Social Security provides a vital financial backstop for American retirees. Many married couples are fortunate enough to get a pair of Social Security checks from the federal government, either because both spouses worked or because of the spousal and survivor benefit provisions of the Social Security program.
Unfortunately, Social Security is complicated enough that you can end up making decisions that, in some cases, will reduce what your spouse receives. Here are three things to watch out for, in particular.
1. Waiting to claim your own retirement benefits
If you qualify for retirement benefits, Social Security allows your spouse to claim spousal benefits, regardless of whether your spouse has worked. Generally, your spouse's spousal benefit will be equal to one-half of your primary insurance amount. This corresponds to what you would receive if you claimed your retirement benefits at full retirement age.
However, your spouse isn't allowed to claim spousal benefits if you haven't claimed retirement benefits. As a result, it's entirely possible that a decision to delay your own retirement benefits could cost your spouse money in spousal benefits, as well.
Image source: Getty Images.
2. Not waiting to claim your own retirement benefits
That said, there's an offsetting problem that can appear if you claim your own Social Security benefits early. After you pass away, your spouse will be entitled to survivor benefits based on your work record. The amount of the survivor benefit will generally be your own benefit, subject to adjustment based on when you claim.
Specifically, if you wait until after your full retirement age to get benefits, your spouse's survivor benefits can be higher, as well. But if you claim earlier, your spouse will get a permanently reduced amount from survivor benefits.
Because of these two conflicting provisions, planning a smart Social Security strategy for married couples is complicated. You really have to look at the particulars of your own family situation, including your age and your spouse's age, to figure out what will thread the needle and serve both of you best.
3. Working after claiming early Social Security benefits
Some people claim Social Security benefits while they're still working. In some cases, that's just because they want the extra supplemental income beyond their take-home pay from work. For others, claiming Social Security is a way to get spousal benefits flowing to a spouse.
If you've reached full retirement age (FRA), you can work as much as you want with no impact on anyone's Social Security benefits. However, if you claim early, you'll be subject to an earnings test.
Make more than $21,240 in 2023 if you won't reach FRA this year, and you'll have to give back $1 for every $2 in annual benefits you receive over the limit. For the year you hit full retirement age, the limit is higher at $56,520 and you'll lose $1 for every $3 you're over the limit, up through the month before you reach FRA. The limits will be higher in 2024.
Moreover, those reductions don't just affect your own Social Security. If your spouse is taking spousal benefits based on your work history, then those reductions will affect your spouse's benefits, as well. It might still be worth it to keep working, especially because you generally start earning some of that forfeited amount back once you reach full retirement age. Nevertheless, it can be a nasty surprise if you're not aware.
Be prepared
No one wants to cause their spouse financial distress. By being aware of some of the things that can reduce your spouse's Social Security benefits, you'll be in a better position to avoid problems and keep as much money going to your spouse as possible.
