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The Social Security Spousal Benefit – Further Explanation

Roosevelt Signs The Social Security Act
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Following up my article which provided several brief examples of the Social Security Spousal Benefit, I thought I’d provide some further explanation and background for the provision. It appears from some of the feedback I have received that there is a great deal of confusion over this provision, so hopefully the further background explanation that I’m providing here will be of help.

I have listed below several additional background details about how the Social Security System works, in order to help you better understand the prior article.

Additional Background Explanation

As stated at the outset of the previous article, this is one of the most confusing provisions of the Social Security system. Don’t expect to fully understand the tenets of the provision in a brief reading – you’ll want to read through the examples carefully, comparing each example to your own situation and considering the outcomes.

1. In the original article, I used two acronyms in my explanations, both of which were explained briefly at the outset of the article. I’ll explain and define each of them further here.

FRA – Full Retirement Age. This is the age at which you would become eligible for your full Social Security benefit (also known as your Primary Insurance Amount, which we’ll get to next). It used to be that FRA (Full Retirement Age) was 65 for all people – but with the 1983 amendment to the system, the age was gradually increased. Full Retirement Age (FRA) depends on your year of birth, according to the table below:

Year of Birth FRA
1937 or before 65
1938 65 and 2 months
1939 65 and 4 months
1940 65 and 6 months
1941 65 and 8 months
1942 65 and 10 months
1943-1954 66
1955 66 and 2 months
1956 66 and 4 months
1957 66 and 6 months
1958 66 and 8 months
1959 66 and 10 months
1960 or later 67

PIA – Primary Insurance Amount. This amount is, for most folks*, equal to the amount that you would receive at Full Retirement Age (FRA). This figure is the primary figure against which all calculations are run for figuring your retirement benefit, and for calculating a Spousal Benefit for your wife or husband.

* If an individual is also receiving a pension from a job which was not subject to Social Security withholding taxes, such as a teaching job or a federal, state or local government job, certain reductions will likely apply. You can read more about the impact of these non-Social Security jobs at this article which explains the Windfall Elimination Provision and the Government Pension Offset (WEP and GPO respectively, if you’d like more acronyms).

2. There is a minimum age at which you become eligible for Social Security retirement benefits, and this is the same for all people, 62. If you file at this age (or at any age before Full Retirement Age), you will be subject to a reduction from your Primary Insurance Amount (PIA) based upon the number of months you’re filing before Full Retirement Age. It’s a somewhat complicated formula (but then again, what about this system isn’t?) so rather than explaining how to build a watch I’ll show you what time it is.

The table below shows the reduction factors for various ages and years of birth. You’ll need to find the row for your Year of Birth, and then work your way across to the right for your reduction factor at various ages. Space limitations don’t allow us to display every possible age (limited to exact years), but you can get the idea of how the reduction works for ages in-between.

Year of Birth 62 63 64 65 66 67
1937 or before -20.00% -13.33% -6.67% 0.00%
1938 -20.83% -14.44% -7.78% -1.11%
1939 -21.67% -15.56% -8.89% -2.22%
1940 -22.50% -16.67% -10.00% -3.33%
1941 -23.33% -17.78% -11.11% -4.44%
1942 -24.17% -18.89% -12.22% -5.56%
1943 to 1954 -25.00% -20.00% -13.33% -6.67% 0.00%
1955 -25.83% -20.83% -14.44% -7.78% -1.11%
1956 -26.67% -21.67% -15.56% -8.89% -2.22%
1957 -27.50% -22.50% -16.67% -10.00% -3.33%
1958 -28.33% -23.33% -17.78% -11.11% -4.44%
1959 -29.17% -24.17% -18.89% -12.22% -5.56%
1960 or later -30.00% -25.00% -20.00% -13.33% -6.67% 0.00%

 

To use this table, find your Year of Birth in the first column. Move right until you reach the age that you wish to begin early benefits. This figure is the amount of reduction from your Primary Insurance Amount (PIA, see the explanation above) that you will experience by filing at this age.

At the earliest filing age of 62, for a person who was born in 1960 or later the reduction factor will be -30%. In other words, if this person files for benefits at age 62, the benefit would be 70% of the amount that this person would receive if he or she waited until Full Retirement Age (FRA) of 67 to file for benefits.

(FYI – there is also a maximum age for all people, after which your Social Security benefit will no longer earn delayed credits, and that is age 70. Delaying receipt of your benefit after Full Retirement Age causes an increase to your benefit, up to age 70.)

