Spousal benefits for Social Security is a complicated issue and can lead to the potential of leaving some money on the table. Recently I hosted a webinar with BlackRock’s Michael Graci and we went over the topic of Social Security, how it works and what it means to you and your spouse. Here are a few key items to know about Spousal Benefits for Social Security.
- A spousal benefit is equal to 50% of their partner’s Primary Insurance Amount (PIA) once they themselves reach their Full Retirement Age (FRA).
- When a spouse collects their spousal benefit can impact the total they take home. If a spouse collects spousal benefits before FRA, their spousal benefits will be reduced (please note that collecting five years early results in a 35% lower benefit). On the other hand, your spouse is not rewarded for waiting beyond FRA. Spousal benefits do not receive delayed retirement credits, so there’s no incentive to wait to collect a spousal benefit beyond full retirement age.
- One spouse must file for their benefit in order for the other spouse to be eligible to collect a spousal benefit. So if they are both the same age and one spouse waits until 70 to file and collect, the other spouse must wait until 70 to collect the spousal benefit.
- Individual benefits and Spousal benefits are netted against one another. Your spouse will get the greater of 50% of your benefit or their own benefit.
The picture above shows the example of a husband and wife. Jordan has a Full Retirement Age benefit amount of $2,200, therefore if his wife Alex waits until age 66 and claims when Jordan claims she will get half of his benefit or $1,100.
It is also important to note that when a spouse claims their spousal benefit determines what amount of benefit they will receive. If Jordan were to claim his Social Security benefit at age 62 and Alex, his wife does the same thing she will received a reduced benefit.
Lastly it is important to note that if one spouse waits until 70 to claim their benefit this will not increase the benefit amount for their spouse. This benefit will still be based on 50% of their amount at Full Retirement Age. If that is the case it will make sense for the spouse to claim their own benefit, if possible, at Full Retirement Age to at least start receiving some benefit.
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