Wedding Gift

Adam M. Grossman

ON THE SURFACE, Social Security seems straightforward: During our working years, we pay into the system. Then, when we’re older, the government sends a check every month for life.

But scratch the surface and you’ll find that Social Security offers a number of additional benefits. Among them: a benefit for spouses. This can be highly valuable, but the rules around it are complex and very specific. Consider, for example, the late talk show host Johnny Carson.

Carson was married four times. First, he married Jody Wolcott. They were together for about 15 years. Then he married Joanne Copeland. That marriage lasted nine years. Next came Joanna Holland. They also were married about 15 years. Finally, Carson married Alexis Maas. They had been married 18 years when Carson died in 2005.

Because of the spousal benefit rules, two of Carson’s wives received partial benefits, one received a substantial benefit and one received no benefit at all. To be sure, Carson’s case was unusual. But if you’re married, divorced or widowed, it’s important to understand how spousal benefits work.

By way of background, the original intention of the spousal benefit was to protect stay-at-home spouses. Here’s why: For a worker to be eligible for Social Security, he or she needs to have accumulated at least 40 quarters—totaling 10 years—of work history. But many stay-at-home spouses don’t have 40 quarters. The spousal benefit was designed to ensure they’d receive at least some benefit, regardless of work history. Here are 10 additional points about spousal benefits:

1. Newlyweds aren’t eligible. To claim a spousal benefit, you need to have been married for at least a year.

2. In very general terms, the spousal benefit is equal to half of the higher earning spouse’s benefit. To illustrate, consider the couple Tom and Jane. If Tom is entitled to $2,000 per month, Jane would be entitled to $1,000. It’s more involved than that, as I’ll explain below, but that’s the general idea.

3. More specifically, the spousal benefit is calculated as 50% of the higher-earning spouse’s primary insurance amount (PIA). The PIA, in turn, represents the amount you’re entitled to at your full Social Security retirement age (FRA), which is between age 65 and 67, depending on the year you were born. For that reason, the spousal benefit doesn’t always equal 50% of the actual benefit the higher-income spouse is receiving. For example, if the higher-income spouse waits until age 70 to claim benefits, the spousal benefit wouldn’t be half of that very robust number. It could be as much as 25% lower.

4. The spousal benefit can only help. In the above example, Tom and Jane would collect a combined $3,000. In other words, one benefit is not deducted from the other.

5. The spousal benefit is an option, but certainly not mandatory. Let’s look at Jane and Tom again. Jane is entitled to $1,000 as a spousal benefit. But should she take it? In the simplest case, if Jane had no earnings record of her own, she would of course claim that $1,000 benefit.

But suppose Jane was entitled to a benefit on her own record. In that case, she still might choose the spousal benefit—but it would be a choice. To decide, she would simply weigh her own benefit against the prospective spousal benefit. Suppose Jane’s own benefit was $750 per month. In that case, the spousal benefit of $1,000 would still be the better way to go.

Now, imagine that Jane’s benefit, based on her own earnings record, was more than $1,000. In that situation, she’d want to stick with her own benefit. In fact, if she had earned significantly more than Tom, it might be Tom who’d collect the spousal benefit based on Jane’s work history. In short, the spousal benefit is just an option, provided only as a floor but not as a ceiling.

6. To claim a spousal benefit, your spouse must have already claimed his or her own benefit. In the above example, if Jane were going to choose the spousal option, she would need to wait until Tom had started his benefit. On the other hand, if they were each going to claim their own benefit based on their own earnings history, they could choose independently when to start.

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7. The timing of spousal benefits should be coordinated carefully. As you probably know, there’s a benefit to delaying Social Security benefits. While you can claim as early as age 62, you can maximize your benefit if you wait until 70. With spousal benefits, it’s similar, but more restrictive. You can still claim as early as 62—provided your spouse has already started benefits, as noted above.

But the penalty for claiming a spousal benefit prior to FRA is steeper than the penalty for claiming your own benefit early. For example, if you claim your own benefit three years prior to FRA, your benefit would be reduced by 20%. But if you claim your spousal benefit three years prior to FRA, that benefit would be reduced by 25%.

At the same time, you definitely don’t want to wait until 70. That’s because spousal benefits hit a maximum when you reach your full Social Security retirement age and don’t grow any further. Bottom line: Ideally, you would claim your spousal benefit right at your FRA.

8. In 2015, Congress overhauled the spousal benefit rules to close a loophole known as the “restricted application.” If you were born before Jan. 2, 1954, you’re grandfathered in. But for everyone else, it’s now a pothole to be aware of.

Consider the couple Michael and Susan. Michael is two years older than Susan. They both have strong earnings records, so they’re both planning to wait until age 70 to claim their own benefits, which will be $4,000 for each at that time. Under the old rules, Michael and Susan could coordinate: He could start his $4,000 benefit at age 70. At the same time, Susan, at 68, could claim the spousal benefit, which would be about $1,500. She could collect that amount for two years, until turning age 70. Then she could switch over to her own $4,000 benefit. In other words, Susan could collect a check, albeit smaller, for two years while her own benefit keeps growing.

