A Little-Known Social Security Spousal Benefit Option

Most everyone is familiar with the concept of Social Security Spousal Benefits – if not, click this link for a complete explanation.

In this article, we’ll be discussing an option that is available to all married recipients of Social Security retirement benefits – but you might not have thought of it.  For most all married couples, it makes the most sense for the spouse with the higher wage base – that is, the spouse that has earned the most money throughout his or her working career – to delay receiving Social Security retirement benefits as long as possible.

As described in the article about credits for delaying Social Security benefits, each year that you delay receiving your Social Security retirement benefit past your full retirement age (FRA) can result in up to an 8% increase in your benefit amount.  When delaying like this, it often also makes sense for the spouse with the lower wage base to begin receiving benefits at the lower rate, either at the early retirement age of 62, or upon reaching FRA.  Then later, when the spouse with the higher wage base begins taking the increased, delayed, benefits, the spouse with the lower wage base will begin receiving the spousal benefit, based upon one-half of the higher wage base spouse’s benefit.

But Wait, There’s More!

What most folks don’t realize is that, while the spouse with the lower wage base is receiving the reduced benefit, the spouse with the higher wage base can apply for a spousal benefit based upon one-half of the lower wage base spouse’s benefit, beginning at the higher wage base spouse’s reaching FRA.

While this doesn’t necessarily amount to a very large payment, it is money that you are entitled to and should receive.  The spouse with the higher wage base can receive this spousal benefit from FRA up to the time when election is made to begin receiving the delayed benefit based on his or her own record, at age 70.  At that time, the spouse with the lower wage base will begin receiving the spousal benefit based upon the higher wage based spouse’s benefit, as well.

Quick Example

Let’s say Jane and Bob are a stereotypical couple – Jane didn’t work outside the home while their children were in school, while Bob has worked and earned Social Security credits since age 21.  As a result Jane’s PIA is considerably lower than Bob’s.  (Keep in mind, the roles could easily be reversed, depending upon circumstances.)

So at age 62, Jane begins drawing her Social Security retirement benefit, in the amount of $666 per month (PIA of $888).  They have decided to delay Bob’s benefit as long as possible, to his age 70.  Once Jane reaches FRA, when both of them are age 66, Bob can now begin drawing a spousal benefit based upon Jane’s PIA (now $1,000).  So Bob can draw a spousal benefit equal to 50% of Jane’s benefit, or $500 per month.

When the couple reaches age 70, Bob applies for and begins receiving his full, delayed benefit – which is approximately $3,600 per month (PIA of ~$2,650).  Jane’s benefit has grown to $800 (PIA of $1,000).   Her Spousal Benefit will be based upon the difference between her PIA and 50% of Bob’s PIA – $1,325 minus $1,000 equals $325.  This is added to her own benefit for a total of $1,125.

That’s all there is to it.  It may not seem like a lot of money, why would you not go for it?

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