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Calculating the Spousal Benefit

Difference_engine_ScheutzThe Spousal Benefit is one of the most confusing aspects of the Social Security retirement benefit system. It may be vaguely familiar that the spouse with the lower wage base is eligible for 50% of the higher wage base spouse’s benefit, or something like that…

How is the Spousal Benefit actually calculated?

Calculating the Spousal Benefit

Here’s how the Spousal Benefit is calculated:

First of all, the Spousal Benefit is based upon a differential – between 50% of the other spouse’s Primary Insurance Amount (PIA) and his or her own PIA.

So what’s the calculation? Let’s look at an example:

Let’s say there’s a couple, both the same age with a Full Retirement Age (FRA) of 66, and the wife has a substantially lower wage base (and therefore a lower benefit) than the husband. At age 62, she files for the her own reduced benefit based on her own record, from a PIA of $800. Her benefit is reduced to $600 due to filing early.

The husband’s PIA is $2,000 per month.

Later on, when they reach age 66, the husband files for his Social Security benefits. The wife is now eligible for a Spousal Benefit, because one of the enabling factors for a Spousal Benefit is that the other spouse has filed for his or her own Social Security benefit. The Spousal Benefit is based on the differential between 50% of the husband’s PIA ($2,000 X 50% = $1,000) and her PIA ($800). The PIA is used to calculate this differential, not her benefit, even though her benefit is reduced since she filed early. The differential between those two factors is $200 ($1,000 minus $800). The differential is then added to her reduced benefit for a total benefit of $800 (reduced benefit of $600 plus the differential of $200). For simplicity, COLAs have not been included in this example.

Let’s adjust the example:  Same couple, only now the wife waits until her FRA to begin drawing her own benefit, which is the same time as the husband. Now her Spousal Benefit differential will still be $200 (the differential between 50% of his PIA and her PIA), so her total benefit will now be $1,000 (her unreduced PIA of $800 plus $200 differential).

Now, what if the wife is younger? As long as she’s at least age 62, she can begin receiving the Spousal Benefit once her husband applies for benefits. It’s important to know though, that if she decides to file for the Spousal Benefit prior to her FRA, the Spousal Benefit factor is correspondingly reduced (as would be her own benefit if she filed early).

Instead of 50% of her husband’s PIA, at her age 62 the Spousal Benefit factor would be reduced to 35% of her husband’s PIA, and then the differential calculated as explained before. At age 63 the Spousal Benefit factor would be 37.5%; at age 64, 41.7%; and at age 65 it would be 45.8%. This reduction is calculated as 25/36ths of one percent for each month before her FRA up to 36 months, plus 5/12ths of one percent for each month more than 36 before FRA. The reduction factor is then taken against the original 50% factor to determine the actual percentage of the husband’s PIA to be used in calculating the Spousal Benefit differential.

In this manner, the reduction is 25% for the closest 36 months to FRA, and then an additional 5% for each year more than 3 before FRA that the filing for Spousal Benefits is completed. If you file for Spousal Benefits exactly 4 years before your FRA, the Spousal Benefit factor is reduced by 30%, as an example. So instead of 50%, the most your Spousal benefit could be is 35% (which is a reduction of 30% applied to the original 50%).

In all cases except for someone born before 1954*, filing for a Spousal Benefit deems filing for your own benefit. Also, whenever eligible for a Spousal Benefit, if you file for your own benefit deemed filing requires that you have also filed for the Spousal benefit. This can result in unexpected reductions to both types of benefit if you weren’t prepared for this.

*If born before 1954 and you’re over FRA, it is possible to file solely for Spousal Benefit while delaying your own benefit to a later date. If you file for a Spousal benefit before reaching FRA, deemed filing applies to you no matter what your date of birth is.

Keep in mind that the examples above denoted the wife as the spouse receiving the Spousal Benefit – but the roles could be reversed, depending upon the circumstances.

I hope this clears things up a bit. It’s a very confusing component to understand, but this should have helped to clear things up – let me know if you have any questions, as always!

4 Comments

  1. donw says:

    Your example gets close to explaining this, but not quite.
    My wife is 5 years older than I. She retires at 62 with a $200 month benefit (reduced from $290). obviouslly she doesn’t get spousal benefits at all because I’m not retired.
    at full retirement age I retire with a beneift of $2000.
    what does she get? $1000 (50%) reduced by her $90? or, is the 50% also reduced because she retired early? because she retired early, is her maximum spousal benefit reduced, or just her own portion of that benefit?

    1. jblankenship says:

      If your wife is at her Full Retirement Age when she becomes eligible for the spousal benefit, there will be no further reduction, it will play out as you described. If she becomes eligible for the spousal benefit at some point before her Full Retirement Age, then the spousal benefit will be reduced according to her age at that time.

      1. billc says:

        I have stared at this and am still not clear on the spousal benefit for my example: I was born in 1953, I just started my SS benefit at 69 + 4 months. My benefit is $3200/month. My spouse is younger, born in mid 1956. She has not yet filed for any SS benefits, and will be elgible for $4100/month in 2026 at age 70. I called the SS toll free number and was told that my spouse can apply for spousal benefits when she turns full retirement age in Nov. 2022 (66 4 months). They claim she will receive 1/2 my benefit ($1600/month) until she files for benefits at her age 70. She will then get her $4100/month benefit. I believe the SS office was wrong stating this, and I believe that if my spouse files for spousal benefit at 66 4 months, she is locking in her personal future benefit at the 66 4 month rate and giving up the added benefit of delaying until age 70. If she files for spousal benefit at 66 4 months, the 3.5 years of spousal benefits add up to $67,200 added cash, but will she be giving up the accrued added benefit from waiting until 70 years old (something like $600 per month for the rest of her life)?

        1. jblankenship says:

          Unfortunately the folks at SS told you wrong, because your wife is not eligible for the spousal benefit at all. This is due to two factors – 1) she was born after 1954, which makes her ineligible for the “restricted application” option; and 2) since she’s not eligible for the restricted application, we must consider the her own PIA versus the amount of the spousal benefit based on your PIA (because they cannot be separated due to deemed filing rules), and since her PIA is more than 50% of your PIA, there is no excess spousal benefit available to her.

          You are correct that if she were to file for spousal benefits at her FRA, this would lock in her own retirement benefit at that current age. She would forgo the delay credits that could be available to her by delaying filing for benefits out to as late as her age 70.

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