Unfortunately, because this was such a generous policy, Congress eliminated it. If you happen to fit in that narrow band of folks still eligible, be sure to look into it. On the other hand, if you were born after Jan. 1, 1954, you may want to do the opposite and avoid filing for spousal benefits in a situation like this. Under the new rules, that could inadvertently, and permanently, reduce your own benefit.

9. There’s one other exception to the new restricted application rule. If you’re widowed, you’re allowed to employ the restricted application strategy, even if you were born after Jan. 1, 1954.

10. If you’re divorced, the rules and benefits are similar to what they would have been if you were still married. But there are some differences. Most important, if you want to claim a spousal benefit based on your ex-spouse’s record, you need to have been married for 10 years. That’s why Johnny Carson’s second wife, to whom he was married for just nine years, received no benefit at all. Also, divorced spouses aren’t subject to the restriction described in No. 6 above. Social Security recognizes that former spouses may not necessarily coordinate benefits, so it doesn’t make them dependent on each other.

These are just the most basic points about spousal benefits. While Social Security does offer a “do over” option, this is definitely an area where—as the saying goes—you want to measure twice and cut once.

Adam M. Grossman is the founder of Mayport, a fixed-fee wealth management firm. Sign up for Adam’s Daily Ideas email, follow him on Twitter @AdamMGrossman and check out his earlier articles.

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1 year ago

I am one of the admins for the Facebook page “Social Security Intelligence” with over 16,000 members including retired SSA employees and some Certified Financial Planners. I found some of the statements in this article were misleading or downright wrong.

Pardon the long post but I will address these.
> Newlyweds aren’t eligible.
In order to claim the spousal benefit, they must be at least 62 years old and their spouse must have filed for their SS benefit (exceptions for ex-spouse I’ll talk about later). So if one spouse is 61 ½ when they marry, they must wait until 62 ½ to claim the spousal benefit on this spouse. In addition, if they had been divorced after a marriage of 10 years or more and had been collecting the spousal benefit based on their ex-spouse, they will no longer be eligible for that benefit. The only SS benefit they would be entitled to during this 12 month period is on their own SS record.
> the spousal benefit is equal to half of the higher earning spouse’s benefit.
> The spousal benefit is an option, but certainly not mandatory.
This is not correct. I know it was detailed further on but how many would stop reading at this point?
The spousal benefit is 50% of their spouse’s SS benefit at Full Retirement Age (FRA). This does not change whether their spouse files for a much reduced amount at age 62 or holds out for the highest possible amount at age 70.
If someone has a spouse who has already filed for SS, when they file, they are considered to be “deemed filing” and will get the higher of the spousal benefit or their own. They cannot choose which benefit to get. If their spouse had not filed, then they would be eligible for SS based on their own SS record only and can go to the spousal benefit (if higher) whenever their spouse files.
The spousal benefit is actually composed of two parts – their own SS benefit amount and a “topper” equal to the difference between their own benefit at their FRA and their spouse’s benefit at FRA.
For example. If their own benefit at FRA is $1,000 and their spouse’s benefit at FRA is $3,000, the spousal benefit would be $1,500 – ($1,000 plus $500). But if they file before their FRA, their benefit would be reduced. Let’s say when they filed, the reduced benefit equaled $700. Then if their spouse had already filed (or when their spouse files), their spousal benefit would be $1,300 ($700 plus $500).
> To claim a spousal benefit, your spouse must have already claimed his or her own benefit.
Yes, this is true. There are different rules in the case of an ex-spouse though. If the marriage lasted at least 10 years, they do not have to wait for their ex-spouse to file for SS before they can file for their own/spousal benefits. This was done to prevent spiteful ex’s from delaying SS in order to hurt their ex. BUT their ex must be at least 62 to file for the spousal benefit based on their record AND they must have been divorced for at least 2 years (if they got the spousal benefit before the divorce, this is not affected).
So John age 67 has a SS benefit of $1,000/month. But his younger ex-spouse Lee, age 55, has an estimated FRA SS benefit of $3,000. John will not be eligible to file for the higher spousal benefit (~$1,500) until Lee is 62.
Or Jane has an estimated $1,000 SS benefit (but has not filed for SS) and her spouse Lyn has a $3,000 SS benefit (same age). Then they get divorced at 67 before Jane has filed for SS. Jane can get a $1,000 benefit but must wait 2 years to get the higher spousal benefit of $1,500.
> The timing of spousal benefits should be coordinated carefully.
Yes, I agree with this. The general guideline is for the lower earning spouse to file first and the higher earner to hold out as long as possible (hopefully until age 70. This ensures when one spouse dies, the surviving spouse will have the highest SS amount possible for the rest of their life. But this depends on many factors including their health, other sources of income, if there are any minor/disabled children, and if they are still getting earned income.
Some people also delay SS to allow more time to withdraw overfunded pre-tax retirement account funds to avoid higher income taxes and Medicare premiums (IRMAA) later on, especially after one spouse dies.
> There’s one other exception to the new restricted application rule. If you’re widowed, you’re allowed to employ the restricted application strategy,
Okay. This is really where this article is wrong. He has confused the spousal benefit with the “Surviving Spouse” benefit. These are completely separate benefits.
The spousal benefit is always 50% of their spouse’s FRA amount, no matter when they filed/but the “surviving spouse” benefit is always equal to whatever their SS benefit was when their spouse died (if they had not reached their FRA and had not filed, it is the FRA amount).
In the case of the “Surviving Spouse” benefit, they can still file a restricted application, which will let their own benefit continue to grow until age 70. But the order of filing (and why) would double the length of my reply. This comes up several times a week in our FB group and we explain the options for maximizing their SS benefits for their lifetime.
There are other rules for eligibility including length of the marriage before a current spouse would be eligible for the “Surviving Spouse” benefit plus rules for ex-spouses who remarry.

