Timing Spousal Benefits

Someone from Ohio asks whether a wife nearing Full Retirement Age (FRA) can claim her own smaller Social Security benefit now, then switch to a spousal benefit once her husband files at his FRA.

"I have a question about spousal Social Security. My wife is 66, and I’m 65. She will reach Full Retirement Age (FRA) in two months (at 66 and 10 months). I won’t reach FRA until age 67, when I plan to start Social Security and stop working. My wife wants to know whether she can turn on her own benefit now (which is less th4pman half of mine) and then switch to half of my benefit when I turn mine on at age 67.

I like this question because, while it’s simple, it will help me clear up some confusion people may have.

The Basic Spousal Benefit Rule

To summarize, your wife is a little older and will start her retirement benefit at her FRA, which is earlier than when you reach yours and start your benefit. Her benefit is less than half of your Full Retirement Age Benefit, which Social Security calls the Primary Insurance Amount (PIA).

The standard situation is that your wife could be eligible to claim half of your PIA once you claim your benefit. However, receiving half depends on a few conditions: she won’t claim her benefits before her FRA, and you won’t claim yours before your FRA. Since she is a little older than you and you both expect to wait until your FRAs, she will have met the requirements to receive half of your PIA.

How Her Benefit Is Calculated

Let’s look at how spousal benefits are paid. For any spousal benefit someone qualifies for, Social Security pays the person’s own benefit first, if they have one. Then, Social Security pays an additional amount called a ‘spousal offset’ to bring the total up to the amount the person qualifies for.

If, on the other hand, the person seeking the spousal benefit has not earned a retirement benefit, Social Security will pay the full amount they qualify for. That will be 50% of their spouse’s PIA unless they have done anything to undermine that potential 50%, such as claiming a benefit early. For the record, in Social Security terms, ‘early’ means any time before Full Retirement Age.

The Effect of Claiming Before Full Retirement Age 

Here’s a common misconception: A wife claims her own benefit early, sometime after age 62 but before her FRA. Although her benefit will be reduced for claiming early, she figures she’ll have some income coming in. Then, once her spouse turns on his benefit and makes the spousal benefit available, she can switch to the spousal benefit and receive the full 50%.

That’s not how it works. Because the spousal benefit is a two-part payment (her benefit plus the spousal offset), she won’t actually receive 50% of his PIA. She will have permanently reduced her own portion by taking it early. She’ll be bumped up to something less than the 50% level.

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But in your case, even though your wife is talking about claiming before you, she won’t receive a lower benefit because of it. She won’t take a lifetime hit for claiming ‘early’ because ’early’ is tied to her FRA, not to claiming ‘before her spouse.’

She will have reached her FRA, so she can absolutely claim her own benefit, whatever the amount may be. (No numbers were shared regarding her benefit or your PIA.) Then, when you open the door to the spousal benefit in a couple of years, when you’re 67, she will get the bump up to the full 50% at that time.

There’s no penalty for her claiming. In fact, if she didn’t claim her own benefit and just waited for the spousal benefit, she’d likely be leaving money on the table, because claiming won’t harm her spousal benefit in the long run. Instead, she’d be able to collect for a couple of years before you reach 67.

What Changes When He Files 

Some people might say, "Yeah, but if she delays, her own benefit will grow." However, her own benefit growing through delayed retirement credits doesn’t increase the potential spousal benefit.

If hers were a standalone retirement benefit and she didn’t have the potential spousal benefit in the future when you claim, waiting would make sense because her lifetime benefit would increase.

But in this case, she doesn’t receive the normal lifetime reward of delayed retirement credits for waiting. All they're going to do when you open the door to the spousal benefit in two years is pay her the combination of her now slightly larger own retirement benefit, topped up with the spousal offset up to the 50% level.

We don’t have all the numbers here, and they might change my suggestion, but in a scenario like this, it probably makes perfect sense for her to claim at her FRA, as she intends to do in a couple of months. Doing so would cause no lifetime damage to any benefit, whether her own or spousal.

When Delaying Benefits May Help

The only exception is if delaying long enough could cause her benefit to exceed 50% of yours. Without the numbers, we can’t say, but for some people, it could be an incentive to focus on increasing her benefit by delaying her claim. You indicated that her benefit would be less than half of yours, but you didn’t specify by how much.

That exception is not often the case, but it could be, so you should explore it just in case.