 Personal Finance PowerPoint Presentation Social Security Spousal Benefits Prepare to get financially fit by practicing personal finance Support Accounting Instruction by clicking the link below giving you a free month membership to all of the content on our website broken out by category further broken out by course each course then organized in a logical reasonable fashion making it much more easy to find what you need than can be done on a YouTube page we also include added resources such as Excel practice problems PDF files and more like QuickBooks backup files when applicable so once again click the link below for a free month membership to our website and all the content on it In prior presentations we talked about investment goals strategies tools now honing down specifically on the goal of retirement planning recapping the sources of income that might be available in retirement including employer pension plans we're going to include 401k plans here as well public pension plans going to include 403b plans here as well noting that public pension plans can be thought of as similar to employer pension plans but for those working in the public sector the government for example we're also going to be including in this section the social security which is a public benefit program from the government that will be our focus at this time we've got the personal retirement plans which could include like IRAs and other savings and we have annuities which is a type of investment tool might be used specifically for retirement most of this information comes from investopedia how our social security spousal benefits calculated which you can find online take a look at the references resources continue your research from there this by Claire Boyd White updated June 27th, 2022 now remember as we're thinking about social security there's two sides we usually think about us paying into social security and the form of payroll taxes and us taking the money out or getting benefits at the time of retirement when we have a married couple it can confuse things a little bit because remember traditionally in a traditional family we often had one spouse working and one spouse not working from an income tax standpoint we kind of think of that as one taxable unit but on a social security side of things we applied the social security benefits to a specific individual social security number so then the question is well how is the spouse going to get some benefit because you think the spouse would get benefits considering they took on the tasks of taking care of the family for example while the other person was able to generate the revenue and paying to the social security which you would think would be applied to the family unit as opposed to say an individual but in practice it's applied to a social security number it's also important to kind of understand as we think about this interplay between the spouses how you might be paying into or structure your paying into social security if you have some capacity to do so to think about what that impact will have on the distribution years from social security so for example if you have two individuals that are connected in some way to a sole proprietor business or partnership kind of business then you might look at and consider who's being allocated the more wages that are subject to social security for example and consider what impact that might have on the benefits between the two spouses keeping that in mind how are social security spousal benefits calculated if you're eligible for social security spousal benefits how much you'll receive depends on a number of factors including your age the amount of your spousal's benefit and whether you have other retirement benefits available to you who's eligible anyone who's spouse, ex-spouse or deceased spouse was or is eligible for benefits once you have reached the age of eligibility is eligible the maximum amount you can receive is 50% of your spouse's full benefits so you're going to think about the full benefits for the person who had the wages allocated to them for social security and then the maximum amount you can receive is 50% of your spouse's full benefits so that's straightforward enough but the precise amount you'll get and when you'll get it depends on several circumstances including your spouse's age and work history your own age and work history and more so that leaves some room for you to maximize the amount you receive so now we can do some planning strategy possibly and remember if that amount is less than the amount you'd get based on your own work history you'll automatically get the higher amount so in other words if you're thinking about a situation where one spouse possibly didn't work as much taking care of the family possibly more they might still have a work history and the question then is going to be would you get more benefit from calculating your own work history or possibly trying to maximize your own work history amounts putting more money into social security doing more work to maximize your benefits or to get the benefits through you know the spousal benefits would be one of the things to consider below you'll find out if you qualify for social security spousal benefits and how to find out the amount you'll get and you'll learn the fate of a couple of once popular spousal benefit loopholes in the social security rules hint it's not good news nevertheless if you know the rules highlighted in this article you'll be able to maximize your social security spousal benefits that's the goal here who qualifies for spousal social security benefits if your spouse has filed for social security benefits you can also collect benefits based on the spouse's work record if you are at least 62 years old regardless of your age if you care for a child who is entitled to receive benefits on your spouse's record and who is under age 16 or disabled when you apply for spousal benefits you will also apply for benefits based on your own work history so then they're going to be taking into consideration what your benefits will be based on either the spousal or the work history whichever would be the more beneficial benefits so if you're eligible for benefits based on your own earnings and that benefit amount is higher than your spousal benefit that's what you'll get if it is lower you'll get the spousal benefit how spousal benefits are calculated spousal benefits are based on how much the other spouse would receive if that person began collecting benefits at the full or quote normal end quote retirement age so we've talked about the different age thresholds to get it early or for the full normal retirement age or to wait on it towards a later point the Social Security Administration has an online calculator that can show you what percentage of your spouse's benefits you will be eligible for depending on your own age when you start receiving benefits