Contributed by: Lauren Adams, CFA®, CFP®
At The Center, having a Social Security filing strategy is an important part of the retirement planning process. For couples where one of the spouses did not work outside of the home, many are surprised to find out that their projected Social Security benefit is much larger than they would have expected.
This is usually due to the Social Security Spousal Benefit – a benefit that an individual may be entitled to based on the earnings history of their spouse. Here is the high-level overview of this benefit:
Who: Available to those who have been married at least one year and are 62 years or older.
What: The benefit amount can be up to 50% of the working spouse’s Primary Insurance Amount at Full Retirement Age (FRA). The spousal benefit only kicks in if this benefit is higher than the receiving spouse’s own retirement benefit.
When: That depends! The working spouse needs to have filed for the spouse to claim this benefit. If the receiving spouse claims before their own FRA, then the spousal benefit is permanently reduced (just like the standard benefit). But unlike the standard benefit, there are no delayed retirement credits that increase the spousal benefit after the receiving spouse’s FRA. This complicates claiming decisions for couples and is why working with a financial advisor - who can take all the different factors related to each couple’s situation into account - is especially important.
Where: You can apply for benefits, including spousal benefits, online at https://www.ssa.gov.
Why: The spousal benefit originated earlier in the 20th century when the typical family structure often saw only one individual working outside the home and aimed to provide some level of financial security for the non-working spouse.
Note that the rules above are different if the spouse is caring for a qualifying child or has been divorced or widowed. Contact us to see how we can help maximize your retirement benefits based on your individual situation.
Lauren Adams, CFA®, CFP®, is a Partner, CERTIFIED FINANCIAL PLANNER™ professional, and Director of Operations at Center for Financial Planning, Inc.® She works with clients and their families to achieve their financial planning goals.
The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete. Any opinions are those of Lauren Adams, CFA®, CFP® and not necessarily those of Raymond James.