Approximately 96% of all U.S. workers are eligible for Social Security (SS) Retirement Benefits. (They paid Social Security taxes during the years they worked.) These individuals can receive their full SS retirement pensions once they reach full retirement age. (For Baby Boomers, this is between ages 66 and 67 depending on birth year). However, individuals may begin receiving their pensions as early as age 62 at a permanently reduced amount.
Social Security also provides Spousal Retirement Benefits for married couples – our topic of discussion today.
Spousal Retirement Benefits
In the case of a married couple, when “Spouse A” begins collecting his individual SS retirement pension, then “Spouse B” may apply for the Spousal retirement pension (no sooner than age 62). If Spouse B waits until she reaches full retirement age (see above), then she will receive 100% of her Spousal retirement pension. However, if she applies before full retirement age (no sooner than age 62), then she will receive a permanently reduced Spousal pension.
Spousal retirement pensions are available to all spouses, not only to those who’ve worked outside the home. For example, if you’ve been a stay-at-home mom who has never had a job outside the home, you’re still eligible for a Spousal pension. On the flip side, if both you and your husband have worked and are eligible for SS retirement pensions, you’re still both eligible for Spousal pensions.
BUT, YOU CAN’T COLLECT YOUR SOCIAL SECURITY RETIREMENT PENSION AND YOUR SPOUSAL RETIREMENT PENSION AT THE SAME TIME! It’s either one or the other. So,
– in the case where Spouse A worked and Spouse B never worked, the only decisions are whether
o Spouse A should collect his retirement pension at full retirement age or earlier and
o Spouse B should collect her Spousal pension at full retirement age or earlier.
As noted above, these decisions will affect the size of their pensions.
– in the case where both Spouse A and Spouse B are eligible for SS retirement pensions and Spousal pensions, decisions regarding how to maximize the amount received from Social Security are much more complicated. There are many different scenarios to consider.
1. Spouses A and B are both 66 (their full SS retirement ages). They are not in great financial shape. So, Spouse A files for his SS retirement pension (receiving his full pension amount). Spouse B decides to forego the Spousal pension (which is less than her full retirement pension) and instead files for her SS retirement pension (receiving her full pension amount). They need the maximum amount of money available through Social Security NOW! And this is the best way to go.
2. Spouse A files for his retirement pension at full retirement age. Spouse B files for her Spousal pension at age 62 (thus permanently reducing her Spousal pension). These two pensions supplement other income coming in, and this couple has enough money to maintain their current lifestyle for some years. However, when Spouse B reaches age 68, she decides to drop her Spousal pension and to file for her retirement pension (which is more than her Spousal pension). Since Social Security increases your full retirement pension by 8% for every year that you wait to file after reaching your full retirement age (this applies up through age 70), Spouse B’s retirement pension will be 16% more than she would have gotten if she filed at her full retirement age of 66. This works out perfectly for the couple. Their other income has dropped sharply by the time Spouse B is 68; so they need her increased SS retirement pension at this point.
The Social Security Retirement Pension and Spousal Pension rules are very complicated. While the above examples are very simple scenarios, provided to give you a feel for the types of considerations that come into play, there are several alternatives to be considered when filing for SS retirement and Spousal pensions. It is strongly advised that you seek the assistance of a financial professional in order to optimize your financial situation.
Getting Legal Help
Experienced Estate Planning Attorney, Elga A. Goodman, can work with you to meet your needs and those of your loved ones. Contact us today at 973-841-5111.
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