• Chris Stein, CFP®

Clarification On A Potential Social Security Spousal Benefit

A reader from Michigan looks for clarification on the potential spousal benefit for his wife.


I am a 65-year-old anesthesiologist. God willing, I would like to work until I am at least age 72, and I don't intend to collect a Social Security benefit until I am 70. My wife is 60 years old and was employed long enough to collect a Social Security benefit on her own work history, but the amount will be less than her spousal benefit (50% of mine). My questions are two-fold: 1. If my wife starts collecting on her own work history at age 62 and switches to the spousal benefit at her FRA (at age 67), will her early collection reduce the size of her spousal benefit? 2. Will the amount of her spousal benefit be 50% of mine at FRA, or will it be 50% of mine at age 70?


"Spousal benefits" is a topic that causes confusion, primarily because Social Security does not make clear how those benefits are calculated in any publications. Instead, the process is simply mentioned as "half of your other spouse's benefit at their Full Retirement Age (FRA)."


Here's a better description of how it works: When you have your own benefit – but are eligible for a spousal benefit because it's larger – the Social Security Administration is paying you in two pieces. First, they're paying you your own benefit, and then they're increasing your benefit by what they call the "spousal offset."


I think it's easier to follow if I use some numbers here.


Let's pretend that your benefit is $3,000 at FRA. That would be on the high end of FRA benefits, reflecting a high-wage earner. The spousal benefit is half of that, or $1,500. But your wife has her own benefit, that is, say, $500 per month.


When she goes to collect, if she waits until her own FRA and if you have claimed, when Social Security goes to pay her benefit, they are actually going to pay her own $500, then top it off with another $1,000 to reach the full $1,500 – or half of your retirement benefit at FRA.


The two pieces are not separate and distinct. Your wife's benefit is paid first, and then the spousal benefit increases the payment up to half of your FRA benefit.


In short, if your wife takes any action that reduces her own benefit, that piece will be permanently reduced. If she were to claim her own benefit at 62, and if her FRA is 67, she would be lowering her own benefit by 30%. It will be reduced by $150 to $350 at age 62.


Then, once you claim and open the door to her spousal benefit, Social Security is still going to pay her the $1,000 offset – without adjusting it to reflect what she lost by claiming her benefit early. So, instead of getting $1,500, she's only getting $1,350.


So, will her claiming early affect her spousal benefit? Yes, absolutely. Her portion of the benefit that she reduced by claiming early will be permanently reduced.


As for the spousal offset, it will be paid in full as long as she only claims it once she has reached her FRA. But that's not what always happens.


Some people claim their own benefit at 62. Then, say at 64, the spousal benefit becomes available because the spouse claims his retirement benefit. If she claims her spousal benefit at that time, the spousal offset gets reduced because she claimed early – before her FRA.


So, the two benefits each have their own early-claiming calculations if she were to claim either one before her FRA.


Your second question comes up frequently, but I'm happy to repeat the answer because it is so confusing to people. Your spouse will not receive half of what you are collecting. Instead, she will receive half of what your FRA benefit would have been had you claimed at your FRA.


You say you intend to claim at age 70, so you will earn delayed retirement credits on your retirement benefit. But that does not change the spousal benefit. In our example, that $1,000 is a fixed amount, only to be changed by your wife's age when she files and not by your age when you file.


What muddies the waters a little is that people often confuse spousal and survivor benefits. With survivor benefits, if you were to pass away, your wife would receive what you are collecting, benefiting from the delayed credits you earned by waiting to claim at age 70.


So survivor benefits are affected by the original claimant's delayed retirement credits. But spousal benefits are not.


With all these moving parts, it's no surprise people get very confused. But, unfortunately, Social Security is not as straightforward as many people believe it to be: it has a lot of nuances.

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