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  • Writer's pictureChris Stein, CFP®

Question on Spousal Benefit Reduction

We received the following question regarding trhe Social Security spousal benefit recently from one of our podcast listeners…

“What is the best claiming strategy to receive the maximum amount of Social Security for my wife?  I am 7 years older than my wife I want to delay taking my Social Security until I am 70. I will receive around $3000 if I wait until 70. Since my wife spent 20 plus years raising our children her social security for herself at full retirement is far less than half of mine. She will be 63 when I start claiming mine at 70. Will the half of mine be reduced for her at 63 or is the reduction only if she claims hers?”

Overall Benefits

There are two issues I’d like to address with this question.  First, the goal of delaying until 70 to claim in order to maximize your own benefit is often debated by those giving advice to retirees.  I am always concerned when the discussion involves arguments against delaying that focus solely on the benefits paid to the one person claiming.  It is true that if you live an average life expectancy that the overall benefits paid to you will be substantially the same whether you claim at 62, 65, 67 or 70.  Many people use this to make the argument that one should claim as early as possible to get the benefit while young enough to enjoy it and since you will end up getting the same amount it doesn’t really matter either way.

Spouse Involved

I could not disagree more.  Not to say everyone should delay filing, but everyone should make the decision with eyes wide open as to the overall effects when there is a spouse involved.  When one spouse passes away, the surviving spouse will be left with just one of the two Social Security benefits.  Couple this with the fact that the living expenses for the survivor will not drop much at all and you have a recipe for financial hardship that will make the emotional loss of one’s spouse, leading to a very unhappy later retirement period for the survivor.

For this reason it is important to seriously consider creating the largest benefit to be left to the survivor by having the higher earner delay claiming as long as possible (up to age 70).  I applaud this listener in his goal to do exactly that by creating a $3,000 monthly benefit that will continue after the passing of either spouse.

Reduction in Spousal Benefit

The second issue is the reduction in the spousal benefit paid to the wife if she claims “early”.  The listener does not indicate his wife’s age today so I cannot determine her full retirement age for sure, but it will be somewhere between 66 and 67.

Let’s assume it is age 67, which is the full retirement age for anyone born in 1960 or after.  Whenever you claim a retirement or spousal benefit prior to your full retirement age your benefit will be reduced.  The reduction for a spousal benefit is 25/36 of one percent per month for each month before FRA, up to 36 months, then 5/12 of one percent per month over 36.  Therefore, if your wife claims her spousal benefit at age 63 (48 months prior to her FRA), her benefit will be reduced by 30% compared to what she would receive if she claimed at age 67.

Since I do not know the exact ages I cannot compute the exact primary insurance amount (PIA) for the husband, but let’s assume it is $2,300 (based on the $3,000 age 70 benefit divulged).  With a $2,300 PIA for the husband, the wife is due a $1,150 spousal benefit at her FRA.  However, if she claims at age 63 she will only receive $805 (a 30% reduction).  The act of the husband delaying to 70 does NOT increase the spousal benefit, but it does create a larger survivor benefit if he passes away.

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