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May 03, 2022 at 10:10 AM
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.
- Since a loophole closed for those born after Jan. 1, 1954, a spouse cannot split their benefits and choose to take their spousal benefit first.
- This is a landmine advisors must understand as it could mean lost retirement income for the client if mishandled.
“Hey Marcia,” began a call from “Barb.” “Last night I had dinner with my older sister, and we got talking about my spousal benefits for Social Security…”
Big sister “Georgia” explained how Barb can collect half her husband’s benefit now and wait to collect her own maximum benefit until 70. Barb wanted to confirm how the process would work.
First, the Specifics
Barb and Tom have been married for 35 years. He was born in 1950, reached his full retirement age (FRA) of 66 in 2016, and waited to claim until 70. He got a 32% increase in monthly benefits. Great!
Barb was born January 1956. Her FRA is 66 years and 4 months, and she’ll reach FRA May 2022.
Knowing just those two pieces of information, have you already connected the dots where big sister had good intentions but was incorrect?
Technical Rules Always Apply
Married or eligible divorced persons may qualify for spousal benefits. However, they cannot split their benefits and choose to take spousal benefit first. (Exception: If the higher earner has not yet claimed benefits, there will be a gap in timing, but not a separation of benefits.)
Therefore, Barb cannot collect spousal benefits first, then claim her own later. That is a “restricted application” strategy, and it closed to those born after Jan. 1, 1954.
Barb’s Possible Claiming Options
If Barb is a dependent spouse, she has not earned her own 40 credits. Instead, she will be eligible for a full spousal benefit at her own FRA. The maximum spousal benefit is 50% of the higher earner’s primary insurance amount — not the amount that spouse is collecting.
In Barb’s case, she is independently eligible for her own benefit. But is it higher than 50% of Tom’s PIA?
- If yes, she will not receive any spousal benefits at all. When she claims, she’ll get her own worker’s benefit.
- If no, she is entitled to a spousal benefit “top-up.” Her own benefit will get paid first, then any additional top-up is added on. This way, she would receive an amount equal to 50% of Tom’s PIA (if she claims at her own FRA). Under the hood, her benefit tabulated from both sides needs to be considered.
A Look at the Numbers
Let’s assume Tom’s PIA was $2,600 a month. He waited to claim until age 70, so he’s receiving around $3,600 a month, including cost-of-living adjustments.
