Uncovered Secrets: Crucial Social Security Regulations Every Married Retiree Ought to Understand
Dual-earner households hold an advantage in retirement planning compared to single adults. If one person meets the criteria for Social Security retirement benefits, both individuals will receive regular payments. This can lead to an enhanced financial situation, particularly for couples who weren't able to stash away a substantial amount for retirement savings.
However, to efficiently utilize these two sources of income, strategic planning is necessary. Here are three fundamental rules that married couples should know to maximize their household benefits.
1. Criteria for receiving spouse benefits
Contrary to popular belief, you don't become eligible for spousal Social Security benefits based on your partner's work record as soon as you marry, provided they qualify for retirement benefits. Typically, you need to have been married for at least one year before becoming eligible, unless you're caring for your partner's minor or disabled child. If you were already eligible for Social Security benefits when you tied the knot, then you can become eligible before the one-year mark.
Divorced ex-spouses might also be eligible if they were married for a decade or more, but keep in mind that re-marriage will invalidate your ex's work record as a source of benefits for you.
2. Determining which benefit you'll receive
If you're eligible for both spousal Social Security and retirement benefits, the Social Security Administration grants you the larger of the two.
Your retirement benefits are calculated based on your average monthly income over the 35 highest-earning years (adjusted for inflation) and your age at which you claim. You become eligible for your full benefit at the full retirement age (FRA), which is 66 to 67 for contemporary workers. If you opt to claim early, your checks will be smaller; however, delaying benefits past your FRA can increase your checks until the age of 70.
Spousal benefits operate differently. Your maximum spousal benefit is half of your spouse's retirement benefit at their FRA. For instance, if they qualify for $2,000 monthly at their FRA, you become eligible for $1,000 monthly spousal benefits at your FRA.
Early claims trigger penalties, which are even steeper for spouses compared to workers. Workers lose 5/9 of 1% per month for the initial 36 months of early claiming, while spouses face a 25/36 of 1% monthly deduction. There's no incentive to extend your spousal benefits past the FRA because they cannot grow beyond that point.
3. Application timeline
You can apply for retirement benefits starting from any month in which you will be at least 62 years old for the entire month. However, many hopeful applicants find themselves unable to claim immediately due to this requirement. Only individuals born on the 1st or 2nd of the month can claim right away. Everyone else must wait until the month after they turn 62 to be eligible. Upon meeting the eligibility requirement, you'll receive your first check in the subsequent month. For instance, if your birthday falls on January 3, 2025, you can claim benefits effective February 2025, and you'll get your first check in March 2025.
Spousal benefits also come with an age limit, with an additional provision that you can't apply until your spouse starts receiving their benefits. Divorced spouses, however, have an exception; they can apply even if their ex isn't collecting benefits, as long as they've been divorced for at least two years.
This warrants careful consideration of when each person should claim and what type of benefit they're likely to receive. When both parties have earned relatively equal incomes throughout their lives, each person should postpone claiming as long as feasible to maximize their respective benefits, barring any health or financial challenges.
In situations where one person has significantly surpassed the other in earnings, it may be advantageous for the lower earner to claim early. Their checks can help the higher earner delay claiming until they become entitled to a larger benefit. Once the higher earner applies, the lower earner has the option of swapping to their spousal benefit if it offers a greater payout than their current amount.
If you seek help estimating your Social Security income, create a "my Social Security" account. You'll need to validate your identity upon initial setup. Upon signing in, you'll be granted access to your estimated monthly benefit at every claiming age, aiding you in making an informed decision.
In the context of retirement planning, efficient use of both Social Security retirement benefits and spousal benefits can significantly impact a finite retirement income. Properly understanding the criteria for receiving spousal benefits and determining which benefit to claim can maximize this income. For instance, you don't automatically become eligible for spousal benefits based on your partner's work record, and you can only receive your spouse's full retirement age benefit if you wait until that age to claim. Furthermore, early claims for spousal benefits come with steep penalties that you should consider when planning your retirement finance.
