Removing The Confusion Surrounding SPOUSAL Social Security Benefits

Over the last few weeks, I’ve been answering all the questions new Relaxing Retirement members (Ron and Rita) posed to me.

In this blog entry, I’d like to share the answer I gave to Rita surrounding when she should begin collecting her benefits.

I wanted to isolate this question for you because there’s lot of confusion about “spousal” benefits.

To begin with, Rita did work over her lifetime, so she has qualified to receive social security benefits on her own. However, when her children were younger, she stopped for periods of time so her benefits are significantly lower than Ron’s.

The first thing I explained to Rita was that she has two ways of calculating her benefits.

Spousal Benefits

Even If she never worked over the course of her lifetime, Rita’s still entitled to one-half of Ron’s benefit at the very least (depending on when she decides to begin collecting as we’ll discuss in a moment).

Since she’s also eligible for benefits due to her own employment history, Rita has a decision to make as to which set of benefits to collect.

For example, let’s assume for a moment that Ron waits to collect his full social security benefits of $2,000 per month at age 66.

Given this, Rita’s spousal benefit is $1,000 per month as Ron’s wife.

If Rita’s social security benefits from her employment are greater than $1,000 per month, she’d begin benefits under her own employment records.

However, if they’re less than $1,000 per month, she’ll collect spousal benefits.

Four Other Issues to Clarify

Here are four other very important points to clarify:

  1. If Rita has reached her full retirement age, she may begin collecting “spousal” social security benefits even if she continues to work and accrue benefits under her own account. When she later retires, if her benefits are greater, she may then choose to switch her social security benefits from “spousal” to benefits from her own employment account.
  2. If Ron began receiving his benefits at age 62, his actual benefit would have been $1,500 per month (75% of his full retirement age benefit at age 66). Even though Ron began receiving his benefits at age 62, Rita may decide to wait to begin receiving ‘spousal’ benefits at her age 66.

*** If she chooses to do so, she doesn’t receive 50% of Ron’s reduced benefit of $1,500 per month (for beginning his benefits at age 62). Rita would receive 50% of Ron’s full retirement benefit ($2,000) as if he began receiving benefits at age 66, or $1,000 per month.

  1. If Rita decided to begin receiving her reduced ‘spousal’ benefit of $700 per month at age 62 (35% of $2,000 per month instead of 50%), she may not later draw an increased ‘spousal benefit amount at age 66.
  2. Assuming for a moment that Rita was younger than Ron, she may not begin collecting any social security benefits before she reaches age 62. (The exception is if Ron passes away. In that case, assuming she has no dependent children, Rita could begin collecting at age 60.)

As you can see, there is a lot of room for confusion and the decision is not as clear cut as you may like it to be.

The key is knowing the rules and fully weighing all options before you begin collecting your benefits so that you can receive the largest amount you are entitled to receive.

In a future blog entry, we’re going to move on to talking about how your social security benefits are taxed when you begin receiving them, and what you can do about it.

Stay Tuned.