Retirement Answers

Jacob: 00:00

Social Security optimization and thinking through how to get the most out of your hard earned dollars that you put into the Social Security system is something that's crucial for every retiree, whether you need the money or not. But most people only think about Social Security benefits for themselves, and they don't factor in something called spousal benefits. So in today's episode, we're gonna be talking about Social Security spousal benefits, giving you everything that you need to know about them, and some different ideas and strategies that maybe help you get more out of your benefits than you otherwise thought you could. Hi. My name is Jacob Duke.

Jacob: 00:29

I'm a certified financial planner and I'm the host here of the Retirement Answers podcast, and the goal of this is to help you be able to plan smarter so you can retire better. If you're new here, welcome. I'm glad to have you. I hope today's episode is valuable. If it is, be sure to share it with a friend, but also go check out all the other episodes that have already been uploaded to learn more about everything retirement.

Jacob: 00:49

So let's dive into Social Security spousal benefits. When it comes to Social Security, we often think about just our own benefits. What have I paid in? How can I make sure I get the most out of that? Should I take it at 62 or 67 or 70?

Jacob: 01:02

What's the best thing for me? How does this all fit into my total retirement income picture? And what happens is most people are unaware of some of the different nuances around spousal benefits, how they work, and who qualifies, and so we're gonna talk through this and maybe some ways you can use this to your advantage as you build out your retirement plan. So here's some things you've gotta know about spousal benefits in terms of who qualifies for them. Number one, you have to have been married to your spouse for at least one year to qualify for a spousal benefit.

Jacob: 01:29

So you can't just go get married tomorrow and expect to get a spousal benefit. You've gotta be married for at least one year. Now, the next thing is this. In order to receive a spousal benefit, you also have to be receiving your own benefits. You have to have filed for them already in order to qualify for a spousal benefit, and here's the thing, let's say you go and you want to get your spousal benefit, which would be more than your own benefits, what you're gonna do is you're gonna have something called a deemed filing where the Social Security Administration says that because you want your spousal benefit, you have to file for your own benefits, and then we tack on the additional amount to give you your full spousal benefit.

Jacob: 02:04

Now, what this does is a lot of people have questions around, hey, can I just get my spousal benefit and then delay my own benefits so at least I can get something while we're doing this, and I can delay my own and then take that at 70 after it's become more than my spousal benefit? That's a good idea, but you can't do that. That's where that deemed filing comes into play, where you can't delay your own in order to get a spousal benefit, you have to be already filed for your own benefits in order to get a spousal. The next thing that has to be true is that your spouse also has to be receiving their benefits in order for you to get a spousal benefit. So let's say that you're 65, you just filed for your benefits, your spouse is only 65 as well, but guess what?

Jacob: 02:41

They're not gonna take their benefits until 70. You cannot get a spousal benefit until your spouse takes their benefits at 70 or whatever age they decide to take it. So they can't delay theirs and you get a spousal at the same time. It doesn't work that way. So both people in the relationship have to be receiving their own benefits in order for either party, one or the other, to get a spousal benefit.

Jacob: 03:03

Now, if you are someone who has a disabled child or someone who's 16 or younger that you're directly caring for, you're eligible for Social Security benefits before age 62, and you would also be eligible in that scenario for a spousal benefit, again, assuming that your spouse is receiving benefits already. So there is some nuance there for those who have exceptions to these different rules. I would make sure to pay attention to that and look at that if that does apply to you. Now here is one of the big misconceptions. Whenever people hear about spousal benefits, they automatically assume that they are going to get 50% of whatever their spouse is receiving, and that is not true.

Jacob: 03:40

You might get that, but that doesn't automatically happen, and here's why. Whenever you look at the Social Security Administration website, the keyword in this around spousal benefit is the word up to 50% of your spousal benefits. You don't get to have 50%, you get to get up to depending on a few different factors. And whether or not you get that full 50% of your spouse's benefits or not depends on when you decide to take your own benefits. So in order to get 50%, you have to take your benefits at your full retirement age.

Jacob: 04:10

If you take your benefits before your FRA, you're not going to get all 50% of those benefits. Now here's what happens. If you take yours at 62, the earliest in which you can take your Social Security benefits, you're entitled to 32 and a half percent of whatever your spouse's benefits are at their full retirement age. So you would get a reduction because you're taking your benefits early. You don't get to have all 50%.

Jacob: 04:33

If you take your benefits at 62, you're gonna get a reduced amount down to 32 and a half percent as the lowest amount possible for the spousal benefits. But if you take your benefits at 63 or 64 or 65, it's gonna be somewhere between 32 and a half percent 50% of your spouse's benefits is what you are entitled to. Really, what happens here is every single month that you delay, you're getting slightly higher percentage, and so depending on where you fall in that age range and deciding when to take your benefits, you're obviously gonna get somewhere between 32 and a half and 50% based on that calculation. I'm not gonna go through the calculation here because it's probably not fun to listen to. So that's the biggest misconception is everyone assumes they're gonna get 50% of their spouse's benefits, and that is not automatically true.

