Social Security’s Gift to Married Couples: Spousal Benefits

One of the benefits of being married is the ability to share your spouse’s Social Security benefits.  If you and your spouse are getting close to retirement you should know that there are various benefits available to spouses, including divorced or surviving spouses.

If you are reading this article, chances are you are already aware that Social Security spousal benefits are available and you’re looking for answers to questions, such as:

• My wife doesn’t have enough credits to qualify for Social Security; can she collect benefits based on my record?
• How can we maximize our family benefits?  Are there strategies that we should be aware of?
• My husband and I have been married for 35 years but are divorcing soon; what will happen to my spousal benefits when the divorce is final?
• What happens to my widow’s benefits if I remarry?
• I am collecting benefits on my ex-husband’s record, what happens if he dies?

Why is Planning for Spousal Benefits Important?

With Social Security making up approximately 40% of the average American’s retirement income, it’s important to maximize your lifetime benefits not only for yourself, but for your spouse also.

The rules surrounding spousal benefits are very complicated.   Making a wrong decision could mean a lower standard of living and could increase the chance that you will outlive your money.

Retirement Benefits for Spouses

Disclaimer:  For simplicity, this article assumes that the husband is the higher earner and that the wife will receive spousal or survival benefits based on her husband’s earnings.  However, the spousal rules are gender neutral; if the wife is the higher earner, or if it makes sense for other reasons, the husband can certainly claim spousal benefits on his wife’s earnings instead.

Wives can collect retirement benefits based on their husband’s earnings history even if they have never worked.  However, there are many rules and requirements that must be met, including:

• You must be married for at least one year before you can collect benefits based on your spouse’s earnings history
• You must be at least age 62
• Your husband must have filed benefits on his own record (that does not necessarily mean he is collecting benefits, see the “file and suspend” strategy below)

If there are minor children involved the rules are a little different.  Wives who are caring for a dependent child who is receiving Social Security can receive the spousal benefits no matter what age she is.  However the spousal benefits will end when the child turns 16 if the spouse is under age 62.

Who is a Spouse?

This may seem like a silly question, but in today’s world where you have multiple marriages in a lifetime, common-law marriages and same-sex marriages, it’s a legitimate question.

First, as stated above, Social Security is gender neutral.  So even though I’m assuming the husband is the “worker” and the wife is the “spouse” in this article, the husband could very easily be the spouse when it comes to spousal benefits.

Second, “spouse” typically means the current spouse, but divorced and widowed spouses can also receive benefits based on the worker’s earning history.  More about divorced and survivor benefits will follow.

Add in common law marriages and same-sex marriages and the definition of spouse gets really confusing.  Common law marriages are recognized by Social Security if they are legally entered into in a state that recognizes common law marriages and you act as if you are married.  So in some cases you can be a spouse for Social Security purposes even if you are not legally married.

On the other hand, same-sex marriages are not recognized by Social Security, so a partner in a same-sex marriage will not be considered a spouse, even if you live in a state that allows same-sex marriages.

How Much Can a Spouse Receive?

Spouses who qualify for benefits based on their husband’s earnings are entitled to the larger of their own benefit or 50 percent of their husband’s primary insurance amount (the amount he would receive at full retirement age).

If you qualify for spousal benefits and benefits based on your own work history, Social Security will calculate both and give you the higher of the two amounts; you cannot receive both added together.

It’s a common misconception that spouses will receive their husband’s full Social Security amount; this is not correct unless the husband has passed away.  While you are both living, the most you can receive in spousal benefits is 50% of the husband’s full retirement amount, and that’s only if you collect at your own full retirement age.

When Can You Start Collecting Social Security Spousal Benefits?

Spouses can start collecting benefits as early as age 62; however, similar to retirement benefits, applying before full retirement will result in reduced benefits.  This benefit reduction is permanent, so please make sure that taking benefits early is the best decision for you and your family before applying.

The reduction for taking benefits early is based on the number of months before the spouse reaches full retirement age.  For example, if you take spousal benefits at age 65, instead of 50% of your husband’s full retirement benefit you will only receive 46%; at age 64 you would receive 42%, at age 63 you would receive 37.5% and at age 62 you would receive just 35% of the full retirement benefit.

Unlike retirement benefits, spousal benefits do not continue to accrue beyond full retirement age, so it does not make sense to wait beyond your full retirement age to apply for spousal benefits.