so you can go to the Social Security Administration website and punch in some numbers and do some estimates there the short answer to the calculation is this you're eligible for half of your spousal's benefit amount as long as you wait until your full retirement age to apply the earlier you file the less you'll get so you have a similar kind of effect that we saw in just general filing for Social Security claiming early or late so we have some leeway in terms of when we can start the claiming your spousal benefit is based on your partner's normal benefit amount but the amount you receive will depend upon when you begin to claim it so you can claim spousal benefits as early as age 62 but you won't receive as much as if you wait until your own full retirement age for example if your full retirement age is 67 and you choose to claim spousal benefits at 62 you'd receive a benefit that's equal to 32.5% of your spousal's full benefit amount instead of the maximum of 50% the amount increases with each year you delay at your full retirement age 67 in this example we've talked about full retirement age in prior presentations and how it might increase as time passes you'd be eligible for the maximum which is 50% of your spouse's full benefit so you figure your spouse's full benefit and then you're going to have to consider 50% being the max it would be less than that if you start taking the payments earlier notably spousal benefits are not reduced if the spouse is caring for a child who qualifies under the age or disability rules spousal benefits can never exceed 50% of the other spouse's full benefit so there is no incentive to file for spousal benefits later than your own full retirement age in other words when we think about calculating social security in general without the spousal component for our own social security we can do it early but there's usually a disincentive to do that in terms of getting less amount or at the normal age or you could file later and get a more higher amount but because when we think about the spousal component it caps at 50% at the full retirement age there's not really any incentives to wait to that next kind of time frame because you're not going to get any more benefit from doing so if you're receiving other retirement benefits the calculation gets a bit more complicated if you are eligible to receive benefits from a government pension or for an employer that is not covered by social security in that case you may still be eligible but the amount will be reduced for example if you have a government pension for which social security taxes are not withheld so this is kind of like if you're a teacher for example or something like that they've got their own pension plans involved and part of the negotiations or whatever with that is they're not paying into social security so in that case you're getting a huge benefit because you're not paying the 6.2% into the social security each paycheck and so that's a different scenario you would think than to someone who just wasn't working for example because they were because their spouse was working there taking care of the home or something like that so for example if you have a government pension for which social security taxes are not withheld the amount of your spousal benefit is reduced by 2 thirds of the amount of your pension this is known as a government pension offset for example suppose you are eligible to receive $800 in social security spousal benefits and you also get $300 from a government pension each month your social security payment is reduced by 2 thirds of $300 or $200 making your total benefit amount from all spouses from all sources $900 per month which is the $800 minus the $200 plus the $300 okay so you can have some impact in those cases so remember if you're working somewhere like a teacher or something like that working for the government that's not subject to social security then you're going to have a little bit of a more complication in the calculation of the spousal benefit so same sex married couples same sex married couples have enjoyed the same rights as all other couples since the 2015 Supreme Court ruling affirming their constitutional rights to marriage recognition and that means they're eligible for social security spousal and dependent benefits so that's one of the big kind of issues when you consider this issue of marriage it was kind of a big kind of issue because marriage you would think sometimes people think of it as kind of like a religious term whereas other people from a legal standpoint it's like a legal term and when you think of it from a legal standpoint on legal terms you would think that it has you know the legal consequences related to benefits and so on and so forth so in any case you would think they would be eligible for the benefits for same sex married couples as well so that are married so social security also recognizes some non-marital legal relationships such as civil unions and domestic partnerships so the social security site urges spouses to apply for benefits if they think they may be eligible divorced and widowed spouses the rules for social security spousal benefits for divorced and widowed people are complex in order to cover all conceivable circumstances so spousal benefits for divorced spouses if you're divorced you may be eligible for spousal benefits based on your ex-spouse's work record the rules are much the same plus your marriage must have lasted for at least 10 years you must currently be unmarried so if your former spouse hasn't filed for benefits yet you can still file for spousal benefits if you have been divorced for at least two years if your ex-spouse is still living in most cases you must be at least 62 years old and your spouse must be old enough to qualify for benefits whether the ex-spouse is actually taking benefits or not doesn't matter if your ex-spouse has died your benefits are similar to those of a widow or widower spousal benefits for widows and widowers a widow or widower can receive up to 100% of a spouse's benefit amount so now you got a situation and again if you think about this from a classical standpoint where you have a family unit one person working like a traditional family the other one taking care of the home you would think for federal income taxes you tax them as one entity one family unit but in essence in general but for social security it's applied to the social security number so you would think that that if the one spouse dies that the social security benefits might go to the other spouse because they should get the same benefit from it because they were acting as a family unit and the social security was being applied to one social security number would be the general idea so in other words a widow or widower can receive up to 100% of a spouse's benefit amount that's if the survivor has reached a full retirement age at the time of the application