Ask Larry: What Will My Wife’s Spousal Rate Be If I Take Social Security Retirement Benefits At Fra
Ask Larry
Economic Security Planning, Inc.
Today’s Social Security column addresses questions about how timing of the record holder’s retirement benefit can affect their spouse’s benefit drawn on their record, survivor benefits and the earnings test and informing SSA of a divorce. 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.
What Will My Wife’s Spousal Rate Be If I Take Social Security Retirement Benefits At FRA?
Hi Larry, My wife took Social Security at 62 with FRA at 66 years and eight months. Her initial monthly payment was about $700 with a PIA at that time of of about $1,000. My FRA is 66 and six months. I expect to wait to draw my retirement benefit at my FRA. What will my wifes spousal benefit be at that time? My Social Security online projects my PIA to be about $3,000. Would it be different if I waited for her to reach her FRA two months later? Thanks, Stan
Hi Stan, Since your wife was born after 1/1/1954, when she filed for her benefits she was also deemed to be filing for spousal benefits. What that means is that she’ll be required to start drawing spousal benefits as soon as you start drawing your retirement benefits, even if that’s before she reaches full retirement age . And, in that event, her spousal rate will be reduced for age.
Can I Still Receive Spousal Benefits If I Worked
What happens if you have Social Security earnings of your own but you also qualify for a spousal benefit? You can actually apply for both at the same timesomething the SSA calls a “deemed filing.” You’ll then receive the higher of the two amounts.
Suppose you’re at full retirement age and qualify for a $1,800 monthly benefit based on your pre-retirement wages. If you also qualify for a $1,000 spousal benefit, you’d receive the $1,800 benefit amount since that’s higher.
Your own retirement benefits will continue to grow the longer you delay your claim, up to age 70. If you wait until 70 to start collecting Social Security income, you can accrue enough delayed retirement credits to increase your benefit up to 32% versus claiming at full retirement age. It used to be fairly common for retirees to take advantage of this featureclaiming spousal benefits while delaying their own retirement benefit so it continues to grow. They would then switch from the spousal benefit to their own retirement benefit after maxing out the latter.
The Bipartisan Budget Act of 2015 clamped down on this strategy, however. Those who turned 62 on or after January 2, 2016, and were eligible for both benefits were thereafter required to complete a deemed filing. While there’s still an incentive to hold off and let your delayed retirement credits grow, you can no longer stagger your application for each benefit.
Divorced Clients Can Get Spousal Social Security Benefits
Claiming a spousal benefit could offer greater supplementary income for a divorced client during retirement.
Divorce is hard. The process is difficult for many reasons. One of the most talked about is division of assets separating everything you owned as a couple. The way those assets are split up could have a great effect on retirement plans.
Social Security benefits are not divided when a couple divorces. But, an ex-spouse can claim spousal benefits through the Social Security Administration.
Most couples are not comprised of two equal wage earners. One spouse may have opted out or reduced their time in the workforce during their marriage. This would result in that spouse having lower earnings, meaning lower benefits through Social Security.
If you are helping to establish a retirement plan for a client who is divorced, be aware that they may be eligible for a spousal benefit. Claiming a spousal benefit could offer greater supplementary income for a divorced client during retirement. Of course, Social Security cannot be the sole foundation for any financial plan for retirement.
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Please Answer A Few Questions To Help Us Determine Your Eligibility
For a number of years, married couples nearing retirement were able to cleverly strategize the timing of their Social Security retirement benefits to get higher lifetime benefits for one or both spouses. The Social Security Administration has put an end to some of the strategies that married couples had used in the past, but spouses nearing retirement age still have many questions about how to get the highest possible joint Social Security benefits. Here are some answers to your questions and a few tips on how to avoid mistakes that could reduce your benefits.
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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What To Know About Social Security Spousal Benefits Strategies
For workers who have paid into the Social Security system for years through payroll taxes, a reward comes when they reach the program’s retirement age and they can start collecting monthly benefits for life. But the program also provides a payout to eligible spouses even if they never worked outside the home.
In fact, developing a Social Security spousal benefits strategy is an important way for couples to manage their post-retirement finances and maintain a comfortable standard of living.
Here are answers to some frequently asked questions about these benefits so you can create a plan that maximizes your potential household income.
How Do I Qualify For Social Security Retirement Benefits
When you work and pay taxes, you earn credits toward Social Security retirement benefits. These credits are based on your annual earnings you can accrue a maximum of four credits per year. Once youve acquired 40 credits , youre fully insured and eligible to receive retirement benefits.
Your paychecks will withhold Federal Insurance Contributions Act tax until youve earned up to the taxable earnings base for the year.
