One of the most common Social Security questions we get is this: “If my spouse starts her Social Security at age 62 and I wait until age 70 to start mine, can she receive a higher spousal benefit when I start?”
When it comes to Social Security, most people know you can qualify for retirement benefits based on your own work history — the taxes you paid into the system over the years. But what many don’t realize is that you might also be eligible for a spousal benefit, even if you didn’t work enough to qualify on your own. That’s right — even if you didn’t pay into Social Security, you may still be able to receive a benefit based on your spouse’s earnings record.
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Articles, Links & Resources:
Social Security Spousal Benefits
For Married Couples In Need of A Strategy, Social Security Spousal Benefits Could Play A Role
Social Security Claiming Strategies For Couples – AARP
Transcript:
454 Unlocking the Spousal Top-Up Strategy in Social Security
Announcer: Welcome back America to Sound Retirement Radio, where we bring you concepts, ideas, and strategies designed to help you achieve clarity, confidence, and freedom as you prepare for and transition through retirement. And now here is your host, Jason Parker.
Jason Parker: America, welcome back to another round of Sound Retirement Radio.
You’re listening to episode number 454. The title is Unlocking the Spousal Top Up Strategy In Social Security. One of the most common social security questions we get is this. If my spouse starts her social security at age 62 and I wait until age 70 to start mine, can she receive a higher spousal benefit when I start?
When it comes to social security, most people know that you can qualify for retirement benefits based on your own work history, the taxes that you paid into the system over the years. But what many people do not realize is that you might also be eligible for a spousal benefit. I. Even if you didn’t work enough to qualify for your own, even if you didn’t pay into social Security, you may still be eligible to receive a benefit based on your spouse’s earnings record.
But before we get into today’s episode, I like to start the day right by renewing our minds, and I’ve got a verse here for us from Proverbs chapter four verse six. Do not forsake wisdom, and she will protect you. Love her, and she will watch over you. And then something fun for the grandkids. What happened when two slices of bread went on a first date?
It was loaf at first sight. What’s a shark’s favorite song? Man, overboard. I thought it was weird when my printer started playing music. Then I realized it was jamming.
In today’s episode, we’re gonna unpack spousal benefits and how this works. Who qualifies for a spousal benefit? How it’s calculated, what happens if you file early? How the spousal top-up benefit works and what to expect later in life, especially if your spouse passes away AKA. The survivor benefits. One of the reasons I wanted to highlight the spousal top-up strategy today is because of a powerful new feature we recently added to the retirement budget calculator, the social security scenario tool.
This tool doesn’t just help you understand how to coordinate benefits like spousal and survivor strategies. It goes a step further by showing you how your claiming decisions affect the long-term success of your retirement plan. And what makes our tool different is that it not only helps you see how to maximize social security income across two people’s lifetimes, how to get the most income over two people’s lifetimes.
But also how your choices affect the amount of money remaining in your plan later on. Something that most social security calculators don’t consider. Sometimes delaying social security makes sense because it produces the most total income over time, but another cases starting Social Security early could be the better choice.
Especially if your goal is to preserve more assets for the next generation, those two goals, maximizing income versus maximizing legacy don’t always align, and our tool helps you weigh those trade offs clearly and personally. Okay, so let’s walk through an example and talk about how this social security top up strategy could work.
How spousal benefits work. In this example, we’re gonna say the husband was born in 1967. He’s currently 58 years old and his full retirement age social security benefit is gonna be $3,000 per month, which would start at age 67. His wife was born April, 1968. She’s currently 57 years old with a full retirement age benefit of $1,000 per month.
It would start at age 67. So the first step in this strategy is she’s gonna file early. She’s gonna start her benefits at age 62 in one month, which is the earliest possible date she can file. When you file early, you take a permanent reduction in benefits because she’s filing 59 months early. Her benefit is reduced by 29.6%.
That means instead of $1,000 per month, she receives $704 per month. Now a question would be why 29.6% Social Security reduces benefits on the exact number of months you file early. The first 36 months are reduced at five ninths of 1%. The remaining 23 months are reduced at five twelfths of 1%. So filing 59 months early results in a 29.6% reduction, reducing her benefit from $1,000 per month to $704 per month.
