How Filing for your Own Benefits Early Affects Spousal Benefits

Social Security spousal benefitsOnce applying for early retirement benefits you will immediately lose the ability to file for full spousal benefits at Full Retirement Age (FRA).

According to the Social Security Administration (SSA) located at www.ssa.gov, when a worker files for retirement benefits, the worker’s spouse may be eligible for a benefit based on the worker’s earnings. Another condition is that the spouse must be at least age 62 or have a qualifying child in her/his care. By a qualifying child, the SSA means a child who is under age 16 or who receives Social Security disability benefits.

The SSA goes on to state that the spousal benefit can be as much as half of the worker’s “primary insurance amount,” depending on the spouse’s age at retirement. If the spouse begins receiving benefits before “normal (or full) retirement age,” the spouse will receive a reduced benefit. However, if a spouse is caring for a qualifying child, the spousal benefit is not reduced.

If a spouse is eligible for a retirement benefit based on his or her own earnings, and if that benefit is higher than the spousal benefit, then the SSA will pay the retirement benefit of the claimant based on his or her work record. Otherwise the SSA will pay the spousal benefit.

The Impact of Applying for Spousal Benefits Early

A spouse can choose to retire as early as age 62, but doing so may result in a benefit as little as 32.5 percent of the worker’s primary insurance amount (PIA). A spousal benefit is reduced 25/36 of one percent for each month before normal retirement age, up to 36 months. If the number of months exceeds 36, then the benefit is further reduced 5/12 of one percent per month.

For a spouse who is not entitled to benefits on his or her own earnings record, this reduction factor is applied to the base spousal benefit. This amount does not include the spouse’s Delayed Retirement Credits (DRCs). The base spousal benefit is 50 percent of the worker’s PIA. For example, if the worker’s PIA is $1,600 and the worker’s spouse chooses to begin receiving benefits 36 months before his or her normal retirement age, the SSA will first take 50 percent of $1,600 to get the $800 base spousal benefit. Then the SSA computes the reduction factor, which is 36 times 25/36 of one percent, or 25 percent. Applying a 25 percent reduction to the $800 amount gives a spousal benefit of $600. Therefore, in this case, the final spousal benefit is 37.5 percent of the spouse’s PIA (as opposed to 50 percent of the PIA amount).

The Impact of Applying for your Own Benefits, then Applying for Spousal Benefits

Once you have applied for early retirement benefits on your own earnings record you have immediately and for all time lost the ability to file for full spousal benefits at Full Retirement Age (FRA).

When you have applied for early retirement benefits on your own work record and your spouse dies when you are between the ages 62 to 70 you can only collect excess widow(er) benefits. In other words, you cannot suspend your own benefits to collect survivor benefits and Delayed Retirement Credits (DRCs) to bump up your own benefits by 32 percent at age 70.

The Social Security Maximization Solution

If you want to file for early retirement spousal benefits have your spouse file and suspend his / her Social Security application. Next you should file a Restricted Application for spousal benefits only. This way you can collect full survivor benefits.

About ksindell

Kathleen Sindell, Ph.D. is the author of numerous academic, popular, and professional finance articles, Web sites, proposals, and books. This includes the bestselling reference book, “Investing Online for Dummies, Eds 1-5” (listed for two consecutive years on the Wall Street Journal’s Bestselling Business Book List). Her most recent book “Social Security: Maximize your Benefits” has been listed in Amazon’s Top 100 Bestselling Retirement Planning Books. It is important to note that “Social Security: Maximize Your Benefits, 2nd Edition” was just released.

Sindell has an in-depth understanding of the financial services industry and has held Series 7, 63, and 65 licenses. Dr. Sindell is regularly tapped as a financial services expert on ABC World News, The Nightly Business Report, and at popular online and print outlets. Kathleen Sindell, Ph.D. is a member of the Board of Directors for the Financial Planning Association, National Capital Area (FPA NCA), is on the Editorial Advisory Panel of the Journal of Financial Planning, and is Co-Chair of the Metro Washington Financial Planning Day. Sindell is a Course Chair II, CFP Program Academic Officer, and adjunct full-professor at the University of Maryland, UMUC, School of Undergraduate Studies.

Contact Information: ksindell@kathleensindell.com or 703-299-1700

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