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What Is The Maximum Benefit
The allowed Social Security retirement benefit for a spouse starts at 32.5% at age 62 and gradually increases to 50% of the amount that their spouse is eligible to receive at full retirement age, which is 66 or 67 depending on their birth year. Even if the spouse delays collecting Social Security until age 70, he or she still gets only 50% of their spouses full amount. So, it is important to claim benefits at your full retirement age, because that will be the most you are eligible to receive.
Note that the maximum benefit for a spouse is 50% of their spouses benefit. That means that your spouse would have had to earn a substantial amount more over his or her working life to make that benefit higher than your own individual benefit. Thus, if both partners are eligible for relatively similar benefits, it makes more sense for each partner to file individually at full retirement age or at age 70, if possible.
Widows and widowers may be able to receive up to 100% of the deceased spouse’s Social Security benefit. Social Security uses a formula for families with more than one eligible dependent to calculate maximum benefits.
If You’re Receiving Other Retirement Benefits
The calculation gets a bit more complicated if you are eligible to receive benefits from a government pension or foreign employer that is not covered by Social Security. In that case, you may still be eligible, but the amount will be reduced.
For example, if you have a government pension for which Social Security taxes are not withheld, the amount of your spousal benefit is reduced by two-thirds of the amount of your pension. This is known as a government pension offset.
For example, suppose you are eligible to receive $800 in Social Security spousal benefits and you also get $300 from a government pension each month. Your Social Security payment is reduced by two-thirds of $300, or $200, making your total benefit amount from all sources $900 per month + $300).
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It Seems Like A Good Time To Review The Who What When And How Much Of Social Security Spousal Benefits And The Different Rules And Benefit Amounts For Spouses Versus Survivors
Ive received numerous questions from InvestmentNews readers about Social Security spousal benefits. There also seems to be a lot of confusion regarding the difference between spousal benefits, when ones mate is alive, and survivor benefits after ones spouse dies.
So it seems like a good time to review the who, what, when and how much of Social Security spousal benefits and the different rules and benefit amounts for spouses versus survivors.
A spouse who hasnt worked long enough at least 10 years to qualify for his or her own retirement benefit may still be eligible for spousal benefits. A spousal benefit is worth up to 50% of the working spouses full retirement age benefit amount. To collect spousal benefits, the couple must be married at least one year, and the working spouse must claim Social Security retirement benefits to trigger spousal benefits for the other spouse. Different rules apply to divorced spouses.
Today, many spouses are entitled to their own retirement benefit. In addition, they may be eligible for a spousal benefit. Traditionally, if an individuals benefit as a spouse is higher, they will get an additional amount so that the combination of benefits equals that higher amount
One adviser, Charlie, asked about an optimum Social Security claiming strategy for his clients Linda and Rick.
How The Restricted Application Strategy Works For Eligible Spouses
If you reach full retirement age and are eligible for your own benefits as well as spousal benefits, you may choose to collect benefits under your spouse’s account now and defer your own benefits until later. To file a restricted application, both you and your spouse must be of full retirement age, and you both must have filed for Social Security benefits.
Filing a restricted application can result in a higher benefit amount when you later file for Social Security under your own account. The reason is you will have accrued delayed retirement credits for each year you deferred retirement, up to age 70, when benefits max out.
Each year of delayed retirement is worth an additional 8% in benefits for those born between 1943 and 1954. So, for example, a person born in 1952 who retires in 2021 at age 69 will receive an additional 24% over and above what they would have received had they started collecting in 2018 at their full retirement age. However, only one person per couple may collect spousal benefits while earning delayed retirement credits on his or her own account.
And, to repeat, this option is no longer available to anyone who wasn’t born on or before Jan. 1, 1954.
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What If My Ex
If you meet all the criteria above and have been divorced for at least two years, you are, in Social Security lingo, an Independently Entitled Divorced Spouse . As an IEDS, you can file for divorced spousal benefits through the Social Security Administration no matter if your ex-spouse has filed for benefits yet.
Social Security And Your Sers Pension
If you are a SERS retiree who also is eligible for a Social Security benefit, you may be affected by federal law regulating Social Security benefits. As a result, your Social Security benefit may be reduced by either the Government Pension Offset or the Windfall Elimination Provision .
Neither the GPO nor the WEP will reduce your SERS pension. They can affect only your Social Security benefit.
For more detailed information on the GPO and WEP and how they may affect your specific Social Security benefit, you should contact the Social Security Administration through your local office, by visiting the SSA website at www.ssa.gov, or by telephone at 800-772-1213. The following is provided only as general information.
