The rules can be complicated, and but it’s smart to want to maximize your benefits if you’re married.
If you’ve been married to your spouse for at least one year, you can collect benefits on the earnings of your spouse, even if you don’t have a work history of your own. This is called a spousal benefit.
However, you can’t claim a spousal benefit unless your spouse has already filed for their retirement benefit.
If you’re eligible to collect retirement benefits on your own, as well as spousal benefits, Social Security will essentially pay you the higher of the two. For example, if one spouse’s retirement benefit is $1,000 per month, but his or her spousal benefit is $1,200 per month, the higher spousal benefit would be paid.
Under Social Security rules, each of us has what’s known as a “full retirement age,” or FRA. Your FRA depends on the year you were born. For most of us, the FRA is between age 66 and 67.
The other key term to know is “primary insurance amount,” or PIA. That’s the amount that Social Security calculates to be your monthly retirement benefit at your full retirement age.
Regardless of your FRA, you can begin collecting Social Security retirement benefits as early as age 62. The same is true of spousal benefits, but if you take either benefit earlier than your FRA, the benefit amount is permanently reduced by a percentage of the applicable primary insurance amount.
The reduction can be as high as 30 percent at age 62, and for the spousal benefit the reduction is even more, as much as 35 percent.
On the other hand, if you wait to begin collecting retirement benefits until after your FRA, the PIA will increase by 8% every year up to age 70. Benefits stop increasing at age 70, so there’s no advantage to waiting beyond then. Spousal benefits, however, do not increase past your full retirement age, even though they’re reduced if you collect them early.
If you are eligible for both a spousal and a retirement benefit, and you file for either one, you’re deemed to have filed for both benefits and automatically receive the higher of the two.
For example: If your PIA is $2,400 per month at age 67, but you start to collect it early at age 66, your monthly benefit would be reduced to about $2,267. Your spouse’s spousal benefit, however, would still be computed as 50 percent of your PIA of $2,400, or $1,200 per month. How much of that your spouse receives, however, depends on the age at which they apply for the spousal benefit.
Regardless of whether you wait or start collecting early, you still need to consider things such as cash flow, your health, and if you’ll be prepared if one of you becomes ill and needs long-term care.
We highly recommend setting up a FREE consultation with us at Tacoma Elder Care. We can walk you through all your options to make sure you are prepared for all situations regardless of when you choose to retire. Retirement should be fun and relaxing, which means having a plan in place.
Call today to schedule a FREE consultation, or register for one of our FREE Workshops.