Dear Readers: Lately, I've been getting a lot of questions from women wondering about their Social Security options. While many are workingwomen who qualify for benefits on their own work records, they're curious about spousal benefits and whether they're a viable choice. I'm not surprised. The Social Security system is complex. Spousal (and ex-spousal) benefits may be one of the least understood aspects of all. Plus, rule changes that went into effect in 2015 eliminated some of the spousal benefit strategies that many couples had relied on.
As confusing as it may seem on the surface, it's definitely worth digging into the details, especially for women. According to the SSA, 55% of people receiving Social Security benefits are women. And although more women work and pay Social Security taxes than ever before, they still face some unique financial challenges when it comes to retirement — longer life, lower pay, less time in the workforce and often lower Social Security benefits.
Spousal as well as survivor benefits can make a difference in increasing lifetime benefits, particularly for nonworking or lower-earning spouses, so it's important to understand how they work before you file. And for the record, these benefits apply equally to men.
How the Basic Spousal Benefit Works
The spousal benefit allows a wife or husband (including a spouse who never worked) to collect up to 50% of what a working spouse's Social Security benefit would be at full retirement age. Here are the basics:
— To receive a spousal benefit, your spouse must have already filed.
— The spousal benefit isn't impacted by reductions or increases in a working spouse's benefits due to early or delayed filing.
— You can file for a spousal benefit as early as age 62. However, your spousal benefit will be reduced permanently if you file before your own FRA.
— The spousal benefit doesn't increase if you wait to file until after your FRA.
The upshot here is that to maximize the spousal benefit, it's best to wait until your FRA to collect, but there's no gain in waiting a minute longer.
How the Spousal Benefit Works With Your Own Benefit
A frequent question is whether you can collect the spousal benefit as well as your own. The answer is a bit tricky because of a provision called "deemed filing," which states that when you file for one benefit, you are "deemed" to be filing for both. However, from a practical perspective, you only get the higher of the two (your work record is paid out first, and then it might be increased by the spousal benefit, if that is higher). In other words, your benefit may be a combination of your work record benefit plus a spousal benefit if that amount would be higher than the benefit under your own work record.
There is one exception, however. If you were born before Jan. 2, 1954, have reached your FRA and have not yet claimed your own benefits, you can file what's called a "restricted application," which lets you apply specifically for the spousal benefit and delay taking your own benefits up until age 70. This could be a significant boost, as your own benefit grows about 8% for each year you delay from your FRA to age 70 and around 6% to 7% from age 62 to your FRA.
Unless you qualify for a restricted application, it's again a question of timing. If your own benefit will be higher than the spousal benefit, waiting until age 70 is generally your best optimizing strategy. If the spousal benefit is higher, it's worth looking into holding out until your FRA if you can — but no longer.
What You Should Know About Ex-Spouse Benefits
If you're an ex-spouse, were married a minimum of 10 years and are currently unmarried, you're in luck because the basic spousal benefit rules apply to you as well, including the restricted application exception.
There's more good news. Unlike the rule for spouses, it isn't necessary for your ex-spouse to have already filed for benefits in order for you to apply, only that he or she is eligible to file. One caveat: If your ex hasn't yet filed for benefits, you must have been divorced for two years.
Interestingly, if you have more than one ex-spouse (each with a minimum 10-year marriage), you can collect on either spouse's record — but not both. Plus, your ex's marital status doesn't affect your eligibility. And what you collect has no effect on what your ex or his or her current spouse — or even other ex-spouses — can collect.
Survivor Benefits for Both Spouses and Ex-Spouses
For a surviving spouse, it's pretty straightforward: You're eligible to collect up to 100% of a deceased spouse's benefit. You can begin collecting as early as age 60 (as early as age 50 for a disabled widow or widower). But as with other benefits, if you collect before your FRA, your benefit will be reduced.
For a surviving ex-spouse, the length of the marriage and marital status again come into play. As an ex-spouse, the marriage has to have lasted at least 10 years. If you remarry before age 60, you're not eligible until that marriage ends. If you remarry after age 60, you can collect survivor benefits on your ex.
And here's an interesting twist: If you've survived more than one spouse, you can choose to collect on the one with the higher benefit — and even switch between them if, for instance, a spouse with a lower benefit dies before a spouse with a higher benefit. Again, what you collect doesn't affect what another widow or widower can collect.
One real plus for both spouses and ex-spouses is that, unlike with spousal benefits, you can file a restricted application to collect survivor benefits only, regardless of your birthday, and let your own benefit grow up to age 70. That can be a great maximizing strategy. Conversely, you could choose to take your own reduced benefit early and switch to the full survivor benefit at FRA.
Where to Get More Information
While the details can seem overwhelming, don't let that stop you. The Social Security Administration's website has a number of resources and publications designed specifically to help women understand their options. A Social Security calculator can help you run some of the numbers yourself. But as always, I suggest talking to your financial adviser to determine the best maximizing strategy for you.