Note: with the passage of the Bipartisan Budget Act of 2015 into law, File & Suspend and Restricted Application have been effectively eliminated for anyone born in 1954 or later. If born before 1954 there are some options still available, but these are limited as well. Please see the article The Death of File & Suspend and Restricted Application for more details.
This post intends to clarify something that comes up repeatedly: both spouses cannot collect Spousal Benefits at the same time.
If you stop and think about the mechanics of Spousal Benefits, it should become clear to you that this isn’t possible. Below is a recap of the rules that are necessary for Spousal Benefits to work.
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Rules for Spousal Benefits
1. In order for a spouse to file for Spousal Benefits, the other spouse in the couple must have filed for his or her own retirement benefit as well.
2. When the spouse begins receiving Spousal Benefits, he or she must also be currently receiving his or her own retirement benefit at the same time due to deemed filing. If the benefits are filed for before FRA (Full Retirement Age), both benefits (retirement and spousal) are permanently reduced. If the spouse receiving spousal benefits was born before 1954, it is possible to file solely for spousal benefits after FRA. If born in 1954 or later, deemed filing requires filing for both benefits when either is filed for if eligible for both.
3. The Spousal Benefit is always a differential between the individual’s own PIA and the factor-applied PIA of the other spouse. If Spousal Benefits are being applied for at or after FRA, the factor is 50%; it’s between 32.5% and 35% at age 62 (depending on FRA), and phased for ages in-between. This differential is then added to the retirement benefit. If the spouse in question is at FRA or older, then the Spousal Benefit differential is 50%.
Now, if all of that is confusing, don’t feel alone. It’s a very confusing set of rules. Let’s run through some examples to sort things out.
Spousal Benefit Examples
John and Priscilla are both age 62. John has a PIA of $800, while Priscilla has a PIA of $2,000. If John wants to file for Spousal Benefits now, he must file for his own benefit first, and it will be reduced to $600 since he’s filing early. The second thing that must happen is that Priscilla must also be collecting her benefit. Now John can also file for Spousal Benefits (in fact he must due to deemed filing rules, if he is eligible when he files for his retirement benefit). John’s Spousal Benefit will be reduced to 35% of Priscilla’s PIA minus his PIA. But wait a minute: 35% of Priscilla’s PIA is only $700, and John’s PIA is $800. So the reduction means that John gets no Spousal Benefit at all.
How about if they decide to delay Priscilla’s filing until her FRA. So now, John still started his own retirement benefit at 62, so that portion of his benefit is permanently reduced. Priscilla files for her own benefit at FRA. Once she has done so, John is now eligible for the Spousal Benefit. The differential is now 50% of Priscilla’s PIA minus John’s PIA ($1,000 – $800), which equates to $200. This is added to John’s reduced benefit of $600, for a total benefit of $800. Note that, even though they waited until FRA for John to file for Spousal Benefits, he will never receive 50% of Priscilla’s PIA, since his own benefit has been reduced by filing for it at age 62. Had he waited until FRA to file for his own retirement benefit, he could have a total benefit equal to half of Priscilla’s PIA.
There’s another way this could work out: What if Priscilla files for her retirement benefit at FRA and John delays filing? Could John still receive a Spousal Benefit based on Priscilla’s record? No – because if John has delayed filing for his own retirement benefit, deemed filing will require him to file for his own benefit when he files for spousal benefits. Regardless, his Spousal Benefit will be 50% of Priscilla’s PIA if he first files for any benefit at or after his FRA.
So now we come to the crux of the matter, the question that started this post off from the beginning: Can both John and Priscilla file for Spousal Benefits? If you think about what’s required for Spousal Benefits to be available, you’ll have your answer.
Clearly, John could file solely for Spousal Benefits when he reaches FRA, but in order to be eligible, Priscilla must have filed for her retirement benefit. On the other hand, Priscilla could file for spousal benefits, but since her own benefit is greater than 50% of John’s, no spousal benefit is available to her.
The act of filing for retirement benefits establishes the currently-filed PIA for that individual. So, while John could still receive a small increase over his PIA in terms of a Spousal Benefit (half of Priscilla’s PIA is $1,000, minus his PIA of $800 equals $200), Priscilla doesn’t have that luxury. Half of John’s PIA is only $400, and Priscilla’s PIA is $2,000, so there is no differential available for her Spousal Benefit. If Priscilla was born before 1954, it is possible for her to file solely for the Spousal Benefit at or after her FRA. If born in 1954 or later, this option is not available.
So the answer is: You can’t have receive Spousal Benefits for both spouses at the same time. Both must have filed for their own retirement benefits, and as such only one can have a Spousal Benefit (and only if his or her own PIA is less than 50% of the other spouse’s PIA). I hope this helps to clear things up.
