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Morgan and Alex are evaluating their Social Security options and recently heard about the spousal benefit where one spouse can draw on the other spouse’s qualifying record. Intrigued, they dug further into the topic and learned a great deal. They’re excited about this because Alex earned much less than Morgan throughout their working years, and the spousal benefit might provide more income for Alex during retirement.
Spousal benefits are typically available whether one is married or divorced. The benefit is calculated based on the spouse’s earning record and the age at which the benefit is claimed. The maximum spousal benefit is 50% of the spouse’s Primary Insurance Amount (PIA – benefit at full retirement age).
Qualifications
Since Alex and Morgan are married, Alex must meet the following qualifications:
– Alex must be at least 62.
– Morgan must be drawing Social Security benefits.
– Alex’s Social Security benefit must be less than the spousal benefit.
If Alex and Morgan were divorced, the qualifications for Alex to claim spousal benefits would be a little different:
– Alex would still need to be at least 62.
– Alex can’t be remarried, but Morgan can be remarried.
– Morgan doesn’t have to be drawing Social Security, just eligible to claim it (age 62 or older)
– The marriage had to have lasted at least ten years.
– The divorce had to be more than two years ago.
Deemed Filing
The Bipartisan Budget Act of 2016 created “deemed filing,” which means that when you file for either your retirement or your spouse’s benefit, you are required or “deemed” to file for the other benefit as well. You will receive the higher of the two benefits.
Reduction of Benefits
Drawing Social Security before Full Retirement Age (FRA) permanently reduces benefits, whether they’re on one’s own record or on the record of a spouse/ex-spouse. The amount that is actually available for the spousal benefit is determined by the age at which the benefit is claimed.
Here are some examples of how spousal benefits work, assuming all qualifications are met.
Example 1: If Morgan’s PIA is $1,000 and Alex’s PIA is $400, Alex’s benefit at 62 would be reduced by 30% to $280. Alex’s spousal benefit would be reduced by 35% to $325 (half of $1,000 x 65%). Since the spousal benefit is higher, Alex will be paid $280 plus $45 to reach the spousal benefit of $325.
Example 1a: If Alex decided to wait until age 67 (FRA in this case) to apply for benefits, the spousal benefit would be $500 (50% of Morgan’s PIA of $1,000), and Alex’s PIA would be $400. Since the spousal benefit is higher, Alex receives the $400 and an additional $100 to reach $500.
Example 2: If Morgan’s PIA is $900 and Alex’s PIA is 500, then at 62, Alex’s benefit would be $350 (30% reduction), and the spousal benefit would be $292.50 (35% reduction on 50% of $1,000). Social Security will pay Alex’s benefit of $350.
Example 2a: If Alex waits until age 67 to claim benefits, the spousal benefit will be $450, and Alex’s benefit will be $500, so Social Security will pay on Alex’s benefit of $500.
Reductions for claiming before FRA vary, whether your own benefit or spousal benefits and the math can be complicated. We can help sort out the numbers, so you have complete information to make the best decision for yourself.
Be sure to check out the Social Security pages on spousal benefits here and here to learn more and contact us to answer any questions about spousal benefits.
