What are our spousal benefits?
I began taking Social Security early at age 63. I am now age 68. My FRA began at 66. My wife will be 66 in 2017, when her FRA begins. Will she be entitled to the maximum 50% of my benefits when we apply for spousal benefits? My question is what determines "my benefit"? Will it be 50% of what I will be receiving in 2017 at her 66th birthday? Or will it be 50% of what would have been my benefit had I waited to begin my FRA at 66?
Social Security is a very important benefit and when you know the rules (including Spousal Benefits), you can help assure that you maximize your and your spouses benefits. If you start Security before Full Retirement Age, your benefit is permanently "penalized" or reduced vs. Full Retirement Age. this also reduces the amount your wife will get under spousal benefits...she will NOT be elegible for 50% of your FRA benefits, but rather a reduced amount as you started early.
If you are married, the spousal benefits allow one or the other (not both) the ability to get 50% of their spouses benefits (if larger than their own). It is even available for non-working spouses to get an additional benefit on top of the working spouses benefits.
However the rules have recently changed, so I am including hyperlinks to my summary of Five Pointers to Consider when Filing for Social Security Benefits (and hyperlinked pieces):
- Claiming Social Security Early
- Social Security – When to Start Them
- Social Security Claiming Strategies for Couples
- Planning for Social Security
- Why it Pays to Delay Taking Social Security
- My interview on the STA Money Hour (my daily radio show on 950AM KPRC in Houston at 12pm Central)with Andrew Hardwick
As financial planners, our advisors at STA Wealth have a broad understanding of how to advise our clients on maximizing their Social Security benefits – and the answer varies depending on each of our clients own personal circumstances.
I have more information on my website via this LINK.
In addition to my website, there is free software to help you maximize your benefits and there are also online tools at the Social Security Website: www.ssa.gov
When your wife files for benefits at full retirement age (FRA), she will be entitled to the maximum of either the benefit on her own record, or 50% of your FRA benefit. The fact that you are already receiving a reduced benefit does not affect the spousal amount.
Because your wife was born prior to January 2, 1954, and has not yet filed, the Social Security Administration provides another option. Your wife can file a restricted application allowing her to receive the spousal benefit, while allowing her own benefit to grow. She could then submit a new application to switch her benefit.
The amount of spousal benefit is calculated as 50% of what your spouse would get at their Full Retirement Age (FRA) unless he or she files early.
In your case, you file early at 63 (FRA = 66), so there will be reduction
- Total months filed early = 36 months
- Reduction = 5/9 * 36 months or 20% (5/9% of 1% for each month before FRA)
You get 80% of what you would get at FRA. Your spouse gets 50% of that 80% or 40% of what you would get at FRA.
Your Spousal Benefit
Since your spouse files at 66, or FRA, there is no benefit reduction. You are entitled to 50% of the spouse's benefit amount. However, you won't get both, only the larger of what your are currently claiming from your own benefit or from your spouse.
For more detailed explanation, check out Social Security Website.
Great question! Social Security can be very confusing with all the different rules, and I feel like SSA.gov makes it even more confusing. At age 66, your wife will be able to collect 50% of your benefit based on what your benefit would have been at your full retirement age. That is good news! Now she can continue to defer her own and grow it to age 70 while still collecting something while waiting. That is true unless half of your benefit will always be more than her own benefit.
The Spousal Benefit is a benefit the spouse can collect 50% of the spouse's current Social Security. The only time the spouse can collect the spousal benefits is when the other spouse has signed up for Social Security and started receiving the Social Security benefits. Now the 50% does not change your value, it's additional to the spouse. Your wife can start collecting 50% of your Social Security right now and when she signs up to receive Social Security, you can collect on her's as well.
You should seek a CFP or ChFC for current updated information on Social Security and to help guide you in the right direction with Social Security.
Thank you and have a great day!