This article was updated on December 7, 2017 and was originally published on September 5, 2016.
Thanks to Social Security spousal benefits, you could be entitled to collect inflation-adjusted income for the rest of your life, even if you never worked or didn't work consistently throughout your career. There's a provision in the Social Security rules that says if your husband or wife's retirement benefit is more than twice what yours would be, a spousal benefit will make up the difference. If you've never heard of spousal benefits, then you may be surprised at how large they can be.
What is a spousal benefit?
In a nutshell, spousal benefits are intended to provide retirement income to Americans who have earned significantly less than their spouses. For example, if one spouse worked full-time for their entire career while the other stayed home to raise children, then a spousal benefit could provide income to the former stay-at-home parent.
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Whether or not you're eligible for a spousal benefit depends on the difference between your spouse's benefits and your own (if you're eligible for your own benefits).
When deciding whether you're eligible for spousal benefits, the Social Security Administration first considers your own benefit. In order to determine your benefit amount, the SSA takes the average income of your 35 highest-earning years (indexed for inflation) and plugs them into a formula. This formula determines your primary insurance amount, which is the monthly benefit you're entitled to receive if you claim Social Security at your full retirement age. Your benefit will be adjusted if you apply for Social Security before or after your full retirement age.
Next, Social Security determines your spousal benefit, which is typically one-half of your spouse's benefit if you claim at your full retirement age. Your monthly benefit amount will be the greater of your own benefit or your spousal benefit. If your spousal benefit is greater, then the SSA pays out your own benefit first and then pays the amount it would take to reach your full spousal benefit. For example, if you're entitled to a $400 benefit based on your record and a $500 spousal benefit, then you will be paid your own $400 benefit plus $100 in spousal benefits.
You can collect a spousal benefit as early as age 62, just like a standard Social Security retirement benefit, but it will be reduced by a certain percentage for each month you collect benefits before your full retirement age. It's important to note that spousal benefits are not reduced at the same rate as retirement benefits. Furthermore, there is no delayed-retirement credit for waiting past your full retirement age to claim spousal benefits.
|
Retirement Benefits |
Spousal Benefits | |
|---|---|---|
|
Reduction per month before full retirement age, up to 36 months |
5/9 of 1% (0.56%) |
25/36 of 1% (0.69%) |
|
Reduction percentage per month beyond 36 months early |
5/12 of 1% (0.42%) |
5/12 of 1% (0.42%) |
|
Monthly delayed retirement credit (increase) for claiming later than full retirement age, up to age 70 |
2/3 of 1% (0.67%) |
N/A |
Source: Social Security Administration.
In the past, you could choose to apply for either your spousal benefit or your own retirement benefit, and you could switch from one to the other later on. However, this strategy was eliminated in April 2016. Thanks to a rule known as "deemed filing," if you were born on or after Jan. 2, 1954, then once you apply for one type of benefit, you're deemed to have applied for them all. If you were born before that date and you have reached your full retirement age, then you may choose to collect your spousal benefit, let your own retirement benefit continue to grow, and then claim your enhanced benefit later.
Also keep in mind that in order for you to claim a spousal benefit, your spouse must also be collecting his or her own Social Security retirement or disability benefit.
How big can a spousal benefit be?
The maximum Social Security benefit for someone retiring in 2018 at full retirement age is $2,788 per month. Since spousal benefits are based on the primary earner's benefit at full retirement age, the maximum spousal benefit is based on this figure, not the higher maximum benefit possible if a worker waits until age 70.
Therefore, the maximum possible spousal benefit in 2017 is $1,394 per month -- half of the maximum benefit for an individual. However, in order to get the maximum spousal benefit, you and your spouse must meet these criteria:
- Your spouse must have earned more than the Social Security maximum taxable wage limit for at least 35 years of his or her career.
- Your spouse must be receiving his or her own benefit already.
- You must wait until your full retirement age to file for benefits.
For the vast majority of people, spousal benefits are significantly less than the maximum. As of October 2017, there are about 2.4 million individuals collecting a spousal benefit, and their average monthly check is about $716.
How you can maximize your own spousal benefit
Since there are no delayed retirement credits for spousal benefits, the strategies to maximize your spousal benefit are somewhat limited. However, here are a few pieces of advice that could help you get the most out of Social Security.
- Check your own retirement benefit -- Even if you didn't work many years, or if you only worked part-time, you may be surprised at how much your own retirement benefit is. Social Security benefits are weighted toward lower-income retirees, so even if your spouse earned several times what you did throughout his or her career, your own benefit may be more than half of your spouse's. You also have the ability to grow your own benefit by delaying retirement -- an option that doesn't exist for spousal benefits. Create an account on the Social Security website and view your Social Security statement to see how large your own benefit could be.
- Delay retirement -- If your spouse is doing particularly well later in his or her career, delaying retirement for a year or two could significantly boost your spousal benefit, as long as you haven't reached your full retirement age. Keep in mind that since Social Security benefits are based on the top 35 years of earnings, adding a couple of high-income years can erase the effect of any low-income years on an earnings record.
- Ask your spouse to file for benefits by 66 -- While your spouse's benefit will continue to grow until age 70, your benefit as a spouse will not. Mathematically, it doesn't usually make sense for your spouse to delay his or her Social Security beyond your full retirement age (66 for people retiring now).
To sum it up, spousal benefits can be a significant boost to the retirement income of married couples, so it's important to know what they are and how to get the most out of yours. While Congress recently killed the most lucrative Social Security strategies for couples, there are still some techniques to maximize income for you and your spouse.
