The spousal benefit was designed to provide for a spouse who does not work outside the home. While the modern household has changed from this standard, the benefits available through Social Security have not. Understanding this is simplest when one spouse makes significantly less than the other.
For example, let’s look at Albert and Bea. Bea was a stay-at-home parent while Albert worked. Albert has now retired and is eligible to receive a $2,000 monthly retirement benefit. As Albert’s spouse, Bea is eligible for spousal benefits. If Bea applies for spousal benefits at age 62, her benefits will be reduced. However, if Bea waits until full retirement age, she should be eligible for a spousal benefit of $1,000.
Now if Bea is eligible to receive Social Security benefits on her own work record, the calculation is more complicated. The spousal portion of her benefit is limited to the difference between 50 percent of Albert’s benefit and her primary insurance amount, which is the amount she is eligible for at full retirement age. This is called the excess spousal benefit. For example, at full retirement age, Bea is eligible for a monthly benefit of $750. Her excess spousal benefit is $250 — the difference between her benefit and one half of Albert’s benefit ($1,000 – $750). If she were to claim benefits early at age 62, her own benefit would be reduced by 25 percent to $562.50. Her spousal benefit is reduced by 25/36 of 1 percent for each of the first 36 months prior to full retirement age, plus 5/12 of 1 percent for each month in excess of 36 — in this case, by 30 percent — to $175. Therefore, her total monthly benefit should be $737.50. If Bea were to wait until full retirement age, she should be eligible to receive her full benefit of $750 and the excess spousal benefit of $250, making her total monthly benefit $1,000.
Another example is to say Bea is eligible for her own primary insurance amount of $1,700 based on her own work record. At 62, her benefits would be reduced to $1,275. Since this is more than 50 percent of Albert’s benefit, she is entitled to only her own Social Security benefit. But this is not to say Albert and Bea cannot take advantage of the spousal benefit rules. Suppose at full retirement age Albert is ready to retire and receive his $2,000 monthly benefit, but Bea, who is full retirement age, is still working. She can file for spousal benefits on Albert’s work record and receive $1,000. She delays claiming benefits on her own work record, therefore earning delayed retirement credits, which will increase her own benefit. At age 70, Bea can begin claiming Social Security benefits on her own work record. Because she delayed benefits, her monthly amount should increase to $2,244.
Alternatively, if Albert were not ready to retire, he could file for benefits and then immediately suspend them. This will allow him to earn delayed retirement credits while allowing Bea to collect her spousal benefit.
Spousal benefits can be complicated, but these rules can be used to maximize a couple’s Social Security benefits.