Many people grumble about having to pay into Social Security during their working years. But the upside is that working and having your wages taxed sets you up for monthly benefits that could prove to be an essential source of retirement income.
Now if you never worked, you might assume that Social Security won't pay you a dime in retirement. But that's not necessarily the case.
If you're married to someone who's eligible for benefits, or you have a former spouse who's entitled to them, you may be in line for spousal benefits from Social Security. And the typical spousal benefit today may be more generous than you'd expect.
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Could Social Security spousal benefits put almost $11,000 a year in your pocket?
The average monthly Social Security spousal benefit today is $911.42. That means the typical recipient of those benefits is getting close to $11,000 a year from Social Security -- not too shabby a deal for not having paid into the program.
That said, the monthly spousal benefit Social Security pays you will depend on what your spouse is entitled to, and when you sign up. If you wait until full retirement age, you'll be able to collect 50% of what your spouse collects. So if they're getting $2,100 a month, you'd be eligible for $1,050 provided you wait for full retirement age to arrive.
Remember, you can claim Social Security as early as age 62 -- even for spousal benefits. But failing to wait until full retirement age reduces your spousal benefit, just as it reduces a benefit you're claiming based on your own income record.
You should also know that when you're filing for Social Security based on your own earnings history, you're rewarded with an 8% boost to your monthly benefit for each year you delay your claim past full retirement age, up until age 70. But that rule doesn't apply to spousal benefits.
There's zero financial upside to delaying a spousal benefit claim beyond full retirement age. The most you'll ever get is 50% of your spouse's benefit -- period.
What if you want spousal benefits instead of your own?
It may be that you worked for a good number of years and are therefore entitled to Social Security each month. Rest assured that if 50% of your spouse's benefit is a larger amount than your full benefit based on your own work record, Social Security will bump you up to the higher amount.
So let's say you'd get a monthly benefit of $1,400 based on your own earnings record, but your spouse is eligible for $3,200. This means you could get a monthly spousal benefit of $1,600 as long as you're not claiming it before full retirement age, which puts an extra $200 a month in your pocket.
But to be clear, Social Security won't pay you a benefit based on your own income record plus a spousal benefit. You'll only get the larger of the two.
How might spousal benefits factor into your retirement income?
Any income your household gets from Social Security could end up constituting a large chunk of the money you have available in retirement. But it's not a good idea to plan to retire on Social Security alone -- even if your spouse is getting a nice benefit and you're getting half of that benefit yourself.
Your best bet is really to save for retirement ahead of time. If you're not working -- hence the reason for only being eligible for spousal benefits -- then clearly, you can't fund an IRA or 401(k) in the absence of a paycheck. But you can work with your spouse who has a job to stick to a household budget that carves out room for steady retirement plan contributions. Withdrawals from a retirement account, combined with Social Security, could make your senior years as comfortable as you want them to be.
