Calculating Spousal Benefits

A reader asks why his spouse's Social Security spousal benefit is less than half of his full benefit amount.

"I hope you can shine some light on a Social Security question. I'm a 70-year-old, born on June 26, 1955, who started receiving Social Security three or four months ago. As you can see in the attached Social Security Administration Benefit Verification Letter, my "full monthly Social Security benefit before any deductions is $4,600."My wife is 71, born in June 1954. She applied for spousal benefits and, after a couple of months, she received notification that her "full monthly Social Security benefit before any deductions is $1,800."It is my understanding that a spousal benefit is typically 50% of the primary benefit. Obviously, my spouse's monthly benefit is significantly less than 50% of my monthly benefit. If it comes into play, my spouse's career was primarily in teaching, and she receives a monthly gross benefit of $2,400 from the State Teachers Retirement System of Ohio.

Can you explain the discrepancy to me?"

Yep, I can clear it right up. Those numbers look to be correct, based on what you indicated. From the information you provided, your answer is actually stated right in the Social Security text you included. I believe you just don't understand the Social Security terminology. That's the disconnect.

The statement you provided states, "Your full spouse's benefit could be up to one-half of the amount your spouse is eligible to receive at their Full Retirement Age," where "Full Retirement Age" is in bold. That's the key; they're trying to emphasize that phrase.

You turned on your benefits a couple of months before turning 70, based on your description, but you were basically age 70 when your benefit started. However, age 70 is not your Full Retirement Age, or FRA. If you were born in 1955, your FRA was at age 66 and 2 months. Had you claimed then, your benefit at that time would have been the basis for the spousal benefit. Doing a quick calculation, it appears the number is right in line with that. Your FRA benefit was approximately $3,600 per month, which means your wife receives $1,800, or 50% of that amount.

Her having a career as a teacher no longer matters. For those individuals affected by the GPO and WEP provisions, which primarily impacted government workers and teachers nationwide, the provisions have been repealed since the beginning of this year. We no longer have to worry about teachers' pensions and similar factors affecting your Social Security benefits. Changes could come in the future, bringing some of those back, but right now, we don't have to worry about them.

Here's what occurred in your case. By waiting past your FRA to collect, you earned late retirement credits, which increased the size of your benefit. That helps in two scenarios. First, it helps you while you're alive, because it increases the size of your monthly check. Second, it helps your surviving spouse because the larger benefit you achieved by having delayed retirement credits is what she will receive when you pass away (assuming her benefit isn't larger, which we know it isn't). So, you both benefit now by having about roughly 25% more than you would have had you claimed at your FRA. The surviving spouse, whichever of the two of you it is, will still retain that higher benefit, so the delayed retirement credits helped there.

What it doesn't help is the spousal benefit that your spouse receives while you're alive, because that does not increase with delayed retirement credits. It is maxed out – as you'll recall, your document stated, "up to one half of the amount of …" Technically, it's based on your PIA, or Primary Insurance Amount, which is another term for your FRA retirement benefit. So, you need to perform some basic math to determine what your benefit would have been at 66 and two months. Your wife gets half of that.

There's no reason to go talk to Social Security. It looks like your numbers are correct. I hope my explanation has clarified things – for you and for any other readers.

Just remember: delaying won't increase the spousal benefit. It does increase your own benefit, and it does increase the potential survivor benefit that your spouse might receive. However, it does not increase the spousal benefit.