• Chris Stein, CFP®

Tips to Maximize a Spousal Social Security Benefit

A reader would like to know if her husband's Social Security spousal benefits would be penalized if she claims her benefits early.

"I'm 62, have been downsized, and will not be going back to work. My husband is 66½ and is still working. We both intended to wait until 70 to file for Social Security benefits. But I understand there is a "loophole" in Social Security that, based on our ages, would allow me to file at age 62 and my husband to file against my record. (He was born in September 1953; I was born in May 1958.) I believe it's called an auxiliary or spousal benefit. He would still be able to file against his work record at age 70 when he can draw the highest amount.

If I file early, at age 62, and I live past my mid-70s, I calculate that my lifetime benefits will be lower than if I wait to age 70. However, if my husband can file against my benefit, even if I file early, and can collect while waiting to collect his own, our combined lifetime benefits will be much higher.

My benefit at age 62 is $1,400, but at full retirement age (FRA), it would be over $1,900. Two people at Social Security gave me two different answers about how it works. So, would my husband receive 50% of my age-62 amount ($700)? Or 50% of my FRA benefit ($980)? Obviously, there's a difference between those two figures, and I am wondering if you can help us."

The second answer is the correct one in this particular case.

The spousal benefit amount is based upon the full retirement age (FRA) benefit of the person who has claimed. If you claim at age 62, your benefit will be reduced to $1,400 instead of more than $1,900 at your FRA.

The FRA has traditionally been age 66. It only started increasing above 66 for those born in 1954 or later. Because your husband was born in 1953, his FRA is 66. (Your FRA, on the other hand, is 66 and 8 months, because you were born in 1958. But, for this, only his FRA matters.)

That means you don't have to wait. Since at age 66½, your husband has reached his FRA, once you have claimed your benefit (even though it's early), that unlocks the door for him to collect half of your FRA benefit, or "PIA" as we call it: Primary Insurance Amount.

The $980 amount you mentioned is correct. The first answer from Social Security was wrong. The spousal benefit isn't half of what you're collecting. It starts with half of your PIA. However, if your husband were below his FRA, that would reduce his benefit. It's true that early claiming can reduce the spousal benefit, but it's related to his age, not yours when you first claim.

So, yes, he can take advantage of the "loophole" that you mentioned. It would entail your husband filing a restricted application, claiming only the spousal benefit from your numbers (the $980 per month), and letting his benefit grow until he turns 70. He would switch to his then-maximized benefit. This plan is available to him because he was born before January 2, 1954, and he's part of that grandfathered group that is allowed to do so still.

A lot of the people at Social Security are relatively new or inexperienced, and they may give you some resistance to this, but he absolutely can do this. The only key is that you must file first. That is always the first step to enable a spousal benefit, which can only be claimed if the person upon whose record it is being claimed has already claimed their retirement benefit.

Because you're only 62, when you file for your own benefit, you will permanently reduce the amount of that benefit. But, because of the loophole, as a couple, you are going to get paid for your husband to wait. You're going to get that extra $980 until he reaches age 70. And at least you'll maximize one of the two benefits.

The only time this might come back to haunt you is if you both live an exceptionally long time. Because you permanently reduced your benefit, you will eventually be penalized. The reduction incurred by claiming at age 62 will overcome the benefit of your husband getting the $980 per month while you get $1,400.

It will take some time, so while it's mathematically possible for this to be a bad idea (if you live a very long time), statistically, this is usually a pretty good option to consider.

I don't have all your figures, so I'm not calculating what you should do. Besides, you weren't asking me my opinion of whether you should or shouldn't do this; you're asking if you could do it. And the answer is: yes, you can.

You claim, then your husband claims a restricted application immediately, delaying his claim until he maximizes at age 70. Then the $980 will stop, and he will collect his age-70 benefit. You'll continue getting your $1,400, and he'll be getting his maximized age-70 benefit.

In the meantime, it's a way for you to collect $1,400 per month and for him to get the $980.

Jim's best friend Mosby

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