How Are Social Security Spousal Benefits Calculated?- Retirement Planning

Social Security is one of the most generous benefits for retirees. Not only because it provides for an individual settlement but also due to its liberal spousal benefits. As per the law, a spouse can claim a Social Security payment based on his or her own income record or as a certain percentage of the partner’s Social Security benefit. This particular source can function as an additional stream of income, especially in times of need. As per a 2019 Social Security report, more than 2.3 million individuals claimed their spousal benefits. These funds bring critical value for those who claim it at the right time. But it is important to know key facts and how these benefits are calculated to be well informed.

Here are some points to note about Social Security spousal benefits:

Eligibility for spousal benefits

Regulated into the Social Security payments in 1939, the spousal benefits are one of the most reliable payouts. It helps expand the household income during retirement and also provides assistance to widows and widowers. It includes provisions for disabled retirees and children as well. However, these funds only accrue to the spouses of qualified taxpayers. Before applying for a spousal Social Security advantage, one needs to be sure of the terms and eligibility criteria. The rules for this are simple and easy to understand.

First and foremost, a person can claim the spousal advantage only if she/he has been married to the person for at least a year.
A divorced person can also qualify for the benefits, provided the marriage lasted for a minimum of 10 years and the current marital status is unmarried.
Both the partners should be at least 62 years old. Or the spouse claiming the benefit should be the custodian for the child of the main beneficiary. However, this exception is only applicable for children that are under the age of 16 or disabled.
The spousal fund can be asserted if the qualifying other half is actively collecting the benefits.
The gain is invalid if the spouse exceeds the annual earnings limitation or they cancel their advantage.
Both the partners are not entitled to the security at the same time.
For those with a work history, either the work benefit or the spousal claim will be paid, whichever is greater.

Calculation of spousal benefits

Before calculating the spousal benefits, it is important to know a few concepts. The most central is the primary insurance amount (PIA). This is typically the total monthly retirement advantage of a person, provided the claim is made at the full retirement age. This varies as per the birth year. For those born in 1960 or later, the official age is 67 years.

A Social Security spousal claim is calculated as 50% of the partner’s PIA, irrespective of the year of filing. Such as, X is born in 1960 and files for retirement benefits at the age of 62. In this condition, X is liable to get an amount that is lesser than the actual PIA. However, if X’s spouse – Y, claims for Social Security, the amount is arrived at by estimating 50% of the X’s PIA. This will not be factored in terms of X’s actual receipts. Instead, it is based on the official PIA.

On the other hand, even if X has filed after the retirement age, (which is supposed to increase the benefits), the amount for Y would not increase more than 50% of the PIA, irrespective of X’s actual receipt. But the amount is also affected by the age of the spouse filing for the advantage.

Note: Spousal funds by Social Security are layered. They are influenced by the PIA of both spouses. If one partner is receiving the worker benefit, he/she is entitled to receive his/her own Social Security, followed by the spousal security. If the partner is receiving a PIA which is greater than that of 50% of the spouse, there is no amount paid. Such as, for X with a PIA of $2,100 and Y with a PIA of $3,000, X will not be entitled to any security since the individual PIA is more than 50% of the partners.

That said, there is no increase in social security post the full retirement age. However, for benefits withdrawn before the official age, there is a reduction for the entire life. These reductions are different from those with working reimbursements. To understand this better, here in an elaborated calculation of the Social Security spousal benefits:

These calculations assume the official retirement age of a person to be 67 years and the PIA to be $3000.

The spousal benefit percentage for different retirement years:

62 years: 32.5%
63 years: 35%
64 years: 37.5%
65 years: 41.66%
66 years: 45.83%
67 years: 50%

The benefit amount for each age is equivalent to:

62 years: $975
63 years: $1,050
64 years: $1,125
65 years: $1,250
66 years: $1,375
67 years: $1,500

Early retirement affects the benefits. The spousal claims are maximized at the official retirement age and reduce as the partner files for the advantage before the authorized year. This reduction for early retirement is for a lifetime and has only certain restricted exceptions, like caring for a child who is younger than 16 or is disabled.

Divorced spouses

A divorced spouse can assert on the ex-spouse’s Social Security record. This is irrespective of whether the other partner is remarried or is collecting the advantage on their record. However, a few requirements must be met:

The marriage must have lasted for 10 years or more.
The ex-partner must be receiving the Social Security benefits.
The official age must be at least 62 years. However, if the other partner has died and the person making the claim has not remarried, the benefits can be claimed even at 60 years as a surviving divorced spouse. Moreover, in the case of disability of any party, the assertion can be made as early as at the age of 50 years.
For those born post-January 1, 1954, both the retirement and spousal security are to be claimed together. In this case, the higher amount is paid.
For people born before January 2, 1954, the authorization can be made on the ex-spouse’s’ record first. Meanwhile, the personal benefit can be allowed to grow to be maximized at the age of 70.
At the time of filing, the marital status must be unmarried. However, in the case of two marriages, a person can choose which one to file from, provided both lasted at least 10 years.

Also, the other partner can apply in case the ex-spouse has not filed for security yet. But the ex-spouse should have reached the retirement age and should be eligible for security. Moreover, the divorce should have been filed at least two years ago.

Surviving spouses

In the case of a deceased spouse, the surviving partner can also assert for the amount. Even though the survivor’s benefit can be claimed as early as the age of 60 years, there are certain provisions to it:

Security asked for before the person’s retirement age will lead to a reduction.
In case the person remarries before the age of 60 or 50 years in the case of the disabled, there is no survivor benefit payable unless the new marriage ends. That said, a remarriage after 60 will not impact the funds.
In the case of remarriage post the age of 60 years, the security amount for the living spouse will be higher than the deceased one. Hence, one must apply to the current Social Security record.
For cases where the surviving partner is taking care of a child, the claim will be paid until the child turns 16. This is irrespective of the age or the marital status. Post this, the child can continue to earn benefits until he/she turns 18 or 19, as long as they are unmarried.

To sum it up

Overall, spousal benefits are a very secure stream of income, provided all eligibility criteria are met. One can file for these online on ssa.gov, or by calling 1-800-772-1213, or in person at the local Social Security office.

To maximize the payouts and for help in dealing with its complications, you can choose to consult professional Financial Advisors.