Jacob: 05:15

You have to wait until at least your full retirement age to take your own benefits in order to get that full 50%. If you file for your benefits before then, gonna get a reduced amount, and the lowest amount that you possibly could get at 62 would be 32 and a half percent. So here's an example. Let's say there's a husband and he has $3,000 a month, which is his PIA, his primary insurance amount. That's the amount that he's entitled to at his full retirement age.

Jacob: 05:39

Let's say he's 65 right now and he's already taking benefits. So instead of $3,000 a month, which what his full benefit would have been, he's actually receiving $2,400 a month because he took his benefits early. So that's the husband. Now the wife in this scenario, let's say that she has $1,200 a month is what her PIA is, her primary insurance amount, which is what she would get at 67, but she's currently 62 and she's not started her benefits. Let's say the question is this, can the wife start taking her benefits right now and get 50% of that spousal benefit?

Jacob: 06:10

The answer is no, as I just explained. She being 62 would not get full 50%, she would only get 32 and a half percent of his PIA, and this brings up an important point. K? You do not get 50% of whatever your spouse is receiving. You get 50% of whatever their full benefit would be at their full retirement age.

Jacob: 06:31

Okay? So think back through this example really fast. The husband in this scenario took his benefits early. His full benefit, had he waited until his full retirement age, would have been $3,000 a month. But because he took his early, he's only getting $2,400 per month.

Jacob: 06:45

Which in this scenario would the wife or the spouse get as her 50% or whatever her spousal benefit? Is it based on the $2,400 per month, what he's actually getting, or is it based on the 3,000 a month, which is what he would have gotten had he waited until his full retirement age? And the answer is it's based on whatever his full retirement age benefit would be, his PIA, primary insurance amounts. In this scenario, it's based on the 3,000 a month, not what he's actually getting, which is $2,400 a month. That's an important fact.

Jacob: 07:14

A lot of people think that they're just gonna get half whatever their spouse is getting, and that's not completely true. Now I wanna take just a second to keep going down this kind of rabbit trail, and we're gonna get back on track in just a second. Let's say that the husband in this scenario, instead of taking his benefits at full retirement age and getting 3,000 a month, what if he took him at 70 and got $3,600 per month? Would the spousal benefit be based on the 3,000 a month, which is his PIA, or would it be based on the higher amount of $3,600 per month because he delayed? So the answer is still, the benefits are gonna be based on the 3,000 a month, which is the PIA.

Jacob: 07:46

There's no additional credits or benefits for the spousal benefits specifically if he delays until 70 and gets higher benefits on his own. So again, it shows that on the front end by taking it early or by delaying it, that doesn't help anybody on spousal benefits. It only helps or hurts you on your own benefits. So that's something that's important to pay attention to here. Now back to the scenario that we're currently running with of husband's already receiving his benefits, wife is 62, trying to figure out how much he's entitled to if she took hers right now at 62, and we've determined that she would not get the full 50%, which is what the most is that she could be entitled to because she's gonna be taking hers at 62 rather than her full retirement age.

Jacob: 08:24

And then again, it's not based on the $2,400 a month that the husband's receiving. It's based on his PIA of 3,000 a month. And so if we do the math on this and we know that she's going to get 32 and a half percent of his PIA, 32 and a half percent of 3,000 is $975 per month. And remember, if she wants to qualify for a spouse benefit, she has to file for her own benefits in order to do that. And so if she takes her benefits here at 62, she's gonna be reducing her own benefits, which the full PIA amount is $1,200, but she would take a 30% reduction to take them here at 62, which means that would be $840 a month is what she would start getting right now today at 62.

Jacob: 09:03

So if she took hers today at 62, she would get $840 on her own benefits, or she would get $975 per month on a spousal benefit, meaning she's gonna get her benefit plus the difference. So whatever the difference is there, I think it's like a $135, she would have that tacked on as her spousal benefit on top of her own benefit. Regardless, she's taking a reduction on both sides because she's got to file her own benefits at 62, which is a 30% reduction, And then in order to even get the spousal benefit by doing that, she's reducing how much that would be from 50% of his PIA down to 32 and a half percent. So it would help her to have spousal benefits in this scenario because they are gonna be higher than her own benefit. But the question, is it worth it to do?

