What You Don’t Know About Social Security Spousal Benefits Can Hurt You

There’s been a lot of talk lately about Social Security filing strategies, specifically strategies around Social Security spouse benefits.

And for good reason; one of the many benefits of being married is that you may be able to collect Social Security benefits based on your spouse’s earnings, even if you didn’t work enough to qualify for Social Security retirement benefits on your own.

Related: Can a Home-Maker Collect Social Security?

This can be a great tool to help you maximize your family’s total Social Security benefits. However, most people don’t understand how spousal benefits work. And making the wrong decision can cost you tens of thousands (even hundreds of thousands) of dollars over your lifetime. Here are some key facts you should know about Social Security spouse benefits.

History

When Social Security was first created in 1935, it only provided retirement benefits, and only the person who worked and contributed to Social Security received any benefits. While this was a huge help, especially given that this was during the Great Depression, there was still a considerable financial burden for workers with dependent family members and for widows (who received nothing under the original act if their husband passed away).

One of the first amendments was to add spousal and survivor benefits. This shifted the focus from just a retirement program to a family based program.

Amount

When you collect Social Security spouse benefits, you generally receive 50% of the amount your spouse would receive at their full retirement age. This is known as their primary insurance amount (PIA).

Your full retirement age depends on your year of birth. For most baby boomers, 66 is the full retirement age. For people born in 1955 or later, the full retirement age increases by two months for every year you were born after 1954.

However, if you decide to collect spousal benefits before you reach your full retirement age, the amount you will receive will be reduced significantly.

For example, if you collect spousal benefits at your age 62, the amount you will receive will be only 35% of your spouse’s PIA. This reduction is permanent, so you should review your options carefully before making this decision.

Also, if you qualify for benefits based on your own work record and you apply for benefits before your full retirement age, the Social Security Administration will pay you your benefit if it is higher than the spousal benefit you would receive. When you are under full retirement age you do not have the option of choosing which benefit you want to collect; the SSA will automatically pay you the highest benefit you qualify for.

Once you reach your full retirement age, then you can elect to receive only the spousal benefit and delay your own benefit (this can be a great strategy as it allows your own benefit to continue accruing credits).

Example: Fred applies for retirement benefits at age 66 (his full retirement age) and is receiving $1,500 per month. Wilma is age 65 and also wants to retire. She has worked as many years and earned a similar salary as Fred, so her benefit at age 65 would be $1,350, even reduced for early retirement. Her spousal benefit, also reduced for early retirement, would be $690. Social Security will automatically pay Wilma $1,350 because she is under the full retirement age and her own benefit is higher than the spousal benefit she would qualify for.

However, once Wilma turns age 66 she can choose to take the lower spousal benefit and allow her own benefit to continue growing. Why would Wilma want to take the spousal benefit when it is so much lower than her own benefit? By taking the spousal benefit, she is receiving some income to help cover living expenses, but she is allowing her own benefit to continue growing. If she waits until age 70 to start collecting her own benefit it will be close to $2,000; this is significantly higher than her benefit at 65 and will be very helpful in her later years when living expenses will be higher due to inflation.

Age

The earliest you can collect spousal benefit is age 62. However, as noted above, your benefit will be reduced if you receive payments before your full retirement age.

Also, in order to collect spousal benefits, your spouse must already be collecting Social Security, or they must have filed and suspended their benefits. Note that you can only file and suspend your benefits if you are at full retirement age or older, so if your spouse is under full retirement age and has not yet retired, you can’t collect spousal benefits on their record until they retires or until they reach their full retirement age and elect to file and suspend their own benefits.

Divorced Spouse Benefits

If you were married to an ex-spouse for at least 10 years, you can collect spousal benefits on their record.

To qualify for benefits on an ex-spouse’s record you must have been divorced from your ex-spouse for at least two years and you must be unmarried. If you later remarry, you will no longer be eligible for benefits on your ex-spouse’s record; however, you may qualify for benefits on your new spouse’s record.

One key difference between spousal benefits and divorced spousal benefits is that a divorced spouse doesn’t have to wait for the ex-spouse to retire to collect benefits. While the ex-spouse must be retirement age (at least age 62), they do not have to be retired or collecting benefits for you to claim benefits on their record. This is to avoid an ex-spouse delaying their retirement to keep their ex from collecting benefits on their record.

Widow Benefits

Survivor benefits can be collected as early as age 60 or age 50 if you are disabled.

As with retirement benefits, the survivor benefit will be reduced if you take it before your full retirement age. However, collecting widow benefits before your full retirement age does not reduce your own retirement benefit, so one strategy might be to collect widow benefits first, then switch to your own benefit later if it will be higher.

If you remarry before age 60 you will not be able to collect survivor benefits on a deceased spouse; however, remarriage after age 60 does not affect your benefits.

Note: the “file and suspend” and “restricted application” strategies mentioned above were eliminated by Congress in 2015.  File and Suspend is no longer available to anyone; the restricted application is still available to people who were born before January 1, 1954.

Related: Can a full-time homemaker collect Social Security?  

Spouses who have never worked, or who didn’t work enough to qualify for Social Security on their own, can collect spousal benefits based on their wife or husband’s work history.  This rule was created back when it was common for families to have just one bread-earner. Before this rule was passed (back in 1939), if the working spouse passed away, this caused financial difficulties for the surviving spouse, especially if they didn’t work or qualify for Social Security on their own.  Today, homemakers can still qualify for spousal benefits even though the family dynamic has changed (and it’s now more common for both spouses to be working and to qualify for Social Security.

Related: Can I collect spousal benefits first, then switch to my own benefit later?

If you were born before January 1, 1954 you can apply a strategy called “restricted application”. This strategy allows you to apply for spousal benefits once you turn full retirement age (assuming your spouse is collecting benefits), and then switch to your own benefit later (most people who implement this strategy delay their own benefit to age 70 to get the maximum amount allowed). This strategy was eliminated by the 2015 budget act, but people born before 1/1/54 were grandfathered in. Click here to learn more about claiming spousal benefits and delaying your own.