Social Security is an essential part of most Americans’ retirement plans. About half of people 65 or older live in households where 50% of family income comes from Social Security. It is therefore essential to ensure that you get the most out of the government scheme.
Married couples may be considering one spouse receiving spousal benefits. Social Security spousal benefits entitle one spouse to receive benefits based on the income of the other spouse. They might be able to receive a higher benefit than if they applied based on their own work history alone, which would significantly increase family income.
But some rules might surprise you. Here are three to watch.
1. You can’t collect spousal benefits until your spouse claims retirement benefits
One thing that might confuse many married couples is that to receive spousal benefits, both partners must apply for Social Security.
This adds a lot of complexity to claims decisions when considering how this will affect the household’s total benefits. If the higher earner defers applying for Social Security until age 70 to maximize their personal benefit, the other spouse may have to settle for a lower benefit – or receive no benefit at all. benefit at all – until the highest earner decides to claim a benefit. .
That said, you will be able to apply for Social Security benefits based on your own income starting at age 62. Then, when your higher-earning spouse files for Social Security and you become eligible for spousal benefits, the Social Security Administration will increase your benefit to the higher benefit.
2. You won’t earn delayed retirement credits
The maximum spousal benefit is 50% of your spouse’s income. primary insurance amount (PIA), which is the amount received at full retirement age. This is not 50% of your spouse’s maximum benefit, which can be increased through deferred retirement credits.
Individuals who claim benefits based on their own earnings can earn delayed retirement credits equal to 8% of their primary insurance amount for each year beyond full retirement age. Unfortunately, those receiving spousal benefits will not receive any additional money.
Therefore, it rarely makes sense for anyone considering spousal benefits to delay applying for Social Security beyond full retirement age. This will be age 67 for anyone born in 1960 or later. But those born in 1957 and 1958 will reach full retirement age at 66 and 6 months and 66 and 8 months respectively. People born in 1959 can benefit from their full pension 10 months after reaching age 66 in 2025 or 2026.
3. You may receive a reduced benefit if you apply early
If you apply for Social Security before reaching full retirement age, you may not receive as many Social Security benefits as you hoped. This is true even if you initially claim your own benefit and later switch to a spousal benefit, once your spouse has claimed their own benefit. So don’t think that if you file at age 62 and then wait until age 67 for your spouse to apply that you will necessarily see a significant increase in your benefit checks.
The following table shows the impact of filing early on your personal and spousal benefits for someone who has reached full retirement age at 67.
|
Age |
Percentage of personal PIA |
Percentage of spouse’s PIA |
|---|---|---|
|
62 |
70% |
32.5% |
|
63 |
75% |
35% |
|
64 |
80% |
37.5% |
|
65 |
86.67% |
41.67% |
|
66 |
93.33% |
45.83% |
|
67 |
100% |
50% |
Data source: Social Security Administration
Algebra can make planning Social Security claiming ages extremely complex. Even more so when there is a significant age disparity between the spouses.
Although everyone’s situation is different, many retirees will maximize their household income by waiting to claim benefits as long as their benefits increase. This is the full retirement age for a spouse who will receive spousal benefits, and 70 for the higher-earning spouse.
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Applying for Social Security benefits for your spouse? 3 surprising rules to know. was originally published by The Motley Fool
