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  • Writer's pictureChris Stein, CFP®

New Spousal Benefit Rules

We have talked quite extensively about two aspects of the recent changes to Social Security filing rules (see the recent posts on Filing Restricted Applications and Suspending Benefits), but there is another small change that will impact a number of people.  The SSA has come down with new spousal benefit rules involving a person eligible for their own retirement benefit and also eligible for a spousal benefit from their spouse’s work record.

The Old Rule

Let me set the stage be describing the old rule:  If filing for benefits before your full retirement age (FRA) you were always “deemed” to be filing for any and all benefits to which you were eligible.  This meant that if you were eligible for a spousal benefit because your spouse had already filed, then you would be forced to apply for that benefit even if all you wanted was to file for your own benefit.  Not to go into great detail, but filing for one and not the other sometimes created greater lifetime expected benefits.  However, if your spouse had not yet filed when you go in then you were not eligible for a spousal benefit and could file for only your own benefit, which would be reduced since you were filing before your FRA.  Even if your spouse then filed a month later for their benefit the SSA did not adjust your claim.  You could continue to receive your own benefit and wait to your FRA to then turn on your now unreduced “Excess Spousal Benefit”.  The success of this approach hinged on the fact that you filed for your own benefit BEFORE your spouse unlocked the door to your spousal benefit by filing themselves.

The New Rule

Under the new rule the strategy above does not work.  Now if you file prior to your FRA and also prior to your spouse filing, you will receive your own reduced retirement benefit only, just as above.  But if a month later your spouse files then the SSA will also look at your claim and force you to file for a spousal benefit right then.  There is no longer the ability to delay claiming your spousal benefit until FRA while collecting your own reduced retirement benefit.  Let me illustrate the change in an example involving two fictitious individuals named George and Helen.

For Example…

George is 66 and Helen just turned 62.  George has a PIA of $1500 and Helen’s is $500.  This means that at age 62 Helen is eligible for her own reduced benefit of $375/mo or a spousal benefit of $550/mo.  If she waits to claim until 66 she would get either $500 (her own) or $750 (her spousal), depending on whether or not George had filed and unlocked her access to spousal benefits.  Assuming George had not yet filed when Helen turned 62, under the old rule she could file for her own benefit of $375, then at her age 66 switch to her spousal benefit, that due to early claiming calculations would total $625 per month.  This benefit would then continue until one of them passes away.  This would work even if George filed immediately in the month following Helen claiming at 62.  Even though at the time of George filing when Helen becomes eligible to receive a spousal benefit, the SSA let her remain claiming only her own until she ASKS to switch.

Lower Lifetime Benefits

Under the new rules if George files the month after Helen then the SSA will IMMEDIATELY switch her to her spousal benefit, which at that time would be $550 per month.  In the near term she does get more ($550 instead of $375), but she never gets the bump up to $625 as in the original strategy under the old rules.  She will get $550 per month until one of them passes away.  If we look at the “break even” point on this change we find that Helen is better off until about age 75, but if she collects the $550 beyond that age she will be receiving lower lifetime benefits compared to under the old rules.

This change may not affect as many people as the other more publicized changes, but it is one more example of the reduction of options that Social Security recipients experience from these recent Congressional changes to the rules regarding Social Security.

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