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Social Security: 3 Things You Should Know About Spousal Benefits

Todd Campbell, The Motley Fool

If you're married or divorced and planning for retirement, you should know that you may qualify for Social Security spousal benefits that can significantly increase your retirement income. However, there are some rules surrounding who can collect spousal benefits and how much money you can receive in spousal benefits. Read on to learn more about this valuable source of retirement income.

No. 1: Who gets them?

Social Security offers spousal benefits to any spouse who doesn't qualify for benefits or only qualifies for limited benefits based on their own work record.

A senior couple sitting on the floor, looking at a laptop, with backpacks beside them.

IMAGE SOURCE: GETTY IMAGES.

Qualifying for Social Security requires accumulating 40 work credits, and collecting those credits usually involves 10 years of working at a job that's subject to Federal Insurance Contributions Act (FICA) taxes. Furthermore, Social Security calculates the amount it awards in benefits based on a worker's 35 highest-earning years. If you work fewer than 35 years, zeros will be used in the calculation, resulting in a significantly lower benefit.

As you can imagine, this design makes it likely a spouse with a limited work history will only qualify for a small benefit or no benefit at all. To guard against the risk of that happening, spouses can collect Social Security benefits that are based on the working spouse's work history, rather than his or her own. This can provide critical financial support to current spouses, including same-sex couples and ex-spouses.

No. 2: How much can you get?

A spouse can get up to 50% of the benefits owed to the working spouse at full retirement age, which is the age at which the working spouse can collect 100% of the benefits to which they're entitled. This amount is known as the primary insurance amount, or PIA.

Spousal benefits are only awarded if the working spouse has already claimed their own benefit and the person claiming spousal benefits will only get the full 50% they're entitled to if they wait until their own full retirement age to claim them.

A person claiming spousal benefits can do so as young as age 62 (there's an exception that I'll cover in a minute), but their monthly spousal benefit is reduced by a fixed amount for every month they claim earlier than their full retirement age. For example, a person born in or after 1960 has a full retirement age of 67. If that person claims spousal benefits at age 67, they'd get 50% of whatever their working spouse's full retirement benefit amount is. However, if they claim early at age 62, then their 50% benefit would be reduced by 35%.

The following table provides three examples of how much a person entitled to $500 per month in spousal benefits at full retirement age would receive if they claimed at age 62 instead.

Birth Year

Full Retirement Age

At Age 62, a $500 Spousal Benefit Would Be Reduced to:

% Reduction

1943-1954

66

$350

30.00%

1957

66 and 6 months

$337

32.50%

1960 and later

67

$325

35.00%

Data source: Social Security Administration.

No. 3: What are the rules for ex-spouses?

One misconception is that divorced spouses can't qualify for spousal benefits. That's not true. If the divorced spouse is unmarried or widowed, is at least age 62, and was married to the working spouse for at least 10 years, then they can receive spousal benefits, too.

An ex-spouse who claims spousal benefits is subject to the same claim-early reduction rules, but the working ex-spouse doesn't have to have claimed benefits already for spousal benefits to be paid, unless the couple divorced less than two years before.

Another misconception is that a divorced person claiming spousal benefits will reduce the ex-spouse's benefits. That's not true, either. A former spouse who receives spousal benefits has no impact on the amount of benefits that can be paid to the working ex-spouse or their family.

Can anyone else qualify for spousal benefits?

I mentioned there's an exception to the age 62 requirement for claiming spousal benefits. If you're a spouse younger than 62 and you care for a child who qualifies for Social Security benefits on the working spouse's record, then you can receive spousal benefits at any age until the child turns 16. Importantly, the claim-early reduction doesn't apply in these cases, so the spouse would receive the full 50% of PIA they're entitled to, regardless of their age.

However, these spousal benefits will stop once the child is 16, unless you're age 62. If you are at least age 62, then your spousal benefit would then become subject to the claim-early reduction.

Overall, the rules regarding spousal benefits can be complex, so if you're unsure of your benefits, make sure you do your research so you aren't shortchanged in retirement.

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