the payment is reduced to somewhere between 71% and 99% of the deceased entitlement if the widowed person is at least 60 but under full retirement age disabled people can apply as early as age 50 the agency has a streamlined application process to avoid delays in the first payment you may be eligible for benefits even if your spouse died long before reaching retirement age every employee racks up annual social security credits for working the credits are what we're adding up in order to help with the calculation so that's a term that's a social security calculation term if your spouse earned credits for at least 10 years a spousal benefit has been earned it's important to note that it pays to hold off until you reach your quote full and quote retirement age to maximize the amount you will receive also if you are receiving spousal benefits and your spouse dies you need to notify social security your spousal benefit of 50% of your partner's benefit will convert to a survivor benefit of 100% so if you're in a situation and you're saying okay one spouse was was taking care of the home the other spouse was working therefore all the social security is kind of tied to the spouse that was working's work record and then the other spouse was getting 50% let's say as a spousal benefit then when the other guy dies when one spouse dies that was the earner then you want to make sure you notify social security because you're still only getting 50% at that point in time it might be up to the 100% of what the spouse would be getting would be the idea so and do it properly it's not usually retroactive so if you do it late they're not usually going to say what if you didn't do it they're not going to go back and give you all the benefits you want to make it immediate so you're getting paid properly real time it's hard to go back and tell the government to give you money for the past points that you didn't apply for so spousal benefit loopholes you may hear or read about other ways to increase the amount of your spousal benefit unfortunately under new social security rules two popular strategies have been abolished so the file and suspend strategy prior to 2016 workers could file for benefits making their partners eligible to claim spousal benefits then suspend their own benefits in order to maximize credits for deferred filing this so called file and suspend strategy meant that a lower income partner could take advantage of spousal benefits while the primary earner accrued delayed retirement credits by increasing their benefit amount so however this quote have your cake and eat it too quote end quote loophole has closed with the bipartisan budget act of 2015 which took effect in April 2016 while it is still possible to file for benefits and this suspend payments temporarily and other benefits that would normally have be available on your account such as spousal benefits are no longer payable during such suspensions deemed filing the 2015 law also stopped people born after January 1st 1954 from double dipping by claiming spousal benefits while accruing delayed retirement credits on their own accounts previously it was possible for those eligible for both types of benefits to claim spousal benefits first while delaying a claim on their own account a process sometimes called a restrictive application this allowed taxpayers to benefit from the earlier spousal payment while maximizing their own benefits through delayed retirement credits under current law spouses born after January 1st 1954 are deemed to have filed for any and all benefits for which they are eligible as soon as they file for any of them the payments they receive are based on whichever benefit amount is the highest strategies for maximizing spousal benefits so let's talk about strategies that may still be applicable here every married couple has to figure out the best way to maximize their benefits depending on their own circumstances so clearly as you're going towards retirement it's going to be dependent upon are both spouses working which is kind of more common these days which you would think that both spouses might be claiming social security is one spouse working for a job that's like a government job like a teacher or something like that where they're not subject to social security taxes being withheld what's going to be the impact there is that a situation where one spouse has worked some years but then they stopped working when kids were there or something like that and maybe you have a situation where you're saying hey would it be worthwhile for us to try to have earned income for a few years to increase their spousal benefits are you self-employed are the two spouses working for a business in some way a partnership or sole proprietorship or one spouse is working for the other or something like that is there some way that you might then think about how that income is being allocated even though it's the same for federal income taxes it might have an impact in terms of who's being allocated the social security in terms of the benefit calculations in those categories as well so the three strategies below will help you make the most of your social security spousal benefits depending on your circumstances however keep in mind that regardless of your circumstances the most of spouse can get is 50% of the amount that the higher earning partner is entitled to at full retirement so I would say then that one of the strategies if you still have some time before full retirement would be is there a way to maximize some of the income of one of the spouses the one that doesn't have as much social security credit would that be worthwhile to think about or not or would it be worthwhile just to try to maximize the up to 50% spousal credit that the one spouse would be receiving for example so number one strategy for late claimers if one partner has little or no earning history the best strategy is for the wage earner to postpone applying for social security retirement benefits until age 70 to get the highest amount possible full retirement age is 66 for most baby boomers and 67 for everyone born in 1960 or later but by delaying claiming benefits until age 70 which is the later date where if you're the person claiming the benefits you get a higher benefit level to claim at 70 the wage earner will accrue delayed retirement credits that will increase the monthly payment by 8% for each year of delay keep in mind that this won't affect the spousal benefit amount so that fact that you delayed shouldn't affect the spousal benefit amount because I believe that's calculated based on the full retirement age spousal benefits differ from personal benefits when it comes to delayed payments if you delay claiming your personal retirement benefits past full retirement age the benefit increases over time as explained above however that will have no impact on your spousal's benefit so that calculation