Millions of Americans rely on Social Security. Married couples can obtain retirement or spousal benefits. Financial advisor and senior vice president Beth Lynch of Fort Pitt Capital Group states that, if they have worked enough quarters, anyone who has contributed to Social Security is eligible for benefits. Someone who hasn’t worked enough quarters to qualify for retirement benefits may be able to claim them through a spouse. Social Security Spousal benefits can raise the monthly payments of low-earning spouses as well as nonworking spouses. Couples should plan when and how to claim Social Security to maximize benefits.
You may be eligible to receive Social Security payments based on the work history of your spouse. (Source: USA Today)
How do Social Security Spousal Benefits Work?
Social Security spousal benefits began in 1939. Congress authorized worker spouse and survivor benefits by amending the 1935 Social Security Act. Most women did not work; therefore, the modification was meant to secure their finances. A spouse can claim spousal benefits based on a Social Security-eligible spouse’s work history. The following factors qualify you for Social Security:
Workers can earn four Social Security credits each year, one for every $1,640 in covered wages. You must earn $6,560 in a Social Security-taxed job to receive all four credits. Someone with 40 credits can receive retirement benefits and their spouse’s spousal benefits.
To compute spousal benefits, you need a worker’s primary benefit. “That’s going to determine how much the spousal benefits are,” said Ally senior wealth advisor Dimitri Pan. Waiting until full retirement age—67 for those born in 1960 or later—to start Social Security benefits will reduce the spousal payment by half. Early benefit enrollment can dramatically lower monthly costs for workers and spouses. Workers can start benefits at 62. It may lower the primary benefit by 30%. A spouse’s spousal benefit decreases.
In addition, spouses can start benefits at 62. The amount will be decreased by a fraction of a percent for each month they start benefits early. The Social Security Administration notes on its website that a spouse can retire at 62, although they may get just 32.5% of the worker’s primary insurance payment.
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Application and Eligibility of Social Security Spousal Benefits
Three ways to apply for Social Security spousal benefits:
- On the Social Security Administration website (if 62 or older within three months).
- Call 1-800-772-1213.
- Visit a local Social Security office.
Birth certificates, marriage certificates, W-2 forms, tax returns, and other documents may be required.
Remember that your job record and spousal benefits cannot be used for retirement. The Social Security Administration will issue the higher benefit if you qualify for both. Spousal benefits are available to Social Security-receiving spouses. They’re not alone. Divorced spouses qualify if:
- At least 10 years were spent married to the worker.
- Unmarried.
- At least 62 years old or older.
- The spousal benefit exceeds their job record.
Divorced spouses’ spousal benefits do not influence worker benefits. Nor do they affect current or former spouses’ spousal benefits.
Based on job history, widowed spouses qualify for Social Security. These benefits are for survivors, not spouses. They have slightly varied rules, including allowing most surviving spouses to start benefits at 60. For every year you delay Social Security benefits after full retirement age, the benefit amount increases by 8%. The rise continues till 70. Delaying Social Security after that age is pointless.
Couples could claim spousal benefits and accumulate retirement benefits until age 70 utilizing “restricted applications” and “file and suspend” strategies. Bipartisan Budget Act of 2015 abolished both possibilities. Applying for Social Security today means filing for all benefits you’re entitled to. You can no longer choose your benefits. The government expects you to want spousal and retirement benefits and pay more.
Spousal benefits can only be maximized by delaying their initiation.
- Both couples postpone benefits starting. Both spouses will earn the maximum Social Security payments if they wait until 70. Their benefits will increase 8% annually from full retirement through 70. They may benefit more if they work during those years. Delaying retirement could erase lower-earning years on your Social Security record as benefits are dependent on your 35 highest-earning years. This may apply especially to parents who work less while raising kids.
- Higher-paid spouse delays benefits. If one spouse receives a much lesser Social Security pension, both spouses may not need to wait until 70. Pan suggested a split strategy. He remarked, “The spouse with the highest benefits can delay until age 70.” While the higher earner’s Social Security payments grow, the lower-earning spouse can start benefits at full retirement age. When the second spouse turns 70, they can claim benefits. The first spouse’s payments will switch to spousal benefits, if higher. This strategy maximizes the spousal benefit while providing a couple with Social Security income in the past.
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