How Can I Switch From My Social Security Benefit To A Spousal Benefit
You can only switch from your benefit to the spousal benefit if your spouse has begun receiving retirement benefits and you are at least 62 years old .You can claim your benefit based on your work history until your spouse files, and then you can switch to the spousal benefit. However, if you’re not at your full retirement age, you’ll get paid a reduced spousal benefit, which can be as low as 32.5% of your spouse’s primary insurance amount.
To monitor your benefits or change them, you can create an account on the Social Security site. It contains a wealth of information, and it allows you to make some changes online, although others require a phone call.
Social Security In The Us
Before Social Security , care for the elderly or disabled in the U.S. wasnt a federal responsibility if they werent cared for by family, it fell into the hands of municipalities or states. This changed in 1935 when the Social Security Act was first established in the U.S. by President Franklin Roosevelt. The first taxes were collected starting in January 1937, which enabled monetary assistance to qualified Americans with inadequate or no income. Originally, SS was just a program that paid out retirement benefits, but a 1939 change added survivors benefits for a retirees spouse and children. In addition, in 1956, disability benefits were added.
Today, SS in the U.S. plays a very important role in keeping a lot of older Americans out of poverty. For most Americans in retirement, it is their major source of income, and for a significant percentage, it is their only source of income, even though SS was never intended to be a full replacement of income. On average, SS pays lower-wage earners higher relative benefits than higher-wage earners. In addition, lower-wage earners tend to pay less tax and are more likely to receive social insurance disability income and survivor benefits. SS is sometimes referred to as Old Age, Survivors, and Disability Insurance .
Social Security Facts
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Strategies For Maximizing Spousal Benefits
Every married couple has to figure out the best way to maximize their benefits depending on their own circumstances.
The three strategies below will help you make the most of your Social Security spousal benefits, depending on your circumstances. However, keep in mind that, regardless of your circumstances, the most a spouse can get is 50% of the amount that the higher-earning partner is entitled to at full retirement age.
Spousal Benefit Reduction Due To Early Entitlement
If you file for a spousal benefit prior to your full retirement age, that spousal benefit will be reduced due to early filing. The reduction is 25/36 of 1% for each month early, up to 36 months. For each month in excess of 36 months, the reduction is 5/12 of 1%.
Example : Bobs full retirement age is 67. Bob files for his retirement and spousal benefits at age 65 . As a result, his spousal benefit will be reduced by or 16.67%.
The final calculation of Bobs spousal benefit will be 83.33% x . And to that, we would add Bobs own retirement benefit to find the total amount of his monthly benefit.
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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When Will You Collect
The SSA calculates your benefit amount at your full retirement age . This depends on the year you were born. FRA by birth year is:
- 19431954: age 66
- 1955: age 66 and two months
- 1956: age 66 and four months
- 1957: age 66 and six months
- 1958: age 66 and eight months
- 1959: age 66 and 10 months
- 1960 and later: age 67
They Range From Simple To Sophisticated
Social Security is a government program serving about 65 million people, so you might use one word to describe it: complicated. Hats off to the Social Security Administration , though. It produces one of the best government websites, using plain English to explain its rules. It also has plenty of calculators and worksheets to help.
We pulled together some of our favorites. Keep this list handy next time youre sifting through the maze of Social Security rules and regulations. You won’t need all 11, but some of them will likely help answer some of your questions as you start to plan.
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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.
Can I Switch My Social Security Benefit To A Spousal Benefit
Switching from your regular retirement benefit to a spousal benefit is something you might be interested in if youre hoping to maximize Social Security benefits. Whether you can make this switch is determined by whether your spouse is already receiving benefits.
If your spouse is not receiving any retirement benefits yet, then you could technically take your regular Social Security benefit as early as age 62. When your spouse files for their benefit later you could switch to spousal benefits. That could potentially increase the total amount of benefits you receive as a couple if theyre waiting until age 70 to start taking benefits.
What if your spouse is already receiving their Social Security benefits? In that situation, the deemed filing rule applies. That rule dictates that when someone applies for their regular retirement benefit, theyre also approved for spousal benefits if theyre entitled to receive them. So again, youd get the higher amount of the two.
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How Does The Social Security Administration Calculate Benefits
Benefits also depend on how much money youâve earned in life. The Social Security Administration takes your highest-earning 35 years of covered wages and averages them, indexing for inflation. They give you a big fat âzeroâ for each year you donât have earnings, so people who worked for fewer than 35 years may see lower benefits.
The Social Security Administration also makes annual Cost of Living Adjustments, even as you collect benefits. That means the retirement income you collect from Social Security has built-in protection against inflation. For many people, Social Security is the only form of retirement income they have that is directly linked to inflation. Itâs a big perk that doesnât get a lot of attention.
Deemed Filing And Spousal Benefits
The Social Security Administration implemented the deemed filing rule to prevent double-dipping. Prior to the rule, if spousal benefits were higher than an individual benefit, the person could receive a combination of benefits equal to the higher benefit. Deemed filing keeps spouses from receiving one type of retirement benefit while also benefiting from delaying another type of benefit.
