Spousal Benefits and Social Security Strategies for Married Couples

While aspects of social security benefits can be complex for individuals, the matter often gets more complicated for married couples. In order to plan out the best strategies for dealing with social security when it comes to marriage, there are important things you need to know.

First of all, there are terminologies used when discussing social security. It is best to first understand what some of the key terms are before planning ahead.

  • Spousal benefits – for the spouse that earns less, they have to make a choice. They can either claim their own earned benefit or claim for a spousal benefit of up to 50% of the other’s spouse’s benefit. In order to be eligible to claim a spousal benefit, the higher earning spouse must already be collecting on benefits. If a spousal benefit is being collected and the lower-earning spouse is not yet at the age of full benefits, the amount of benefits will be reduced for each month the person is underage.
  • Surviving spouse benefits – the spouse that has survived a retired person who was already receiving full benefits will be able to receive 100% of those benefits provided they have reached full retirement age. If not, the benefit will be reduced based on the surviving spouse’s age. Also, if the surviving spouse is insured of their own accord and the deceased spouse’s benefits are higher, the surviving spouse will then receive their own benefits in addition to the sum that is the difference between their own benefits and the benefits of the deceased.

Photo by Will Scullin via Flickr

Perfecting a Strategy

If the spouse waits until full retirement age to collect benefits on behalf of their spouse, the benefit totals will be greater so it can make a big impact on the amount of benefits being received. In order to plan a strategy, the age difference between spouses should be a considered. In the case where a couple has a substantial age gap, there should be consideration for not waiting until the full benefit can be received.

It is also important to calculate what other resources can be used until a spouse can no longer wait for the additional financial support. By taking into account other retirement savings and how much the household needs to bring in each month to meet financial obligations, married couples and surviving spouses may better predict when to take the benefits.

The ‘Benefits During the Wait’ Strategy

One can receive a spousal benefit before the other half of the couple is at the age to collect in full. This is called voluntary suspension and it works by having the higher earning spouse file for benefits and the other spouse filing for spousal benefits. The higher earning spouse can request the voluntary suspension of benefits while the other spouse continues to collect benefits. The suspended spouse’s pension will then continue to grow. This will allow more money to be brought in while the other pension gets larger.

The ‘Waiting for the Switch’ Strategy

There is also another scenario that may work for spouse who prefers to wait on benefits until they are of age. If the husband plans on waiting until age 70 to collect benefits and the wife is eligible for her own benefits, technically the wife could sign up to collect her benefits allowing her husband to receive spousal benefits. The husband could continue to collect on spousal benefits until he has reached the age of 70. When that time comes, he can make the change to the higher benefit with his wife filing for spousal benefits if the amount would be higher.

There are some complicate matters involved in social security and planning for retirement. It is best to explore all possible scenarios to see which is going to work best for both halves of the couple before making a decision. The ultimate goal should be using the strategy that best maximizes all the contributions you have made into your pension over the years in order to have the most financial stability.

Common Scenarios for Social Security

These scenarios assume that you should start at the full retirement age so that you have access to the full benefit. However, starting at the full retirement age may not be the best option depending on your specific situation. These scenarios also assume that both spouses are planning to stop working. These factors, along with life expectancy, your financial needs, and other retirement savings are important factors to consider when determining the best strategy for you. Unfortunately, we cannot explore all the intricacies involving these factors here.

General rules

  • The spousal benefit is 50% of the primary claimant’s benefit.
  • The full retirement age is typically around 65-67 depending on your age.
  • The minimum age to collect social security benefits is 62 years old. However, your benefit is reduced if you start to receive your benefit prior to the full retirement age (e.g., at age 62 you are only eligible to receive 75% of the full retirement benefit).
  • Your benefit increases ~8% per year above the full retirement age (up to age 70), and the 50% spousal benefit portion also increase accordingly.
  • The spousal benefit is also reduced if your spouse is younger than the full retirement age. For example if both of you decides to collect benefits at 62, the primary beneficiary receive 75% of the benefit and the spouse will receive only 28% (50% x 75% x 75%) — don’t do this!
  • The greater your earnings, the bigger your monthly benefit payment.

Scenarios

If you and your spouse are both alive:

Similar Earnings You earned more You earned less
Similar Age You each claim your own benefits because your individual benefits will be greater than either of the spousal benefits. If your spouse’s benefits is less than the spousal benefits, you claim your benefits and your spouse claims the spousal benefits.

As your spouse becomes older, your spouse’s benefits might exceed the spousal benefits, if so, switch.

If your benefits is less than your spouse’s spousal benefits, she claims her benefits and you claim the spousal benefits.

As you become older, your benefits might exceed the spousal benefits, if so, switch.

You are older You claim your benefits and your spouse claims the spousal benefits any time between the age of 62 and the full retirement age. She let her benefits grow and switches to her benefits any time between the full retirement age and 70 (when the maximum benefit amount is reached). You claim your benefits and your spouse claims the spousal benefits.

When (and if) her benefits exceed the spousal benefits, she switches to her benefits.

You claim your benefits and your spouse claims the spousal benefits.

When your spouse reaches her full retirement age, she switches to her benefits. If your benefits is less than your wife’s spousal benefits, you also switch.

You are younger Your spouse claim her benefits and you claim the spousal benefits any time between the age of 62 and the full retirement age. You can switch to your benefits any time between the full retirement age and 70 (when the maximum benefit amount is reached). Your spouse claims her benefits and you claim the spousal benefits.

When you reach the full retirement age, you switch to your benefits. If your spouse’s benefits is now less than your spousal benefits, she also switches.

Your spouse claims her benefits and you claim the spousal benefits.

When you reach the full retirement age, you switch to your benefits if it’s more than what you’re collecting.

Another Point Worth Noting

The rules and regulations may change often in regards to what you can and can no longer do. Your best first move would be to discuss the various scenarios with your spouse and then contact the Social Security Administration with any questions or concerns you may have. A qualified financial consultant may also add insight into your overall retirement planning needs and goals.

Source: Social Security Online.

About the Author

By , on Mar 1, 2011
Tisha Tolar
Tisha Tolar is a co-owner of Trifecta Strategies, LLC and the author of Gen X. When she is not busy being a fiction writer, she writes personal finance articles for several web sites, including Moolanomy.com.

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Leave Your Comment (4 Comments)

  1. Glen Napier says:

    I plan on retiring at 65 and will draw appr. 2400 per month. My wife will turn 62 7 months later and draw 900 per month on her own work record. Can she start drawing a spouses benefit when i retire or does she have to wait until i am full retirement age (66)? Also how would the draw and suspend stategy work in our case?

  2. Kraig Kristofferson says:

    You indicate “Your benefit increases +/- 8% per year above the full retirement age (up to 70), and the 50% spousal benefit portion also increases accordingly”. Social Security says this is not true, as the spousal payment is limited to 50% of what you would have received at 66, not 1/2 of the increased amount at 70.

  3. R Hansch says:

    My spouse was 86 and has died just recently. I am 56. Will I be able to collect on his Social Security immediately?

  4. krantcents says:

    Thanks for the information! As I get closer to retirement, I start to think about these things.

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