And to make it more fun, if they couple is in a common law marriage in certain states, they may also be eligible for the spousal benefit and Surviving spouse benefit in certain situations.
So in the Johnny Carson example:

Joan “Jody” Morrill Wolcott (B 1926) – Eligible for the spousal benefit at 62, if higher than her own, and after his death for the “Surviving Spouse” benefit since she married and then divorced her next spouse.
Joanne Copeland. – No SS benefit
Joanna Holland (maiden name Johanna C. Ulrich) (b 1940). – Eligible for the spousal benefit at 62 and after his death for the “Surviving Spouse” benefit. She was not eligible for benefits from her former husband because that marriage only lasted 6 years. Since she has a successful career after her divorce (meaning her own benefit would be higher than the spousal benefit) the strategy for a “restricted application” for the “Surviving Spouse” benefit and later on her own at age 70 probably gave her more long term SS benefit.
Alexis Maas.(b 1952) – Eligible for the spousal benefit and for the “Surviving Spouse” benefit. But she was 53 when he died so she would have to wait until age 62 to file for any benefit. Her strategy would be to file for her own/spousal benefit at age 62 and then the “surviving spouse” benefit at her FRA..
But if her own benefit at age 70 would be higher than the “surviving spouse” benefit, then she would do the reverse by filing a “restricted application” for the surviving spouse benefit. This would let her own benefit continue to grow until is surpasses that benefit and then she claims her own once if it is higher and she needs the extra money or at age 70 when it has reached the highest amount possible.
>Because of the spousal benefit rules, two of Carson’s wives received partial benefits, one received a substantial benefit and one received no benefit at all.
This is not true. Wives #1, #3, and his last wife #4 were all eligible for the same Social Security benefits based on his SS record – spousal benefit equal to 50% of his SS benefit at his FRA., if it was higher than their own SS benefit, or the separate “Surviving Spouse” benefit equal to the SS benefit he was receiving.

Jonathan Clements
Jonathan Clements
1 year ago
Reply to  imnontrad

Comments are appreciated and encouraged here at HumbleDollar — but not those that are long-winded, self-congratulatory and unjustifiably harsh. Adam’s article is in no way “misleading or downright wrong,” and your comments utterly fail to back up that characterization. You say you’re one of the admins for the Facebook page Social Security Intelligence. You would, I hope, be appalled if someone on that page used the tone of your comments above to justify the most nitpicky of quibbles.

Rob Schuff
Rob Schuff
1 year ago

This is a quite well-written article. Thank you!! In my case, my wife has no SS benefit herself, and is not yet a US citizen. In the event of my demise, she will almost certainly return to her home country (Thailand) for her remaining years. We are trying to sort through the citizenship/residency implications on spousal benefits. What a complex web of regs to sort through!

Paula Karabelias
Paula Karabelias
1 year ago

Great article . I don’t think I’ve seen other writers point out that FRA of the major earning spouse is the optimal application time for spousal benefits, not at 70. Good to know.

James McGlynn CFA RICP®
James McGlynn CFA RICP®
1 year ago

Paula the optimal time to claim “spousal benefits” is FRA as they do not increase after that age. Worker benefits increase to age 70. Most Social Security maximizers typically recommend waiting to age 70 for the maximum income earner. The quirk with spousal benefits is that they are capped at FRA.

Ray Hutchinson
Ray Hutchinson
1 year ago

James, with the spouse not able to claim spousal benefits until the high income earner claims benefits at age 70 scenerio.
Can the spouse collect spousal benefit retroactive back to their FRA date?

Paula Karabelias
Paula Karabelias
1 year ago

I think Adam made that clear in his article , but thanks for taking the time to reply to me . Spousal benefits aren’t a concern to me as both my husband and I each were very high earners and had a nearly identical salary history .The cap is good to know about as others aren’t often aware of it.

Mik Cajon
Mik Cajon
1 year ago

Great article…can you also explain why and/or why not deficits matter…many thanks.

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