Jacob: 09:47

Do they need that extra $975 a month right now, or is there more benefit to delaying when she takes it until her full retirement age, which means she would be eligible for 50% of his PIA, which should be $1,500 per month rather than only $9.75. So there's a trade off there, there's a decision to be made, but hopefully this example gives you a few different nuggets and kind of things to think about as you evaluate your particular situation. So here's a couple extra facts. Number one, it doesn't matter when the husband took his benefits in this scenario. So just because he took it before his full retirement age doesn't mean that she is going to be penalized on the spousal benefit side of things because of him taking it early.

Jacob: 10:26

She controls if she is penalized or not on getting full 50% or it would be less than that. She is the one in control of that. She cannot be penalized on her spousal benefits because of his decision to take them earlier. So it doesn't matter when the husband took his benefits because spousal benefits are based on the PIA, the primary insurance amount, not how much he is receiving. And again, if she takes those benefits early, she's going to reduce her own benefits but also reduce her spousal benefits.

Jacob: 10:52

If she wants to get the full amount for her or her spousal, then she would wait till her full retirement age to take those benefits. Now for those of you who are divorced, the question is always, hey, am I entitled to benefits? I was married for twenty years. Am I entitled to spousal benefits as someone who's been divorced? And the answer is yes, as you are entitled to spousal benefits even though you're not currently married, but there are a few rules that you've got to look at and make sure you qualify based on.

Jacob: 11:16

The first one is this, the marriage has to have been for at least ten years. So you had to have been married for at least ten years in order to qualify. That's number one. Number two is, is you cannot be remarried. So if you remarried, then your spousal benefits would be based on your new spouse, not your ex spouse, so everything would switch over to the new spouse.

Jacob: 11:35

The next thing is like everyone else, you have to be at least 62 years of age. And final thing to pay attention to here is this. Your ex spouse has to be entitled to collect Social Security retirement or disability benefits in order for you to get a spousal benefit. Now, is a little bit of nuance here that you might wanna pay attention to. The first thing is this.

Jacob: 11:54

You can only claim your spousal benefits when they are not taking their benefits already, even though they are eligible, if the divorce was at least two years ago. So just work with me here on this. If you divorce someone yesterday and they're 67, let's say, and they're not taking their benefits just yet, you cannot go down to the Social Security office or call them and say, hey, I want my spousal benefits. Guess why? Because they're not taking their own benefits and it hasn't been two years since the divorce.

Jacob: 12:22

So that's the first thing, is you can only claim whenever they're not receiving their benefits if the divorce is at least two years or older, meaning it happened two years ago or older. The second thing is this, if they are already receiving their benefits, that two year rule is waived. So go back to that same scenario. Let's say we get divorced today and your spouse is 67 or 62, I don't really care. They're taking their benefits already and you know that, you can go and file for your spouse's benefits tomorrow.

Jacob: 12:48

Okay? So there's no two year rule if they're taking their benefits. That two year rule only applies if they're not taking their benefits just yet. So for all of you who are divorced, guess what? Good news.

Jacob: 12:58

You are entitled to a spousal benefit if it makes sense and you qualify for those three to four things that you've got to check off. Number one, had to have been married for at least ten years, you can't be remarried, you've to be at least 62, and there are some nuances there around when you can take it or how you can take it depending on when your divorce actually happened. So hopefully this gives you some ideas around Social Security and spousal benefits and timing and decisions, because a lot of people aren't sure of how this works or just don't know the rules or the nuances around spousal benefits and assume a few different things, like they're always gonna get 50% of their benefits, or they can get their spousal benefits without filing for their own, or they don't have to wait for their spouse to file their benefits in order to even start. So understanding all this helps you make better decisions around your retirement income timelines, when you're gonna do what, when to file for Social Security, how it actually impacts different facets of the Social Security system around spouse benefits and your own benefits, and what's the pros and the cons of making these decisions, but that's all I had for you today.

Jacob: 13:53

I wanted to share this with you because I do get questions around spousal benefits all the time, and I hope this helps you as you continue to make retirement planning decisions. Alright. If you've got a question and you wanna have it answered here on the show, I do a Friday q and a every single week. What you can do is you can click the link down in the description where it says to ask a question. You can click that and submit your question there.

Jacob: 14:13

I receive all of those. I go through them, and I try to put an answer together here and upload that on Fridays. So if you wanna have your question featured here on the show, I ask you to do that because I need questions to be able to do this consistently. I appreciate you listening to this week's episode, and I hope you found it valuable. And if you did, please leave a rating and review.

Jacob: 14:29

That way, other people can find the show and benefit from these same conversations. So much, and we will see you next time. Hey. It's Jacob again, and I wanted to remind you that nothing discussed in today's episode is meant to be financial, legal, or tax advice. Retirement Answers is for educational purposes only.

Jacob: 14:45

Thanks for tuning in to this week's episode. I look forward to talking with you again next week.