Social Security helps millions of retired Americans make ends meet. But one of the least understood truths about Social Security is that it is especially valuable for married couples, because the program offers lucrative benefits not only to those who worked during their adult years but also to their spouses, even if they didn't work or only worked part-time. Understanding Social Security's rules about the benefits your spouse is entitled to receive in retirement is crucial in earning the biggest benefits possible. Fortunately, there are three simple ways to help your spouse receive larger Social Security payments while both of you are still alive and after your death.
1. Make sure you're eligible for the most Social Security benefits you can receive
In order for your spouse to receive spousal benefits under Social Security, you first have to qualify for your own Social Security benefits. To do so, you need to collect enough Social Security credits to be eligible. For retirement benefits, you need to earn 40 credits over the course of your career. Even low-income workers can earn credits relatively easily, as the current rules require earnings of just $1,200 to earn a single credit in 2014. The challenge, though, is that you can only earn a maximum of four credits each year. As a result, you must have earned at least $4,800 per year for 10 years total in order to qualify for your own retirement benefits, which triggers spousal benefits as well.
Once you've passed the threshold for receiving benefits, continuing to build your earnings history will boost not only your own benefits but also your spouse's benefits. Your payments will depend on your top 35 earning years, so working a full career can be the easiest way to maximize your Social Security. Higher wages also increase benefits, up to a cap for each year (currently $117,000).
You also must have been married for at least one year before your spouse can apply for spousal benefits based on your work record. If you pass away, you must have been married for at least nine months prior to your death for your spouse to collect survivors benefits, although there are some exceptions for accidental death or death while on active duty in the armed forces.
2. Both you and your spouse should be smart about when to claim Social Security
Figuring out when to claim Social Security benefits is a complex topic in itself, but for spousal benefits, two things are most important. First, while you're still alive, spousal benefits are subject to similar early-claiming rules as regular work benefits. Specifically, if your spouse claims benefits at age 62, then those benefits will be 30% smaller than they would be if he or she waited until the current full retirement age of 66. Of course, your spouse will also get four extra years of those benefits by claiming at 62 instead of waiting until 66, so whether that proves to be a smart move depends on life expectancy and other hard-to-predict factors.
Second, after your death, the survivors benefits your spouse will get depend on when you claimed Social Security. Your own potential benefits max out at age 70, and if you wait until then, your spouse's survivors benefits will also be the largest possible. But if you claim Social Security early, then you'll have smaller benefits when you retire, and those smaller benefits carry over to your spouse's survivors benefits after your death.
3. Coordinate your benefits and your spouse's benefits to earn even more
The two tips above deal with the basics of Social Security. But benefits can also get extremely complicated, and the best strategies take advantage of the rules to squeeze more money from Social Security.
For instance, one strategy many retirees use is to file for their own benefits but immediately suspend them. The filing allows your spouse to receive spousal benefits, while suspending your own benefits lets you collect delayed-retirement credits that will result in larger survivors benefits for your spouse after your death. Another strategy involves filing as a spouse first and restricting your application to receive spousal benefits based on your spouse's work history while again allowing your own benefits to grow. The net impact of these rules is to let a couple receive some benefits early on while also getting larger payments in the future.
These three tips aren't the only way you can boost your spouse's Social Security benefits. But they'll help you start thinking about Social Security as an opportunity to do the most you can to provide for your family's financial future.