM, she worked as a Certified Federal Benefits Specialist, trainer, course developer and manager, and supervisor of 20 employees for adjudicating retirement claims. After more than 25 years of experience in the Federal Benefits Administration, she retired and now continues her work as an instructor, providing Federal benefits training nationwide, for live events and via webinars.This newsletter is designed to provide information on the subjects covered. NITP, Inc. takes great care to insure the accuracy and quality of these materials which are provided without any expressed or implied warranty, including, but not limited to, their fitness for a particular purpose. They are also provided with the understanding that neither the author nor the publisher is engaged in rendering legal, accounting, financial planning or other professional service. If additional assistance is required, the services of a competent professional should be sought.
Why It Makes Sense For The Higher Earner To Wait Longer To Collect
David and Linda are married. David’s primary insurance amount at full retirement age is $1,600 Linda’s is $1,450. They both have an FRA of 67.
If they both wait until 68 to collect, which means their benefits will increase by 8%, David’s benefits will be $1,728 , and Linda’s will be $1,566 .
That extra $12 per month means an extra $144 per year, or $2,880 over 20 years.
In addition, the spouse who lives longer will continue to collect the higher payments.
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The Voluntary Suspension Loophole
Prior to April 30th, 2016, this Social Security loophole allowed a married worker to voluntarily suspend his/her own benefits after full retirement age, allowing the spouse to receive spousal benefits while the worker was not collecting benefits. Effective April 30, 2016, spousal benefits can only be received if the worker spouse is collecting retirement benefits.
If you are receiving a divorced spouse benefit, the change in the law does not apply to you. You may continue to receive a spousal benefit if your ex-spouse decides to voluntarily suspend his/her benefit.
You may wonder if there is any reason to use the file-and-suspend strategy today, and the answer is yes, maybe! If you started receiving benefits but would now like to voluntarily suspend and earn higher benefits for delaying, you can do so. This may be the case if you started receiving benefits, but then gained some type of employment, received an inheritance, or suddenly discovered you do not need the benefits youve been receiving. If thats the case, you can suspend your benefit so that you earn delayed credits. But please note, if your spouse was receiving a spousal benefit, that benefit will be suspended as well. And, to voluntarily suspend, you must have at least reached your full retirement age.
Both loopholes are discussed more in-depth at .1
When Should I Take My Social Security Retirement Benefits
Waiting to collect Social Security benefits may be beneficial if youre able to do so. While the age to receive your full retirement benefit is 66-67 , you can begin collecting Social Security benefits as early as age 62. But each month you wait to start collecting increases your eligible benefits.4
Once you reach full retirement age, youre entitled to 100% of the benefits calculated from your lifetime earnings. If you wait until age 70 to begin collecting Social Security, your retirement benefit will be 32% larger.3
However, waiting may not be the right choice for everyone. Your financial advisor will help you determine an approach that reflects your options and your personal situation. For example, they may consider:
- Varying tax rates on Social Security income
- Capital gains and IRA withdrawals
- Health issues and life expectancy in your family history
- Whether your current retirement accounts and additional sources of income will cover your essential expenses before you reach full retirement age
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How To Calculate Your Own Social Security Spousal Benefits
The spousal benefit calculation is straightforward if you dont have a benefit of your own. Remember, in that case, its between 32.5% and 50% of the higher-earning spouses full retirement age benefit, depending on your filing age.
However, it can seem a little more complicated if you have Social Security benefits from your work history.
And to keep things interesting, the Social Security Administration decided that a different calculation method should be used to determine how much each benefit should increase/decrease based on your filing age.
Fun, right?
As complicated as Social Security benefits can seem, there is a way to correctly calculate how much your spousal benefit will be if you qualify to receive it.
Check out this section of my video that goes over this calculation step-by-step. VIDEO: How To Calculate Spousal Benefits The RIGHT Way
If you understand how they break down the individual benefits, its not hard to use the table above to quickly figure out what your approximate benefit will be. Heres an example.
Joe and Julie each have a Social Security benefit from work they individually performed. Julies benefit at her full retirement age is $800 per month. Joes benefit at his full retirement age is $2,000.
Assuming they are both full retirement age when they file, Joe will be entitled to a benefit of $2,000 and Julie will be entitled to the greater of her own benefit or half of Joes benefit.
Sounds simple, right?
The Restricted Application Loophole
As you may know, there is an incentive to delaying your Social Security benefits. Every year you delay, your monthly retirement benefit increases . One Social Security loophole allowed married individuals to begin receiving a spousal benefit at full retirement age, while letting their own retirement benefit grow. This was done by filing what is called a restricted application. A restricted application essentially allows you to choose which benefit you are applying for at the time you file for benefits.
For those born in 1953 or earlier, the restricted application strategy may be an option. But, as of the date of this articles update , it seems this loophole has essentially shut. The reason is that anyone born in 1953 or earlier is either already 70 or will be turning 70 in 2023, and Social Security benefits may not be delayed beyond age 70.
Aside from that, there are a few other things that would have needed to be in place before taking advantage of the restricted application. First, your spouse must have been receiving benefits at the time you filed your restricted application. Therefore, your spouse would need to have been born around 1958 or sooner in order to take advantage of this (because they would have needed to be at least 62 to file for their own benefits when you filed your restricted application.
Again, this loophole has essentially phased out completely as of 2023. I discuss more in the video below.
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What Day Will Social Security Be Paid This Month
The Social Security Administration releases a payment calendar each year.
However, many beneficiaries find the calendar confusing to read.
We have therefore created a simplified version.
You can find it in our post, 2022 Social Security Payment Schedule.
In addition, we have created a monthly payment calendar that tells you the payment date for each month.
Just click on the month below to see the payment dates for that month.