Strategies to Maximize Your Family Benefits

Married couples have an advantage over single individuals; not only do they have two Social Security benefits available to them, there are a couple of spousal benefit strategies that can help maximize your family benefits.

Restricted Application

The restricted application is a way for couples who are still working at full retirement age to maximize their benefits.  The basic idea is to take a small benefit at full retirement age and a bigger one when you actually retire.  To implement this strategy, the higher earning spouse files a restricted application for his spousal benefit only at full retirement age, then switches to his own benefit at age 70.  This allows him to continue to accrue delayed retirement credits on his own benefit, which will result in a payment that is 32% higher than if he took his full benefit at full retirement age.

Under this scenario the lower earning spouse would apply for her own benefits at age 66 (or her full retirement age); however, she could apply for spousal benefits at age 70 when her husband switches to his own benefit, if that would result in a higher amount.

Note: you must be at full retirement age or older to submit a restricted application.  Also, this strategy works best when the higher earner has a lower life expectancy than the lower earner; so for many couples this will be the husband, especially if he is older than the wife.

File and Suspend

The basic premise of the file and suspend strategy is to file for your own Social Security benefits but then suspend the payments until a later date.  This allows delayed retirement credits to accrue which will increase your benefit when you resume payments.  It also allows your spouse to collect spousal benefits on your record, even though you are not yet collecting benefits.

There are two main advantages to this strategy.  First, your wife doesn’t have to wait for you to retire to start collecting spousal benefits, and second, not only will your benefits be higher, but the survivor benefit your spouse receives will be higher should you pre-decease her.

The higher earning spouse (who will be suspending benefits) must be full retirement age or older to file and suspend benefits.  This strategy works best when one spouse has little or no benefits based on her own record, and when at least one spouse is expected to live beyond the break-even point (generally late 70s, early 80s).

Divorced Spouse Benefits

Many people are surprised to learn that you can collect spousal benefits on an ex-spouse’s earnings record.  Divorced spouses can collect spousal benefits if the marriage lasted at least 10 years and if it has been at least 2 years since you have been divorced.  Similar to spousal benefits, you will receive the higher of your own benefit of 50 percent of your ex-spouse’s benefit.

The age requirement (must be age 62 to collect divorced spouse benefits) and reduction for early withdrawal of benefits applies just like it does for spousal benefits.  However, one of the main differences between divorced benefits and spousal benefits for the current spouse is that the divorced spouse doesn’t have to wait for her ex-husband to start collecting benefits before she can start collecting divorced spouse benefits.

If you are the ex-husband you may be wondering how your ex-wife collecting on your benefits affects your current wife and family.  The answer is “it doesn’t”.  The payment of benefits to an ex-spouse has no effect on the maximum family benefits for your current wife and family.

If you have been married more than once, and each marriage lasted more than 10 years, you may qualify for benefits on either ex-spouse’s record.   As long as you are not married at the time you apply (and you have been divorced for 2 years), you can apply for spousal benefits on any ex-spouse that you were married to for at least 10 years.

Tip:  If you are considering divorce and you have been married for close to 10 years, consider delaying the divorce until after you have reached the 10 year mark to allow the lower earning spouse to qualify for spousal benefits.  Benefits paid to an ex-spouse don’t affect your family maximum benefits, so it helps the wife and does no harm to the husband or his new family should he remarry.

Survivor Benefits

Finally, whether you are the current or ex-wife, if your husband passes away before you do, you may qualify for survivor benefits.  In general, survivor benefits are 100% of your husband’s benefit; however, survivor benefits will vary depending on the number of years worked, the earnings and if the deceased worker was already retired (and at what age).

Survivor benefits can be taken as early as age 60, or even age 50 if you are disabled.  A widow can choose to take survivor benefits at age 60 and then switch to her own benefits at full retirement age.

Widows will lose their survivor benefits if they remarry before age 60, however, once you have reached age 60 you can continue to collect survivor benefits even if you remarry.

Seek Professional Help

As you can see, there are many rules when it comes to spousal, divorced spouse and survivor benefits.  With pensions disappearing, dismal investment returns, and the decline in saving, it’s important to maximize your Social Security income.  While I hope this article has been helpful to you, I encourage you to work with a financial advisor who is well versed in Social Security before you apply for benefits to make sure you are getting the maximum benefits for you and your family.

[Note: The budget deal passed in November 2015 eliminated the file and suspend and restricted application strategies.  For more information, please read Budget Deal Eliminates File and Suspend Social Security Filing Strategy.]