At this point, she can only receive her own benefit because her husband hasn’t filed yet, and this is where the deemed filing comes in. Deemed filing is a social security rule that says if you apply for retirement benefits and you’re eligible for both your own benefit and a spousal benefit, you’re deemed to be applying for both at the same time.
And this applies to anyone born on or after January 2nd, 1954, and it begins once you turn age 62. But here’s the catch, you can only receive a spousal benefit if your spouse has already filed. So if your spouse is delaying, say until age 70, and you file at age 62, the spousal benefit isn’t available yet.
You’ll only receive your own reduced benefit. Then later when your spouse does file, you may become eligible for a spousal topup, depending on your age and benefit amounts at that time. Okay, here’s the second part of this. He the husband, now, he’s delaying taking his social security until age 70. And he’s earning those delayed retirement credits of 8% per year for three years, so that increases his benefit to $3,720 per month.
In reality, his benefit would likely be higher than 3,720 per month since this example only accounts for delayed retirement credits and does not include any cost of living adjustments for inflation. Even though he’s receiving $3,720 at age 70, this spousal benefit for his wife is still based on his full retirement age amount of $3,000.
So in order to calculate this, you take his $3,000 benefit. 50% of his $3,000 benefit would be $1,500. That’s the maximum spousal benefit, and her own full retirement age benefit was $1,000 per month. Had she waited until 67, she would’ve received $1,000 per month. So to calculate the spousal top-up, you take 50% of his benefit, which was 1,500 and her full retirement age benefit, which was $1,000, and that equals $500 because she is over her full retirement age when he files.
There’s no reduction to the spousal portion, so this is how it works for the wife. Her reduced benefit, remember she, if she would’ve waited till 67, she would’ve had a thousand dollars, but she started it early at 62 in one month, so her benefit is reduced permanently to $704 per month. But of course, you’ll get cost of living adjustments now when her husband files.
She gets a spousal top-up of another $500 per month, so now her total benefit is $1,204 per month. So in this scenario, his benefit at age 70 is now $3,720 per month, and she is now, uh, collecting $1,204 per month. Their combined household income is $4,924 a month. At this point, if the husband passes away first, the wife will step up to the higher of the two benefits.
This is called the survivor benefit. So her benefit’s currently $1,204. His is $3,720. She will begin receiving $3,720 a month as a widow. The easiest way to think about this is that the lower one stops and the higher one continues. So here are a few couple key takeaways on the strategy. Number one, early filing permanently reduces your own benefit.
Number two, spousal benefits are based on your spouse’s full retirement age amount, not their delayed benefit. So she doesn’t get 50% of the $3,720 a month. She gets 50% of what his benefit was at full retirement age, which is $3,000 per month. If you wait until full retirement age or later, the spouse can receive the full spousal, top-up survivor benefits are based on the actual amount the spouse was receiving, including the delayed retirement credits.
And the spousal benefit is only available if your own benefit is less than the spousal benefit, you’d be entitled to, or 50% of your spousal’s full retirement age amount. So for example, let’s say that she was eligible for 1,700 per month, but the spousal benefit was 1,500 per month. In that scenario, there’s no spousal benefit available to her because her own benefit’s greater than the spousal amount.
If you’re trying to decide how to coordinate benefits with your spouse, or want to understand how your social security choices impact your broader retirement plan, be sure to explore the Social Security optimizer built into the retirement budget calculator. It’s designed to help you make smarter, more personalized decisions that align with your goals, whether that’s maximizing income or preserving wealth for the next generation.
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Investing involves risk. Jason Parker is the president of Parker Financial LLC, an independent fee-based wealth management firm. Located at 9 2 3 0 Bayshore Drive Northwest Suite 2 0 1, Silverdale, Washington. For additional information, call 3 6 0 3 3 7 2 7 0 1 or visit us online@soundretirementplanning.com.
