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August 02, 2023 at 03:02 PM
What You Need to Know
- Welcome to Connecting the Dots, the column where Marcia Mantell discusses real-life decisions around Social Security claiming and retirement.
- Social Security's spousal benefits are a point of confusion for many clients, who mistakenly believe they have a choice between their own benefit and their spouse's.
- Many client couples have a lower earner and a higher earner, but without enough difference to trigger a spousal benefit.
Both financial advisors and consumers have been reaching out recently asking about when and how to claim spousal benefits, and which benefit to claim first.
They mistakenly assume there is a choice to be made.
Surprisingly, there’s a whole lot of confusion about “spousal” benefits. Just because you’re a spouse doesn’t mean you get Social Security “spousal benefits.” And there is no choosing between your own benefit and your benefit as a spouse.
Let’s go through the details and connect some dots for married couples.
‘Spousal’ Benefits Are Simply a Comparison
A “spousal” benefit is not simply awarded to a spouse because they are a spouse, although you must be a spouse (or ex-spouse) to be considered for a spousal benefit.
Technically speaking, the spousal benefit is a multi-part calculation and comparison. Social Security will look at 50% of the higher-earning spouse’s primary insurance amount (PIA) and compare it to the lower-earning spouse’s PIA. Whether the lower earner gets a “spousal” benefit or not depends on their own work record and PIA:
- If the lower earner doesn’t have 40 credits to get a benefit on their own, they receive 50% of the higher earner’s PIA, or less if claiming before full retirement age.
- If the lower earner has a benefit from their own work record, but their PIA is less than 50% of the higher earner’s, they receive their own benefit plus a spousal “top up” to equal 50% of the higher earner’s PIA, or less if claiming before full retirement age.
- If the lower earner’s PIA is more than 50% of the higher earner’s PIA, no spousal benefit is available.
The 1939 Social Security Amendments
In the 1939 Social Security Amendments, the “spousal” benefit was specifically titled and defined for wives only. An at-home wife and homemaker had no work history but contributed to the economic success of the household. Therefore, Congress determined she was entitled to a Social Security benefit, equal to 50% of the working husband’s PIA.
If a wife did have her own work history, she could receive as much as 50% of her husband’s PIA by combining her benefit with additional dollars to reach the proper value.
Spousal Benefit Examples
Fast forward to today. “Wives” in the law is now “lower-earning spouse.” But the concept is the same; lower-earning spouses receive a retirement benefit.
Here are typical points of confusion regarding spousal benefits:
