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Personal Finance: Understanding Social Security Spousal Benefits

Wednesday, September 17, 2014


Photo Credit: JMR_Photography via Compfight cc

Wondering whether you’re eligible for Social Security Spousal benefits? Confused by the complex answers you get to that question? 

Most folks know that Social Security pays benefits to spouses based on the record of the other spouse in the marriage. Either spouse is eligible for a spousal benefit, whether or not they are also eligible for a Social Security retirement benefit based on their own employment history.

Beyond this, however, there is a lot of confusion about spousal benefits. 

Let’s clarify some key aspects to help you to better understand this Social Security benefit.  

Who is Eligible?

Social Security is a gender neutral system; either spouse in a marriage may qualify for spousal benefits. 

In addition, as a result of the recent Supreme Court decision in Windsor invalidating part of the Defense of Marriage Act (DOMA), legally married same-sex spouses living in states that recognize same-sex marriages are also eligible for spousal benefits. The status of same-sex couples living in other states is still unsettled.

For one spouse to qualify for a spousal benefit, the other spouse must first file for his or her own retirement benefit. Anyone can file for a retirement benefit beginning at age 62, though doing so before full retirement age (FRA) results in a benefit reduction.  

Who is Not?

Only one spouse at a time can claim a spousal benefit. It is therefore important for couples to decide between them who will claim this benefit. This decision becomes even more important when each spouse is also entitled to their own retirement benefit; coordinating which spouse will take which benefit and when is key to maximizing lifetime income.

What is a Spousal Benefit Worth?

The amount of the spousal benefit is based on the full retirement age (FRA) of the other spouse. FRA is the age at which one can claim a full retirement benefit, known as the primary insurance amount, or PIA. Folks born from 1943 through 1954 have an FRA of 66.  

If you file for a spousal benefit at your FRA, you will receive a full spousal benefit, calculated as 50 percent of your spouse’s PIA. 

If you file before FRA, the spousal benefit will be subject to a reduction. As in the case of retirement benefits, you can claim a spousal benefit as early as age 62, but if you do it will be reduced. 

For example, if your FRA is 66, starting your spousal benefit at age 62 lowers it to 35 percent of your spouse’s PIA.  

Photo Credit: 401(K) 2013 via Compfight cc

Will My Spousal Benefit Change Depending on When My Spouse Takes their Retirement Benefit?

Your spousal benefit will be based on the PIA of your spouse regardless of when he or she actually starts their benefit.

In other words, even if your spouse takes a reduced benefit early or an increased benefit after delaying, your spousal benefit will not be affected. 

The factor that determines whether you receive a full or reduced spousal benefit is the age at which YOU claim it. Again, claiming at your FRA entitles you to a full spousal benefit valued at 50 percent of your spouse's PIA.

There is no credit for delaying a spousal benefit after FRA, unlike in the case of retirement benefits.

What if I am no longer married?

Divorced spouses can also qualify for spousal benefits on the record of their former spouse. Certain rules apply in addition to those for married couples: the marriage must have lasted at least 10 years, the claiming spouse must be unmarried, and the former spouse must be at least 62 years old and filed for a retirement benefit.

If the marriage ended more than two years prior, the requirement for the former spouse to have filed for a retirement benefit is waived. Remarriage disqualifies you for a divorced spouse benefit, but of course you then become eligible for a regular spousal benefit based on the record of your new spouse.

Consider working with an advisor with Social Security expertise to help you understand the rules and compare your own spousal benefit claiming options. Avoiding mistakes can result in tens of thousands of dollars in additional lifetime income which can make all the difference in the life you live in retirement. 

Joe Alfonso, CFP®, ChFC, EA regularly writes on financial topics and is an expert on Social Security planning. He is founder of the Fee-Only financial planning firm Aegis Financial Advisory (http://www.aegisadvisory.com) in Lake Oswego, Ore., and is the principal advisor for the firm. Joe is a CERTIFIED FINANCIAL PLANNER™ professional and an Enrolled Agent, admitted to practice before the IRS to represent taxpayers at all administrative levels for audits, collections, and appeals. He is a member of The National Association of Personal Financial Advisors (NAPFA).

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