3. A Spousal Benefit can be available to one spouse or the other but not both. The maximum amount that this benefit could be is 50% of the other spouse’s Primary Insurance Amount (PIA, the amount that he or she would receive at Full Retirement Age). The 50% amount is available if the spouse applying for the Spousal Benefit is at least Full Retirement Age. If he or she is younger than Full Retirement Age, a reduced amount could be available. The reductions are listed below:

Year of Birth 62 63 64 65 66 67
1937 or before -25.00% -16.67% -8.33% 0.00%
1938 -25.83% -18.06% -9.72% -1.39%
1939 -26.67% -19.44% -11.11% -2.78%
1940 -27.50% -20.83% -12.50% -4.17%
1941 -28.33% -22.22% -13.89% -5.56%
1942 -29.17% -23.61% -15.28% -6.94%
1943 to 1954 -30.00% -25.00% -16.67% -8.33% 0.00%
1955 -30.83% -25.83% -18.06% -9.72% -1.39%
1956 -31.67% -26.67% -19.44% -11.11% -2.78%
1957 -32.50% -27.50% -20.83% -12.50% -4.17%
1958 -33.33% -28.33% -22.22% -13.89% -5.56%
1959 -34.17% -29.17% -23.61% -15.28% -6.94%
1960 or later -35.00% -30.00% -25.00% -16.67% -8.33% 0.00%

 

Following the example listed above where a person born in 1960 or later files for Spousal Benefits at age 62, the 50% factor is reduced by 35%. In other words, the Spousal Benefit factor for this person would be reduced to 65% of the full 50% factor, which calculates to 32.5% of the other spouse’s PIA.

4. Furthermore, the Spousal Benefit is only available if the other spouse has filed for benefits already. Stay with me on this – it’s confusing. This means that until the other spouse files for retirement benefits, the first spouse can’t file for Spousal Benefits. Once the other spouse files for retirement benefits, the first spouse, as long as he or she is at least age 62, can file for Spousal Benefits. It’s important to note that the Spousal Benefit is available only to one spouse in the couple at at time – not both, so you have to choose which option works out better for you and your spouse.

5. At Full Retirement Age, a special provision is available that allows one spouse or the other to file for her own benefit and then suspend receiving the benefit; this will enable the other spouse to file for Spousal Benefits based upon the first spouse’s record. Since the one spouse has suspended receiving her benefit, she can continue to accrue delayed retirement credits up to age 70, while at the same time the other spouse is now eligible to file for Spousal Benefits based upon her record.

6. If the Social Security recipient is filing for benefits prior to Full Retirement Age and he is also eligible for the Spousal Benefit at the same time (that is, his spouse has already filed for her own benefit), then another special provision applies, called Deemed Filing. Deemed Filing requires that, if the individual is eligible for both the Spousal Benefit and his own benefit and is younger than Full Retirement Age, then that individual must file for both benefits at that time. The only other alternative is not filing for either benefit.

If the individual is not currently eligible for the Spousal Benefit and he is filing for his own benefit prior to Full Retirement Age, Deemed Filing does not apply – even if a month later his spouse files for her own benefit, making this first spouse eligible for the Spousal Benefit. Deemed Filing only applies in the first month that the individual is filing for his own retirement benefit, and then only if he is younger than Full Retirement Age. (Roles could be reversed, as always.)

Back to the examples

Now, with this additional background information, you should be able to go back to the first article and it will (hopefully) make more sense.

Keep in mind what I mentioned at the beginning: this is complicated. Don’t expect to pick up on it immediately. If all this does is raise questions, feel free to post your questions in the comments and I’ll try to address your questions as best I can.

In addition, bear in mind that I am an independent financial advisor; I don’t work for the Social Security Administration. As such, in these articles I am reporting the way the system works – not advocating it, not agreeing with it, not defending it. I agree that many of the provisions of the system can be unfair when applied, but I don’t have any sway with the Social Security Administration to fix the problems. I’m a taxpayer just like you, and I have to deal with the system the way it stands as well.

I have spent quite a bit of time studying how the system works in order to help my clients. As a result of my study of the system, I’ve also written a book that you may find useful – A Social Security Owner’s Manual. The Spousal Benefit and many other confusing provisions of the Social Security system are explained in the book.

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9 Comments

  1. AnneNo Gravatar says:

    Hi Jim: this is Anne in Conn. I have been enjoying and reading alot of your articles about Social Security Benefits; I am learning alot: I like the way you talk !

    for example Jim Blankenship wrote: 2. There is a minimum age at which you become eligible for Social Security retirement benefits, and this is the same for all people, 62. If you file at this age (or at any age before Full Retirement Age), you will be subject to a reduction from your Primary Insurance Amount (PIA) based upon the number of months you’re filing before Full Retirement Age. It’s a somewhat complicated formula (but then again, what about this system isn’t?) so rather than explaining how to build a watch I’ll show you what time it is.

    Comment: Jim wrote: It’s a somewhat complicated formula (but then again, what about this system isn’t?) so rather than explaining how to build a watch I’ll show you what time it is.

