Social Security can feel complicated, from how the benefit gets calculated to the best age to start payments. The details can get even more complicated when you bring spousal benefits into the equation. To help, we’re going to go over some of the basics about spousal benefits and review a few of the common scenarios we see at Revo Financial.

Because of the complexity (and the many moving pieces) involved in these types of decisions, we always recommend working with a financial advisor to find out what works best for your personal situation. But we hope this article can help you get started.

How spousal and survivor Social Security benefits work

Traditional Social Security benefits are based on a worker’s earnings history (rooted in their 35 highest-paid years). With spousal benefits, you can claim a portion of the benefits accrued by your spouse. Here are the basics:

• Spousal Social Security payments are capped at 50% of the higher earner’s benefits at full retirement age.
• You can qualify for spousal benefits even if you have little to no earnings history of your own (meaning you might not qualify for your own Social Security benefits).
• You qualify for spousal benefits at 62 and can take them so long as your spouse has already filed and is actively receiving benefits.
• You must have been married for at least a year.
• If you do qualify for your own Social Security benefits, spousal benefits work in tandem with your benefits. That means if your Social Security benefits are greater than your spouse’s, you wouldn’t be able to claim spousal benefits. If your benefits on their own are less than what your spousal benefits would be, you can claim spousal benefits up to that 50% amount.

Spousal benefits are different from survivor benefits. With survivor benefits, the surviving spouse can claim 100% of the higher earning’s benefits. As with spousal support, this is a tandem benefit; if your spouse’s benefits were greater than yours, you keep their benefits package but would forfeit your own.

This is where advanced planning and a holistic approach become increasingly important.

General guidelines

If you are the higher earner hoping to maximize Social Security payments to your spouse, the general guideline is to wait as long as possible to claim benefits, as waiting past full retirement age can increase the amount of your payments. While this won’t impact your partner’s spousal benefits, it has the potential to increase their survivor benefits if you die before they do.

Additionally, if you begin claiming Social Security before you reach full retirement age, that will reduce not only your benefit payments, but the spousal benefits that your partner receives. 

Real-life considerations

How spousal and survivor benefits work can depend a lot on timing. Consider a few of these common scenarios.

1. Both spouses are in their 70s. The Husband’s benefit is $5,280 a month, as he waited until 70 to retire (and received credits since he waited past full retirement age). The wife’s benefits are $1,800 a month—her benefits from early in her career plus spousal benefits, taking her to 50% of what her husband’s benefits would have been at full retirement age. 

• If the husband dies first, his wife’s benefits will likely increase to $5,280 a month. 
• If the wife dies first, his benefits won’t change as his wife’s benefits are smaller.

2. Both spouses are in their early 60s. The husband is nearing retirement after a 40-year career at an oil company; his wife worked early in her career, took time off to raise their family, and is now working part-time. Neither is claiming Social Security. 

• If the husband dies unexpectedly, his wife will qualify for his full retirement benefits, so long as she waits to claim them until she reaches full retirement age. 
• She won’t get any additional credits if she waits past full retirement age, but her benefits would be reduced if she decides to collect early. If he had begun collecting Social Security early, she would inherit those reduced benefits instead. 
• If she dies first, his benefits don’t change, as he was the higher earner and qualified for larger benefit payments.

3. Consider the same scenario as example two, but imagine the wife is in her early 50s instead. This can create a significant income gap in between her husband’s death and her ability to begin claiming any benefits.

In these three examples, we’re just looking at Social Security benefits. In the real world, there are additional considerations: tax strategy, healthcare costs (including how to be strategic about Medicare benefits), and how retirement accounts, pensions, and investable assets fit into the mix. 

For instance, in the examples we listed above the couples were likely enjoying a tax break if they filed jointly, thanks to their disparate incomes. In a scenario where the surviving spouse earns the same income but is filed as an individual, they’re likely to see an increase in their federal income tax rate. That’s just one of the many factors we look at when we help couples come up with a retirement plan early on in their careers, or an income strategy as they near retirement.

Questions on how this might apply to you? Contact us to discuss.