Have you ever noticed how much there is to learn around the time you retire? You're pushed into the Medicare pool, where you must know the difference between various plans and decide which might benefit you most. You learn about tax breaks available only to those 65 and older, such as an extra standard deduction. Not only that, but you also receive a crash course in retirement benefits, such as Social Security.
With so much going on, it's no surprise if some of what you've been told has fallen through the cracks. In case there's anything about Social Security spousal benefits that confuses you, here's a quick rundown of everything you need to know.
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1. Eligibility
Eligibility depends on your current situation. For example:
- If you're still married: You must currently be married to someone who has enough work credits to be eligible to collect Social Security benefits.
- If you're divorced: You're eligible to claim benefits on your ex-spouse's work record if you were married to them for at least 10 years, your ex is eligible to receive Social Security benefits, and you are currently unmarried.
- If you're a widow or widower: If you're a surviving spouse whose deceased partner's earning record was sufficient to receive Social Security benefits, you can receive benefits based on their earnings. It's good to compare your work record with theirs to see what you would receive if you claim Social Security based on your record, or you claim spousal benefits based on theirs.
- When you can make a claim: To receive Social Security spousal benefits, your spouse must be receiving their benefits. If your spouse does not receive retirement or disability benefits, you'll need to wait until they do.
In addition, you must be:
- 62 years of age or older
- Any age if you have a child under the age of 16 in your care or has a disability and is entitled to benefits based on your spouse's work record.
2. Spousal benefit amount
Here are two essential things to know about how much a spouse can collect in spousal benefits:
- The benefit is calculated as a percentage of the higher-earning spouse's primary insurance amount (PIA). PIA is the benefit the higher-earning spouse would receive if they retired at full retirement age (usually 66 or 67, depending on the year they were born).
- If the lower-earning spouse claims benefits before they reach full retirement age, their monthly Social Security benefit will be permanently reduced based on how many months before full retirement age you begin receiving benefits.
Note: It's important to reiterate that collecting spousal benefits does not reduce the higher-earning spouse's Social Security benefits, even if you're divorced.
3. The tax man cometh
All Social Security benefits, including spousal, may be subject to federal income tax, depending on your total income. Here's how you can figure out if you'll owe federal taxes on your benefits.
First, calculate your combined income. This includes the adjusted gross income (AGI), plus nontaxable interest income, plus half your Social Security benefits received that year. Based on that calculation, here's the "base amount," as set by the IRS:
- Single filers: $25,000
- Married filing jointly: $32,000
- Married filing separately: You'll almost certainly be required to pay taxes on your Social Security benefits.
No tax:
- If your combined income falls below the figures shown, none of your Social Security benefits will be taxed.
Up to 50% of Social Security benefits taxed:
- Single filers: $25,000 to $34,000
- Married filing jointly: $32,000 to $44,000
Up to 85% of Social Security benefits taxed:
- Single filers: Above $34,000
- Married filing jointly: Above $44,000
Tips as you move forward
Here are a few miscellaneous tips to keep in mind as you plan your post-retirement budget:
- Depending on the state in which you live, you may also need to budget for state income tax on the benefits received.
- To avoid an unpleasant surprise at tax time, you have the option of having federal income taxes withheld from your monthly payment.
- Before claiming spousal Social Security benefits, consider visiting with a financial or retirement planner who can use Social Security calculators to determine the best strategy for you. The goal is to maximize the benefits you receive and ensure you're getting everything you're entitled to.
When the time comes to apply for spousal benefits, the process is surprisingly easy. It all begins with filling out an online application at my Social Security. If you don't have a my Social Security account yet, signing up for one is fast and free.