as to whether you should take it at full retirement age or spend it from the spousal benefit because it won't have an impact there the question is you know you might have taken into consideration your life expectancy how long you're going to live and are the added payments you're going to be receiving going to out outpace the fact of getting them earlier due to living long enough to have that happen so since since they maxed out at full retirement age so in other words there is no benefit for your spouse and delaying the spousal benefit beforehand if both partners work and their earnings are more or less equal their individual social security benefits will each be greater than the spousal benefit so the best strategy for both is to postpone applying for benefits until age 70 so in other words if both spouses have a significant amount of work history paying into the social security system they're both going to get their own benefits based on their own benefits and it's not going to be based on and again you've got the question as to whether you take the benefit early whether you take it at full retirement or whether you take it later and that will be dependent upon in each individual's case you can think of it individually or combined based on life expectancy of the individual for example if you take it later that's maximizing the amount that you're going to be receiving but you're not going to be receiving the money as early so in order to maximize that amount as we've talked about prior presentations you'd have to live longer so that there'd be a break even point we talked about that in prior presentations number two strategy for divorced spouse if you have been divorced for at least two years you can apply for spousal benefits if your marriage lasted 10 or more years if on the other hand you are still married and considering a divorce and are near retirement age try to apply for spousal benefits before your divorce is final if you have been married and divorced multiple times you can choose to receive whichever spousal benefit is highest just pick one just pick the highest one saving your ex-spouse saving your ex-spouse's social security numbers and dates of birth will make the enrollment process easier number three strategy for widowed spouses widows and widowers may receive full benefits at their full retirement age or reduced benefits as early as age 60 as explained in the section above remarrying after age 60 will not affect your eligibility for survivors benefits however it may be more convenient for you to forego your widow or widower spousal benefits depending on your circumstances if your current spouse is also eligible for social security benefits and earns more than your former spouse you may wish to apply for spousal benefits based on your new spouse's records instead so if you are collecting a survivor benefit but also qualify for a benefit on your own you may wish to collect a survivor benefit in the early years of retirement and leave your own social security benefits to accrued delayed retirement credits then you can switch to your own retirement benefit as late as age 70 so that's an interesting strategy so how do social security benefits work? You're eligible for spousal benefits if you've married divorced or widowed and your spouse is or was eligible for social security spouses and ex-spouses generally are eligible for up to half of the spouses entitlement widows and widowers can receive up to 100% you can claim benefits based on your own work or that of your spouse you'll automatically get the larger amount it's one or the other you don't get both so if you are no more than three months away from age 62 you can apply online or by phone so you might want to check out the social security administration website for example and do some research there if you plan to put off applying to get the largest payment possible wait until you're no more than three months from retirement age that's 66 or 67 depending on your year of birth can I collect half of my spouse's social security at 62 not quite the percent of your spouse's social security that you receive starts at 32 .5% at age 62 and steps up gradually to 50% at your full retirement age 66 or 67 depending on your year of birth the amount is based on your spouse's benefit at full retirement age the important point is don't bother delaying past your full retirement age the amount you receive won't grow beyond that point what is the maximum spousal social security benefit the maximum spousal benefit is 50% of the amount that the spouse is eligible to receive at full retirement age that's a cap by the way if your spouse delays retiring until 70 the spouse gets more but you don't because it's based on the retirement age not that delayed age as we saw prior survivors may receive up to 100% of the deceased person's social security amount there's a complicated formula for families in which more than one dependent is eligible for benefit it caps the maximum how can I switch from my social security benefit to a spousal you can only switch from your benefit to a spousal benefit if your spouse has not begun receiving retirement benefits you can claim your benefit based on your work history until your spouse files and then you can switch to the spousal benefit so if you might be eligible for the benefit first for example however if you're not at your full retirement age you'll get paid a reduced spousal benefit which can be as low as 32.5% of your spouse's primary insurance amount to monitor your benefit or change them you can create an account on the social security site so you can go to the social security website and create an account it contains a wealth of information so you can obviously do endless research on this stuff a lot of scenarios that can be thought out of it and it allows you to make some changes online although others require a phone call what's the bottom line maximizing your spousal social benefits is all about timing and the timing is determined by your circumstances as a couple if both partners work they should investigate what each partner's individual benefit will be unless one partner earns massively more than the other it will probably pay for both to file individually waiting at least to full retirement age if not to age 70 if possible so if you're both getting your own benefit and not basing it on the account then you get the maximum benefit amount per month by waiting to the longer time frame although again you got to take into consideration your life expectancy as to whether that would be ultimately beneficial which we've talked about in prior presentations correction February 14th 2022 a previous version of this article misstated the amount of the spousal benefit for a spouse retiring early at age 62 so you could take a look at which on this including checking out investopedia and then the social security website of course as well