As you are planning for retirement, one of the first things you’ll need to do is understand which sources of income are guaranteed. These sources can include pensions, rental income, and – most commonly – Social Security.
If you have ever been married, you could qualify for a special type of Social Security income – spousal benefits. Income from these benefits can be vital to achieving a comfortable retirement, especially if you didn’t work or earned significantly less than your partner.
What are Social Security spousal benefits?
Spousal benefits are monthly Social Security payments that you could be entitled to during retirement. Unlike standard retirement benefits, these are based on your partner’s – or even your former partner’s – earnings rather than your own.
These benefits are not a new addition to the Social Security program. In fact, they were introduced in 1939 – just four years after the program was established. Initially, only the wives of eligible retirees could claim benefits once they turned age 65. As such, these benefits were initially known as “wives’ benefits.” Later, they became “spouse’s” or “spousal” benefits when they were opened to eligible husbands as well.
Do you qualify for Social Security spousal benefits?
There are several factors that determine if you are eligible for Social Security spousal benefits. Among these are your age, marital status, and other Social Security income.
Your Age Impacts Your Eligibility for Social Security Spousal Benefits
To qualify for Social Security spousal benefits, you must be at least age 62. However, there is an exception to this rule if you are caring for a child under age 16 who receives Social Security disability benefits.
Your Marital Status Impacts Your Eligibility for Social Security Spousal Benefits
You may be eligible to receive Social Security spousal benefits on either your current spouse’s earnings record or your ex-spouse’s. The requirements for each of these scenarios are different.
If you are currently married, you must have been married to your spouse for at least a year to claim Social Security spousal benefits. Additionally, your spouse must be currently receiving Social Security benefits.
To claim Social Security spousal benefits on a former spouse’s earnings record, you must have been married to them for at least 10 years and you must be currently unmarried. Also, if you have been divorced less than two years, your former spouse must be currently receiving Social Security benefits. On the other hand, if you’ve been divorced longer than two years, you can claim spousal benefits even if your former spouse is not currently receiving benefits.
Other Social Security Income Impacts Your Spousal Benefits
If you qualify for both spousal benefits and Social Security retirement benefits on your own earnings record, you will automatically receive the higher of the two payments – but not both. In the past, you could claim spousal benefits while delaying your own retirement benefit, but this loophole was closed in 2016.
How much could you receive from Social Security spousal benefits?
Social Security spousal benefits are 50% of your partner’s Primary Insurance Amount [PIA] – the amount they would be paid if they began receiving benefits at their FRA. However, there are several other factors that can impact the amount of your monthly check.
Claiming Spousal Benefits Before FRA Reduces Your Benefit Amount
If you begin receiving benefits at your FRA – 67 if you were born after 1960 – you will receive the full 50% of your spouse’s PIA. However, your benefits are reduced if you take them early.
For example, if you choose to begin receiving spousal benefits at the earliest possible age – 62 – your monthly benefit will be reduced to 32.5% of your spouse’s PIA. However, spousal benefits are not reduced when you take them early if you are caring for a child who is under age 16 and receiving Social Security disability benefits.
Delayed Retirement Credits Don’t Apply to Spousal Benefits
When claiming benefits on your own earnings record, you can choose to delay benefits past your FRA until age 70. If you do this, you earn delayed retirement credits, which increase your monthly benefit amount. Unfortunately, these delayed retirement credits do not apply to spousal benefits. For this reason, if your spouse delays retirement until age 70, their benefits will increase for each year delayed but your spousal benefits will still be limited to 50% of their PIA. Additionally, if you delay benefits past your FRA, your own retirement benefit could be increased, but not your spousal benefit.
The Earnings Test Can Reduce Spousal Benefits
The earnings test is another factor that could reduce your monthly spousal benefits. This rule withholds a portion of your benefits based on how much income you – or your spouse in some cases – earn each year before your FRA. However, the withheld amount is paid back to you over the course of your life after you reach FRA.
Government Pension Offset Rules Can Reduce Spousal Benefits
Your benefits could also be reduced based on the Government Pension Offset rule. This rule reduces your benefits by two-thirds of the amount of a pension you receive from a job at which you did not pay Social Security taxes.
Social Security spousal benefits can provide much needed income during retirement, but there are many factors you need to consider before you apply. That is one reason it makes sense to partner with an experienced financial advisor who can help you decide when to apply and how to coordinate benefits with your spouse.
Understand Your Social Security Benefits with Meld Financial
The team of tax, legal, and investment professionals at Meld Financial has been helping clients achieve their retirement dreams for nearly four decades. We have the experience to help you with every aspect of retirement planning – including optimizing benefits from government programs like Social Security and Medicare.
Our comprehensive wealth management plan – Financial Fingerprint® – is quick to assemble, easy to understand, and simple to modify as your circumstances change. This nimble plan accounts for the most common challenges to your financial future, like maximizing Social Security income and coordinating benefits with your spouse.
To get started with Financial Fingerprint® today, contact us.
