People hear or read about claiming strategies involving spousal benefits, and they want to make sure they are not missing out on these benefits.
Here are some of the questions people often have about spousal benefits.
Q: Can I claim my spousal benefit when my spouse turns Full Retirement Age (FRA)?
A: You can claim your spousal benefit when your spouse claims his benefit. If they are delaying to, as late as age 70, you will have to wait until then to start your spousal benefit.
Q: Will my spousal benefit be 50% of my spouse’s benefit if I claim at 62?
A: No. Your spousal benefit will be 50% of your spouse’s Primary Insurance Amount (PIA) (not their benefit) if you claim it at your FRA. If you claim it at 62 your spousal benefit will be anywhere from 32.5% to 35% of your spouse’s PIA, depending on your birth year and FRA.
Q: Can I claim my spousal benefit and let my own benefit build delayed credits?
A: Only if you were born before Jan. 2, 1954. If you were born on or after that date, you must file for your own and your spousal benefit at the same time. You will be paid your own benefit first, and this will stop the accumulation of your delayed credits. You will be entitled to a spousal benefit only if your PIA is less than 50% of your spouse’s PIA. If so, that difference will be added to your own benefit so the total equals 50% of your spouse’s PIA assuming you are applying at FRA or later. If you apply before FRA, both your own and your spousal benefit will be reduced for early claiming. [Benefits by year of birth] ##Note for later question##
Q: Can I file and suspend so my spouse can receive a spousal benefit?
A: No. You cannot file and suspend. That strategy was abolished April 30, 2016. It is no longer possible for a husband, say, to file for his benefit (to entitle his wife to spousal benefits) and then suspend the benefit (so he can earn delayed credits). Now, if a husband wants his wife to start a spousal benefit, he must file for—and receive—his own benefit. [Not to be confused with being able to suspend your benefit. Suspension is still possible. … just NOT as the common strategy used before]
Q: Can I file for my reduced benefit at 62 and jump up to 50% of my spouse’s PIA at FRA?
A: No. If you file for your reduced benefit at 62, then when you later add on the spousal benefit [when they file for their own benefit … see ##Note for later question## , or question annotated with this note, two questions above], the difference between your PIA and your spouse’s PIA will be added to your existing reduced benefit. The total combined benefit will be something less than 50% of your spouse’s PIA.
Here are the basic rules for spousal benefits:
The worker spouse must have filed for his benefit. This is one of the most fundamental rules and it trips people up all the time. The husband wants to delay to 70. The wife turns 62 and wants to start her spousal benefit. She can’t even think about applying for her spousal benefit until her husband has filed for his benefit. She can start her own benefit as early as 62. But she cannot add on the spousal portion until he files. (Note: disability benefits count. If the husband, say, is age 60 and receiving disability benefits, his wife can file for her spousal benefit as soon as she is eligible: age 62 for a reduced benefit, or at wife’s FRA for the full 50% of his PIA.)
The applicant’s own benefit will be paid first. If an applicant is dually entitled—meaning she qualifies for a retirement benefit on her own work record and a spousal benefit based on her spouse’s record—the retirement benefit will be paid first. If the applicant’s PIA is less than 50% of the worker spouse’s PIA, that difference will be paid in addition to the retirement benefit so the total equals 50% of the worker-spouse’s PIA, if claimed at FRA. (Note: an exception exists for those born before Jan. 2, 1954. They are grandfathered under the Budget Act of 2015 and may restrict their application to their spousal benefit. This allows them to receive 50% of their spouse’s PIA while their own benefit builds delayed credits to age 70.)
Benefits will be reduced if claimed before FRA. The spousal benefit will be 50% of the worker spouse’s PIA only if the spouse claims the benefit at FRA or later. If the spousal benefit is claimed before FRA, it will be as little as 32.5% of the worker spouse’s PIA depending on the spouse’s FRA as determined by birth year and claiming age. See the Quick Reference Guide for the full reduction table.
Here are some more rules for spousal benefits:
You cannot receive a spousal benefit while your own benefit is in suspension. Prior to the Budget Act of 2015, it was possible to start a combined own/spousal benefit before FRA and then at FRA suspend the retirement benefit while continuing to receive the spousal portion. This would allow the retirement benefit to grow while allowing the client to still receive the spousal add-on. Now, if the retirement benefit is suspended, the spousal benefit would have to stop [and all other benefits based on suspended benefit are suspended too]. It is not possible to receive another benefit while your own benefit is in suspension.
For spouses who worked in noncovered jobs [didn’t pay into Social Security] and who apply for their spousal benefits before FRA, the Government Pension Offset (GPO) will be applied to the reduced benefit. Here’s an example: The husband’s PIA is $2,500. The wife’s teacher retirement system pension is $1,384. If the wife claims the spousal benefit at 62, she will not be entitled to a spousal benefit because 2/3 of the pension ($923) will be subtracted from the reduced spousal benefit ($2,500 x 1/3 =$825. $825 – $923=$0). However, if she waits until her FRA to claim, the $923 will be subtracted from $1,250, giving her a spousal benefit of $377.
Let’s say it’s the husband also worked in a noncovered job. The spousal benefit will be based on the worker-spouse’s WEP-adjusted PIA. His PIA is $1,200. After the Windfall Elimination Provision (WEP) reduction it’s say $750. The wife’s spousal benefit will be 50% of $750 if she takes it at her FRA. If she also worked in a noncovered job and receives a pension from that job, then the GPO would apply to her spousal benefit and 2/3 of her pension will come off of the $750.
Yes, spousal benefits may be a bit confusing, especially if there are more facts involved such as the WEP and/or GPO. If you get an unexpected answer from Social Security, you can ask to speak with a supervisor to explain that decision more. Better yet, talk with an informed and knowledgeable financial adviser who is very comfortable with the Social Security rules so you go in, or back in, better armed with what to ask for. Social Security workers cannot, by their rules, give you advice or help you strategize; they can only tell you what are benefits are today.
What about Medicare benefits for spouses?
If one spouse has never worked, they may qualify for free Part A based on the other spouse’s earnings record. The spouse claiming the Medicare must be at least 65, and the spouse on whose record the Part A is being claimed must be at least 62.
Part B is not related to the earnings record, because everyone pays a premium for Part B. So a spouse who never worked, but who is age 65 and a U.S. citizen or legal resident, can have Part B as long as they pay the premium. In this case the other spouse’s age is not relevant.
Original article for an adviser newsletter by Elaine Floyd, CFP®, Director, Retirement and Life Planning, Horsesmouth, LLC, within which I’ve made edits for the broader public.
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