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Can I Collect Survivors Benefits After Claiming Early Retirement Or Dependents Benefits
Some spouses claim early retirement or early spousal retirement benefits but can then switch to higher survivors benefits when their spouse dies.
Claiming your early retirement or spousal retirement benefits doesn’t affect the amount of your survivors benefits . If you have a considerably older spouse who has a higher earnings record, or your higher-earning spouse is in poor health, you could claim your early retirement or spousal retirement benefit, relying on the fact that you will be able to switch to full survivors benefits in the not-too-distant future.
Note that if your spouse claims early retirement benefits, however, your eventual survivors benefit will be reduced. The amount of the reduction depends on how early your spouse claims their retirement benefits.
This article was excerpted from Social Security, Medicare & Government Pensions, by Joseph Matthews .
What Does It Take To Qualify For Social Security Spousal Benefits
Unlike most rules related to Social Security, the rules for the spousal benefit entitlement are pretty straightforward and easy to understand.
If youve been married to your current spouse for at least one year, youre eligible for a spousal benefit under their work record.
Pretty simple, right?
You may also qualify for the spousal benefit If youre divorced but the marriage lasted for at least 10 years and youre not currently married.
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More Than Just Income: The Social Security Spousal Benefit And Medicare Coverage
If you are eligible for a Social Security spousal benefit, you are also entitled to premium free part A Medicare at age 65. The catch?
Youre entitled to Medicare only if your spouse is at least 62 years old.
If you are more than 3 years older than your spouse, you may have to buy Medicare Part A until your spouse turns 62. Thats when your premium-free benefit would start. The Part A monthly premium is $422 in 2018.
How The Divorced Spousal Benefit Works
The marriage lasted for at least 10 years.
2
If the ex-spouse who is the worker has not applied for retirement benefits, the couple has been divorced for at least two years.
3
The person claiming spousal benefits is not married at the time of application.
4
The person is age-eligible age 62 or older.
5
The Social Security benefit for the claiming spouse is less than the benefit based on their ex-spouses earnings history.
6
The ex-spouse is age-eligible. The ex-spouse does not need to be collecting benefits in order for the former spouse to be eligible for a spousal benefit.
An ex-spouse who files for divorced spousal benefits would receive benefits based on either their own work record or their ex-spouses work record. The claiming ex-spouse would receive benefits based on whichever benefit is greater but cannot claim both.
Collecting a Social Security divorced spousal benefit will not diminish the worker ex-spouses benefits at retirement. The claim is confidential the worker will not know if the ex-spouse filed a claim.
One of the main requirements for a former spouse to be entitled to Social Security benefits on a workers account is for the couple to have been married for at least 10 years.
This is not a comprehensive list of all the rules involving Social Security benefits for divorced spouses. For example, there are also rules for surviving divorced spouses and rules related to continuing work when applying for divorced spouses benefits.
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‘file And Suspend’ Has Been Totally Eliminated
You may also hear or read about another Social Security claiming strategy known as file and suspend. Unfortunately, it is no longer applicable, also due to the Bipartisan Budget Act of 2015. Using this strategy, the higher-earning spouse could file for Social Security at full retirement age , but then “suspend” his or her claim and not take benefits until later, while racking up delayed retirement credits in the meantime.
Can Both Spouses Collect Social Security At The Same Time
Both spouses in a married couple can get full Social Security benefits, at the same time. Married couples get two separate Social Security checks, and there is no “marriage penalty” for Social Security benefits. The maximum Social Security benefit for an individual is $3,345, so the maximum Social Security benefits for a married couple is $6,690, but very few people get benefits anywhere close to the maximum.
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How Much Is The Social Security Spousal Benefit
If youre eligible and can qualify, the spousal benefit can be as much as 50% of the higher-earning spouses full retirement age benefit.
If your spouses full retirement age benefit amounts to $2,000 per month, your spousal benefit at your full retirement age could amount to $1,000 per month.
Its important to note that this benefit cannot be more than 50% of the higher-earning spouses full retirement benefitbut it can be less!
Thats because the benefit is also based on your filing age. Depending on how old you are when you file, the spousal benefit amount will range between 32.5% and 50% of the higher-earning spouses full retirement benefit.
Check out the chart below to get an idea of how the benefit works and what your payment might be if you can take advantage of spousal benefits. The chart assumes that your full retirement age is 67 and your spouses full retirement age benefit is $2,000 per month.
Did you notice the steep penalty for filing early? You receive significantly less in payments if you choose to file sooner rather than wait until full retirement age.
You may have also noticed that the spousal benefit does not increase beyond your full retirement age. When considering your own Social Security benefit, there can be a lot of advantages to waiting to file and delaying when you start receiving payments well past your retirement age, but thats not the case here.