Finance Retirement Planning

Social Security Benefits for Couples

As a follow up to our post last month on breakeven ages for social security benefits for individuals, I wanted to follow up with a post on benefits for couples and related strategies. For couples, it’s a little more complex because there are two people involved as well as additional variables. I attempt to provide a concise overview below.

Spousal Benefits

Spousal benefits are the benefits one spouse is eligible to receive based on the other spouse’s earnings record while that spouse is alive. To qualify for any sort of social security benefits, you need 40 Social Security credits which you earn by paying Social Security tax on your income. You can earn up to four per year, and most people earn 40 credits after ten years in the work force.

A spouse is entitled to the larger of benefits based on his/her earnings record or, if eligible, up to 50% of his/her spouse’s Primary Insurance Amount (“PIA”). Your PIA is the official term for your monthly social security benefit at full retirement age. Remember if you decide to draw on your Social Security benefits prior to your full retirement age, your PIA is formulaically reduced. If you wait to draw on your Social Security benefits until after your full retirement age, your PIA is formulaically increased.

To receive spousal benefits, the spouse with the higher PIA must have filed for benefits based on his/her earnings record. A spouse is eligible for spousal benefits as early as age 62 but at a reduced benefit, like if he/she filed for his/her own benefits prior to full retirement age. By delaying benefits, the spouse can increase the spousal benefit up to 50% of his/her spouse’s PIA. For example, if your spouse’s PIA was $2,000, you could receive up to $1,000 in spousal benefits if you qualified.

Survivor’s Benefits

Survivor’s benefits are the benefits one spouse receives based on a deceased spouse’s earnings record. Widows and widowers are entitled to the larger of benefits based on their earnings record or survivor’s benefits based on their deceased spouse’s earnings record. Similar to filing for their own benefits, widows and widowers can receive full survivor’s benefits when they attain full retirement age. If they file before full retirement age, the amount of benefit is formulaically reduced. Conversely, the amount of the survivor’s benefits they are eligible for increases if their spouse died after full retirement age and hadn’t started receiving benefits. An important distinction for widows and widowers is they are eligible for reduced benefits as early as age 60 (age 50 if disabled) versus the standard age of 62.

No one size or approach fits everyone. Understanding the nuances of Social Security benefits is an important first step in determining the right strategy for drawing on benefits. Clearly everyone wants to maximize their benefits but there are trade-offs and some unpredictable variables that if known would make it a lot easier to pick a strategy.