Photo: Flickr user kayugee
If you didn't earn much throughout your lifetime, or if your spouse simply earned a lot more than you did, Social Security spousal benefits could provide you with extra income in retirement. And, this could apply even if you're no longer married. With that in mind, here are three things you need to know about spousal benefits and how to make the most out of yours.
Selena Maranjian: Spousal benefits can be a great way to get more income out of the Social Security system, but many time divorcees don't take advantage of them, assuming they're out of luck. That's wrong, though, because Social Security spousal benefits apply to ex-spouses, too, in many cases -- even if your ex has remarried.
There are rules, of course, and not every ex will qualify. To be eligible for spousal benefits based on an ex-spouse's work record, you need to meet the following requirements:
--You must have been married for at least 10 years.
--You must be unmarried.
--Your ex-spouse must qualify for Social Security retirement or disability benefits.
--The benefit you would receive based on your own work record must be smaller than the one you'd get based on that of your ex.
What, exactly, can you expect to receive, if you qualify? As a divorced spouse, you can collect up to half of your former spouse's full retirement (or disability) benefit if you begin collecting benefits at your full retirement age. If your spouse has increased his or her benefits by delaying starting to collect them, you won't get more. Also, if you're working, your spousal benefit might be temporarily reduced, if you're earning more than a certain sum for the year -- which is $15,720 in 2016.
There are a few more rules to learn if this benefit might apply to you -- or to someone you know.
Matt Frankel: Once your spouse files for Social Security retirement benefits, you may be eligible for spousal benefits if you're over 62. However, you should know how much your spousal benefit can be reduced for claiming early.
The standard spousal benefit is half of the worker's primary insurance amount. So, if your spouse is entitled to a $2,000 monthly benefit at their normal retirement age, your spousal benefit would be half of that amount, or $1,000, if you started collecting it at your normal retirement age.
As I mentioned, spousal benefits can be started as early as age 62, but the amount is reduced significantly if you claim early -- even more than regular Social Security benefits are. Specifically, your spousal benefit is reduced by 8-1/3% per year for the first three years before early retirement age, and 5% per year beyond that. So, for people reaching retirement age now, claiming Social Security benefits at 62 can result in a 25% reduction, but spousal benefits can be reduced by 30% for claiming so early. In other words, a spousal benefit claimed at age 62 would be just 35% of the worker's full benefit amount.
Also, keep in mind that spousal benefits have no delayed retirement credits for waiting past full retirement age. So, if your normal retirement age is 66, here's how claiming early or late could affect your spousal benefit.
|
Age when claiming benefits |
Primary worker's benefit (as a % of primary insurance amount) |
Spousal benefit (as a % of worker's primary insurance amount) |
|---|---|---|
|
62 |
75% |
35% |
|
63 |
80% |
37.5% |
|
64 |
86.7% |
41.7% |
|
65 |
93.3% |
45.8% |
|
66 |
100% |
50% |
|
67 |
108% |
50% |
|
68 |
116% |
50% |
|
69 |
124% |
50% |
|
70 |
132% |
50% |
Dan Caplinger: One aspect of spousal benefits that has always been confusing is how they interact with your regular retirement benefits. Until very recently, those who claimed Social Security earlier than full retirement age were deemed to have claimed both their retirement benefits on their own work record and their spousal benefits on their spouse's work record at the same time. If their own benefits were higher, then they essentially got nothing in spousal benefits. If the spousal benefit was higher, then they were treated as getting their own smaller work benefit plus enough in spousal benefits to reach the higher amount. After turning full retirement age, you could file a restricted application for spousal benefits only, letting benefits on your own work history continue to grow.
Recent legislation took that right away for those who turned 62 after Jan. 1, 2016. As a result, all filers for Social Security are treated as claiming retirement and spousal benefits at the same time.
In some cases, that law change leads to a very different result in terms of your optimal Social Security strategy. It's therefore extremely important for married couples to look at their Social Security choices together, in order to make sure that decisions that one spouse makes don't have an adverse impact on the other spouse's ability to maximize the entire family's potential benefits.