    A VERY CLEVER ANALOGY! i.e. you do all the research and I glean the info…THNX!

  2. RobeyNo Gravatar says:

    Jim many thanks for your series of posts about Spousal Benefits. I’m curious if I have grasped the obvious. Using the Dec 2nd examples of Dick and Jane with a slight variation, Dick’s PIA is still $2400, but Jane’s PIA is now $1400. In example 2, where Jane files early but waits until FRA to claim her Spousal Benefit, she would get no benefit (just like example 1). The same for example 3. It looks like the only time Jane would enjoy a spousal benefit is if she filed solely for the Spousal Benefit at her FRA. Yes? No? Maybe?

    1. jblankenshipNo Gravatar says:

      Yes Robey, that is correct. Since Jane’s own PIA is greater than half of Dick’s PIA, in those examples she would not receive a spousal benefit. Her only option for receiving the spousal benefit is to apply solely for that benefit at FRA and delay her own benefit to a later date.

      jb

  3. JohnNo Gravatar says:

    Jim,
    Thanks for the response. I will take a look your suggested 3rd options where my wife delays SS until I reach FRA at which time she files for Spousal Benefit and allows her benefit to grow until age 70. I will need to run the numbers on this but in a quick look it does appear that her age 70 benefit is larger than her Spousal Benefit. Just one point of clarification on this approach. If my wife files for Spousal Benefit, I would not be able to file for a Spousal Benefit since both spouses can’t be on Spousal Benefit at the same time. So I would either have to take my PIA at 66 or nothing until I turn 70 and then have the increased benefit. Is that right?

    John

    1. jblankenshipNo Gravatar says:

      Yes, you’d either file for your benefit at FRA or file and suspend at that point. I was assuming you were going to file and suspend when I wrote that, the outcome is similar to your first scenario, the difference being that she would forgo 10 months of her own benefit at age 66 in return for a (possibly) larger benefit at age 70.

      jb

  4. clydewolfNo Gravatar says:

    I have been told there are over 70 decision points through the SS maze to qualify for SS benefits.
    For many folks selecting the best path is easy. For other folks….. it can be a real challenge.

    1. jblankenshipNo Gravatar says:

      Wow, Clydewolf – I had never seen that figure. 70 decision points! I am well aware of the complexity of the system, but didn’t realize the sheer number of decisions.

      jb

  5. JohnNo Gravatar says:

    Hi Jim and thanks for the effort in explaining SS. You’re right, it can get complicated.

    I have asked Santa for a copy of your book on SS, hopefully, I have been a good enough boy this year to get it. But given Christmas is still 15+ days away, let me see if I got this straight.

    Here is my situation: My wife is 10 months older than I and has significantly less lifetime earnings so the Spousal Benefit will give us a higher payout. I am just wondering if either of the following strategies will work:

    In both strategies when my wife turns 66 (her FRA) she will apply for her benefit based on her earnings. Then 10 months later, I turn 66. When I turn 66, I think I can do either one of these things (this is where I need your help).

    The first is that I file for my benefit and then immediately suspend. (This option will allow my benefit to grow and allow my wife to file for Spousal Benefit based on my PIA). With this strategy my wife is collecting a Spousal Benefit based on 50% of my PIA and I am not collecting anything until age 70.

    The second option would be that my wife would continue to draw on her PIA until I turn 70 at which time she will file for Spousal Benefit based on my PIA. I would claim Spousal Benefit based on her PIA when I turn 66 and then my own increased benefit at 70. (I am assuming here that my benefit will continue to grow between age 66 and 70 since I have never claimed my benefit)

    Would either of these approaches work? I ran the numbers and it looks like the latter approach would offer more of a SS benefit over time. Am I missing anything?

    Thanks
    John

    1. jblankenshipNo Gravatar says:

      John –

      Hope you get your Christmas wish!

      Either approach will work, but since you said your wife’s own benefit is significantly less than yours (I’m assuming less than half) of the two I’d recommend the first tactic. This way after she has received her own benefit for 10 months, your wife could begin receiving half of your FRA benefit, and she’d receive that for the rest of her life (or until you pass away, if you go before she does). The second method would have her receiving her own amount for four years, and you receiving half of hers, which could be less in total dollars – but it might be more, you’ll have to run those numbers.

      I suggest that you look at one more alternative: Your wife does not file for a benefit at her FRA, but she waits until you’ve filed and suspended 10 months later. At that point she could file solely for the Spousal Benefit, allowing her own benefit to grow up to age 70. Depending on the amount of her own benefit, after the delayed retirement credits (8% per year) are added on, it might be higher than the Spousal Benefit – again, you’d want to calculate the numbers on that to be sure.

      Hope this helps!

      jb