3 Myths About Claiming a Social Security Spousal Benefit
With Baby Boomers retiring by the thousands each day—and living longer in retirement than previous generations—there’s been a lot of press lately about the importance of maximizing Social Security benefits.
Much of the talk focuses on delaying the receipt of benefits. For example, although you may be eligible for Social Security benefits as early as age 62, you’ll get a higher monthly benefit if you wait to begin receiving payments until your full retirement age (FRA), which today ranges from age 66 to 67. And if you delay taking payments until you reach age 70, you’ll receive an even greater benefit.
Regardless of whether you choose to delay receipt of benefits, there is another option that may help you maximize your Social Security income: the spousal benefit. If you are currently married or have been married, the spousal benefit gives you the option to receive either your own benefit or one-half of your spouse’s benefit, whichever is greater.
“Carefully examining the options and picking the one that fits your life circumstances can generate thousands of dollars in added income over the course of a long retirement,” said Jennifer Jedrzejewski, director of Advanced Planning at Northwestern Mutual. “But these strategies are often misunderstood.”
So before you decide how and when to file for Social Security—including whether you can make use of the spousal option to maximize your benefit—it’s important to know the facts. Here are three commonly misunderstood “myths” regarding the eligibility for spousal benefits:
Myth #1: I’m eligible for spousal benefits only if I’m currently married and have been for 10 years.
There’s a great deal of confusion about the circumstances under which someone may be eligible for spousal benefits. Here are the current rules:
- If you are currently married: You can claim a spousal benefit beginning at age 62, as long as you have been married for a period of one year and your spouse has filed for his or her Social Security.
- If you are currently divorced: You can claim a spousal benefit beginning at age 62 based on the work record of your ex-spouse if you meet three criteria: You were married to him or her for at least 10 years, you are currently unmarried, and your ex-spouse is at least age 62. (Your ex does not have to have actually filed for Social Security.)
- If you have been divorced more than once: You can claim a spousal benefit from any one of your exes to whom you were married for at least 10 years. “In cases where there have been more than one divorce, one of the most common questions we get is whether you have to take the benefit based on the work record of your most recent ex,” said Jedrzejewski. “And the fact is that you can take the benefit from any one of them. So, it makes sense to claim the spousal benefit from your ex who made (or makes) the most money, because their benefit (and yours) will be higher.”
- If you have been widowed: You can claim a survivor benefit beginning at age 60 based on the work record of your deceased spouse as long as you were married for at least nine months before he or she died.
You may already know that if you apply for Social Security benefits between the ages of 62 and your FRA, there are limits to the amount of money you can earn while receiving the benefit. Currently, the earnings limit is $15,720. If you make more than that, your benefit will be reduced by $1 for each $2 you earn above the annual limit. The earnings rule is more relaxed in the calendar year in which you attain your full retirement age. In that year, you can earn $41,880 before Social Security will reduce your benefit, and then the reduction is $1 for each $3 you earn above that limit.
The same rule applies if you take a spousal benefit. If you receive the Social Security benefit—even if it’s based on the work record of your spouse—you, as the recipient of the benefit, are subject to Social Security’s earning guidelines.
Once you reach your FRA, the earnings rule no longer applies; you’ll receive the full benefit no matter how much you earn.
Myth #3: Once I execute a Social Security option, I’m locked in.
Once you settle on an option, you can change your mind and not be penalized for it—as long as you do so within the first 12 months of receiving your first Social Security benefit. Jedrzejewski says people typically want to change course for one of two reasons:
- They become more aware of their options. “It’s not unusual for people to sign up to take Social Security as soon as they turn 62 and then, after talking with their financial professional, realize they could increase their benefit by employing another strategy,” she said.
- Their circumstances change. “In 2008 and 2009 when markets dropped and new retirees lost a lot of their savings, many people had to return to work, so they stopped taking Social Security,” said Jedrzejewski. “Or, today, people in their 60s who inherit money may decide they don’t need Social Security—at least not right away.”
Although you can reverse course within 12 months if need be, a smarter strategy is to make sure you fully explore your options long before you apply for benefits. She recommends talking with a financial professional who understands not only the complexity of the Social Security options, but also how they can be used most effectively within the context of your overall financial plan.