There are some exceptions to this rule, which would still allow you to apply for spousal benefits independent of your own retirement benefit. You might be eligible for an exception if you:
- Were born before January 2, 1954
- Are caring for a child under 16 or a child with disabilities
- Are eligible for Social Security disability benefits
If youve already taken your retirement benefits and your spouse is receiving a spousal benefit, they can opt to switch over to their retirement benefit instead if they were born before January 2, 1954. In that situation, you could then apply for an additional spousal benefit on top of your regular benefit once their benefits kick in.
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When Should I Start Collecting Social Security
Ultimately, the decision of when to begin collecting Social Security is one you have to make. It depends on your age, your health status, how much you spend and how much you have saved. Its generally best to start collecting as late as you can, because you get a larger monthly payment, which is adjusted for inflation each year.
Consider a retiree who was born in 1950 and averaged $50,000 a year in salary. If she has $3,000 a month in expenses, her Social Security check would cover 48 percent of her expenses if she started Social Security at age 62. If she waited till age 70, her check would cover 85 percent of her expenses. Every year she delays retirement, her Social Security payout which is adjusted annually for inflation rises by about $1,649.
Traditionally, the retirement system in the U.S. has been a three-legged stool: Social Security, savings and pensions. Social Security was never intended to be the sole source of income for retirement. Increasingly, however, employers have been moving away from their employer-sponsored pension plans in favor of tax-deferred retirement savings accounts, such as 401 plans.
If You Will Be Eligible For A Social Security Retirement Benefit Based On Your Own Earnings:
As well as a higher benefit based on your spouse’s earnings, it will also affect your benefits as a spouse, widow, or widower.
To get a more accurate estimate of how the government pension you receive will affect your benefit based on your spouse’s work:
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The Downside Of Claiming Early: Reduced Benefits
Consider the following hypothetical example. Colleen is 62 as of 2022. If Colleen waits until age 67 to collect, she will receive approximately $2,000 a month. However, if she begins taking benefits at age 62, shell receive only $1,400 a month. This early retirement penalty is permanent and results in her receiving 30% less year after year.
However, if Colleen waits until age 70, her monthly benefits will increase another 24% over what she would receive at her FRA, to a total of $2,480 per month.1 If she were to live to age 89, her lifetime benefits would be about $112,000 more, or at least 24% greater, because she waited until age 70 to collect Social Security benefits.2
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.
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?
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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 spouses Social Security benefit. Social Security uses a formula for families with more than one eligible dependent to calculate maximum benefits.
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When Should You Claim Spousal Benefits
Timing matters when deciding when to claim spousal benefits. Again, taking benefits before full retirement age can reduce the number of benefits that youre eligible to receive. However, delaying spousal benefits beyond full retirement age wont increase the benefit amount, the way that it would regular retirement benefits.
When deciding how to time spousal benefits or retirement benefits, it helps to look at the bigger picture and consider:
- Life expectancies and how long you and your spouse anticipate relying on Social Security benefits
- Health and the possibility of one or both of you needing long-term care at some point
- Other income sources, including investments, a 401 or IRA or money earned from part-time work or side jobs
- Retirement budget and estimated expenses
Living longer, for example, might make delaying Social Security benefits more attractive. On the other hand, if you dont have sufficient savings and investments then you might need the additional income that Social Security can provide sooner rather than later.
If youre confused about when to take spousal benefits or whether you can switch your retirement benefit to spousal benefits, talking to a financial advisor can help. An advisor whos well-versed in Social Security planning can help you to decide on the right time to claim those benefits.
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Beware The Social Security Earnings Test
Bringing in too much money in earned income can cost you if you continue to work after claiming Social Security benefits early. With what is commonly known as the Social Security earnings test for annual income, you will forfeit $1 in benefits for every $2 you make over the earnings limit, which in 2022 is $19,560. Once you are past full retirement age, the earnings test no longer applies, and you can make as much money as you want with no impact on benefits.
Any Social Security benefits forfeited to the earnings test are not lost forever. At your full retirement age, the Social Security Administration will recalculate your benefits to take into account benefits lost to the test. For example, if you claim benefits at 62 and over the next four years lose one full years worth of benefits to the earnings test, at a full retirement age of 66 your benefits will be recomputed and increased as if you had taken benefits three years early, instead of four. That basically means the lifetime reduction in benefits would be 20% rather than 25%.
Social Security Spousal Benefit Rules Every Married Couple Should Know
Editors Note: This story originally appeared on The Penny Hoarder.
The benefits of marriage dont stop at love and companionship. In some situations, marriage can result in more Social Security benefits. If you stay married for at least 10 years, those benefits can last even if you get divorced.
But the rules for marriage and Social Security get complicated.
You dont automatically get more Social Security benefits just because youre married. Many, if not most, people will get the biggest benefit by claiming on their own work record.
But if your work history is limited and you marry someone who earns significantly more money than you do, you may get more from Social Security by claiming spousal benefits. Here are several things married couples cant afford not to know.
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