Retirement Answers

Hello, and welcome to Retirement Answers. My name is Jacob Duke. I'm a certified financial planner based in Little Rock, Arkansas working with clients throughout the South. Today's question comes from Dave and Karen. And, Dave asks, hey.

I'm 67. I recently began taking my Social Security benefit, and my wife, Karen, she is 62. And we're curious around should we take her benefit so that she would begin receiving the 50% spousal benefit or not? And so, Dave, this is a really good question, and a lot of confusion really comes into play here for most people because they don't understand the rule completely. So just a little background real quick on Dave and Karen.

Dave's benefit is $3,200 a month currently, and Karen's benefit at 62, if she began taking it today, would be $1,000 per month. So if we could do the quick math on that, we see that 50% of Dave's benefit is $1,600, which is higher than what Karen would receive on her own benefit. So that's really the heart of the question. Should we start taking the benefit now so Karen could receive the extra $600 a month, or should we continue to delay that into the future for her? Dave, great question.

As I mentioned, lot of confusion around this. So let's just kinda lay some groundwork really quickly. Going back to the 50% rule, most of us understand that rule for spousal benefits, but we understand it incorrectly. The keywords for that that rule is gonna be up to 50%. You are entitled to up to 50% of your spouse's benefit.

Now what does that mean? Well, that's the most that you could receive, and there are reasons why. If you take your if you take your own benefit before full retirement age, we're gonna assume that Karen's full retirement age is 67. If you take your benefit before that date, Karen, then you would receive a lower percentage of your spouse's benefit. Right?

So you would not be eligible for the full 50% because you took your benefit early. So the way that works is, let's say that Karen took her benefit today at 62, hoping to get 50% of Dave's benefit. Well, that wouldn't work out because Karen would actually get only 32.5% of Dave's benefit because every month that she decides to take her benefit early before 67, there's about a point 7% decrease in her amount that she's actually eligible to receive. Okay? So that's something to consider and and remember whenever you're deciding when you should take your benefit kinda if you're looking at spousal benefits.

So because Karen if she took it today, would take it at 62, she would only get 32.5% of Dave's benefit, which remember if Dave's benefit is $3,200, 32.5% is only $1,024. So technically, she would only get 24 more dollars than she would get on her her own benefit if she decided to take it and actually, you know, begin receiving the spousal benefit. So that would probably not be the the best choice if the goal is to simply get the most out of the spousal benefit. The best choice would be to delay, Karen's Social Security benefit as long as possible, assuming that she doesn't need that $1,000 a month and can live off of other sources of income. Just kind of looking at this in a vacuum, the way to get the the highest spouse benefit is to delay your own benefit until full retirement age.

So Karen and Dave, I hope that really answers your question around how that benefit is calculated. So every month that you continue to delay your own benefit, that's a little bit more of of a higher percentage, somewhere between 32 and a half to 50%. That's the range. Right? The most you can get of your spousal benefit is 50% of your spouse's, and the least is 32 and a half.

So if you take it at 62 on the dot, you're gonna get 32 and a half percent of your, of your spouse's benefit. If you take it at 67, you're eligible for 50%. And then if you take it between sixty two and sixty seven, obviously, you would get somewhere between 3250%. So, that's how that benefit works. So for all you listeners out there, this question is super helpful probably for you as well whenever you're looking at spousal benefits and how to take them because we often forget that the 50% is a keyword up to 50%.

It's not an automatic 50%. And so that's something that you have to pay attention to. Now just a quick reminder on on what is it was required to actually get a spouse benefit. Well, Karen has to take her benefit to get a spouse benefit, and Dave has to be taking his. So both people have to be taking their benefits in order to be eligible for a spousal benefit, not just one or the other.

It has to be both. So if Dave was not taking his because he wanted to delay his until 70 and Karen was like, oh, I'm gonna take mine at 62 because that's when I think I'm gonna get a better benefit from a spousal benefit. Well, she wouldn't even get the spousal benefit because Dave would not be receiving his yet. So both people have to be taking their own benefit in order for the spousal benefits to even come into play. I hope this has been helpful for you.

I hope this has been insightful. And, if you feel like this would be helpful for someone else you know, please do share it with them and send it their way. That way, they can give it a listen. But I appreciate you being here, and thanks for tuning in. I hope to see you next week.