Most married and divorced individuals may rely on spousal Social Security benefits as an income boost, particularly if the spouses or ex-spouses do not have significant earnings. Retired couples can benefit from knowing how these benefits operate, when one should claim them, and how to maximize payments. Those are three things all retired couples need to know regarding spousal Social Security benefits.
1. Eligibility criteria: Who qualifies for spousal benefits?
In order to qualify for spousal benefits, claimants must meet certain eligibility requirements as set by SSA. To qualify for benefits, an individual must be at least 62 years old and married to someone entitled to Social Security retirement or disability benefits. The couple must be married for at least one continuous year at the time of application. Or if the claimant is the caretaker for a child less than 16 years of age or a disabled child receiving benefits on the basis of his/her spouse’s record, the age restriction is waived.
Eligibility also applies to divorced couples married at least ten years with no further marital tie to anyone else, who are divorced from their former spouse, provided that the former spouse is 62 years and over and receiving Social Security benefits. Notably, divorced spouses sharing spousal benefits do not subtract from their ex-spouse’s benefits. Plus, spouses entitled to both benefits receive the higher amount. In case their monthly benefit is lower than that of the spousal benefits, SSA pays its benefit as the primary amount and supplements it to that of spousal benefits. Understanding such provisions would weigh the options for couples and divorced people on whether they are entitled and which benefits bring the maximum financial advantage.
2. Benefit calculation: What is the 50% rule and early reductions understand
Spousal benefits amount to as high as or equivalent to 50% of the primary insurance amount (PIA) of a worker, which refers to the amount he would be entitled if he began to claim upon reaching full retirement age (FRA). For example, if a spouse’s PIA is $2,000, that means the maximum spousal benefit when claimed at the FRA is $1,000 per month. However, if claimed before full retirement age, there is usually a reduction in the benefit. Thus, if a spouse applies for the benefits any time in between the two ages of 62 and an FRA, the benefit will be reduced permanently according to how early the application was placed. For more information on getting spousal benefits read this article, What are the marriage requirements for receiving Social Security spouse’s benefits? . The reduction decreases by 0.694% per month for 36 months before FRA, then for claims made before 36 months early, the reduction is about 0.416%.
Unlike benefits accrued from one’s own work record, spousal benefits do not acquire delayed credits for retirements. In other words, the spousal benefit remains as it is at half the PIA, no matter how long the worker delays his benefits beyond full retirement age. Couples can understand how different ages of claiming will affect them by using SSA’s spousal benefits calculator to determine the best option for them.
3. Claiming strategies and coordination
There are various claiming strategies which retired couples can use in maximizing their combined Social Security incomes. One example of claiming strategy is staggered filing in which the higher earning spouse postpones filing for benefit pay-out, thereby accumulating delayed retirement credits while the lower earning spouse claims spousal benefits at, or after reaching, full retirement age. This total household income rises ever so slowly using both delayed-credits and spousal supplements.
Moreover, the spouse initially receiving spousal benefits would later switch to worker benefits if such worker benefits increase because of additional work or delayed credits. This type of switching is permitted under Social Security; however, timing becomes critical since earlier claims are made with permanent reductions. In addition, couples should also consider survivor benefits in their plans. Surviving spouses can claim benefits of up to 100% of the deceased spouse’s PIA, so knowing how spousal and survivor benefits work together is essential in order to avoid erroneously reducing survivor benefits by claiming spousal benefits too early.
Tax considerations and other impact factors
To a level, combat income may subject spousal Security benefits to federal income taxation. If aggregated income exceeds certain IRS thresholds, as much as 85% of Social Security benefits may be taxable. Retirement couples should include this in their tax strategy. Further, because some government pensions reduce Social Security spousal benefits under the Government Pension Offset rule when the spouse has a pension from non-Social Security-covered employment, Social Security benefits will also likely suffer cuts.
Social Security spousal benefits can be considered sound financial sources for married and divorced retirees. Couples will be able to maximize retirement income by learning about eligibility, how the 50% spousal benefit and early claiming reductions applied, and how to coordinate filing strategies. Further personalization of the retirement plan can be done using resources from the SSA, benefit calculators, and financial advice. These are the key features for retired couples to gain a whole lot in terms of security against the financial future after retirement.
Read more: “You Earn It, You Keep it”: proposed bill would eliminate tax entirely on social security
