Social Security helps to ensure that American workers will still have some income once they retire, but did you know that people can also claim benefits based on the income of their spouses? It's true, which is great news for anyone who chose to be a homemaker rather than entering the paid workforce, as well as those who earned significantly less than their partner.
Of course, as with any other government program, there are plenty of details that impact how this one will work for you, so potential recipients should get to know the rules before they plan on relying on payments. With that in mind, we asked three Motley Fool contributors to share one key fact about the spousal benefit that they think is not well understood. Here's what they had to say.
1. You can claim spousal benefits even after a divorce
Brian Feroldi: One less-known fact about spousal benefits is that you may still be eligible to claim them even if you're divorced from the person whose income you want to base them on.
As you'd expect, there's a strict list of criteria that needs to be satisfied before you can qualify, but you can still claim spousal benefits based on your ex's work history if all of the following conditions are met:
- The marriage lasted for at least 10 years.
- You remain unmarried.
- You are at least 62.
- Your ex-spouse had earned enough work credits to qualify for benefits or is already receiving disability benefits.
- The benefit you would get from your own work history (if you had one) is less than what the spousal benefit would be.
If you check off all of those boxes, then you can qualify for the benefit, which generally is equal to one-half of your ex-spouse's monthly benefit.
If you did get remarried, however, you're not necessarily out of luck. While you won't be able to collect a benefit based on your former spouse's income while you remain married to your new spouse, if that later marriage also ends for any reason, you still might qualify.
Trying to determine exactly how much you could receive in spousal benefits can be complicated, so if you're curious about what size check you might be eligible for, I'd suggest experimenting with SSA's calculator. If you have specific questions about your particular situation, visit your local Social Security office to get all of them answered.
2. No delayed retirement credits for spouses
Matt Frankel: One thing you should know about Social Security spousal benefits is how much you can expect to receive. If you retire at your full retirement age, your benefit will either be half of your spouse's full retirement benefit, or the benefit based on your own work record, whichever is greater, as long as your spouse is already receiving benefits.
If you decide to claim a spousal benefit early, that is, between 62 and your full retirement age, your benefit will be permanently reduced by the following percentages:
- 25/36 of 1% for every month before full retirement age, up to 36 months early
- 5/12 of 1% for every month beyond 36
Unlike benefits based on one's own work record, spousal benefits don't go up if you wait until after your full retirement age to file. The amount of a spousal benefit is capped at half of the spouse's primary insurance amount (PIA), which is what they would receive if they filed for Social Security at full retirement age.
The bottom line is that there is no benefit whatsoever in delaying claiming spousal benefits beyond your full retirement age, unless that will result in your own benefit (based on your work record) increasing to the point where it is greater than half of your spouse's PIA.
3. Only one benefit will carry on
Brian Stoffel: It's important to carefully plan out when you and your spouse will start claiming Social Security benefits. The most important fact to remember is this: When one spouse dies, the other spouse will only be allowed to collect one benefit check per month. Once the other spouse claims both potential benefits, that check will be whichever is higher: the the other spouse's own retirement benefit, or the survivor benefit based on the deceased spouse's work history.
Because husbands typically have higher benefits than wives -- and because they tend to die sooner as well -- it makes the most sense for husbands to wait as long as possible to start claiming Social Security. Assuming that the wife has enough of a work history to provide her own Social Security benefit, this can be claimed earlier to provide income while they wait for the husband to file for his benefit.
That way, the couple will be able to keep themselves afloat for as long as possible -- ideally until the husband reaches 70 -- while allowing the larger monthly benefit to grow. After the husband reaches 70, the couple can claim their full benefits, while knowing that whoever survives the longest will receive the largest benefit possible.