Unlocking the Spousal Benefits Puzzle: What Women Need to Know
Spousal Benefits Are Based on a Comparison
A "spousal" benefit involves a multi-step calculation and comparison. Social Security compares 50% of the higher-earning spouse's Primary Insurance Amount (PIA) to the lower-earning spouse's PIA. Whether the lower earner receives a "spousal" benefit depends on their own work history and PIA:
If the lower earner lacks the necessary 40 credits to receive their own benefit, they will receive 50% of the higher earner's PIA (or less if claiming before full retirement age).
Suppose the lower earner has a benefit from their own work history, but their PIA is less than 50% of the higher earner's PIA. In that case, they will receive their own benefit plus a spousal "top-up" to reach 50% of the higher earner's PIA (or less if claiming before full retirement age).
If the lower earner's PIA is greater than 50% of the higher earner's PIA, they won't qualify for spousal benefits.
Here are a few examples:
PIA versus maximum benefits: Brian plans to delay claiming until age 70 for maximum benefits, and his lower-earning spouse, Kristin, lacks 40 credits, so she expects 50% of Brian's maximum benefit.
Reality: Kristin may get 50% of Brian’s PIA, not 50% of his maximum benefit.
Brian's PIA is $3,000, and his maximum benefit is $3,800
Kristin's dependent spousal benefit is $1,500 (50% of Brian’s $3,000 PIA) if she claims at full retirement age, not $1,900 (50% of Brian’s maximum benefit)
Spousal benefits and top-up: As the lower-earning spouse, Marie thinks she will get her own benefit plus half of her spouse John’s benefit.
Reality: Marie will receive a combined benefit if her PIA is less than half of John’s.
Marie's PIA is $1,000.
John’s PIA is $3,000.
Marie's maximum benefit at full retirement age is $1,500: $1,000 from her work record and a $500 spousal top-up. She does not get her $1,000 plus $1,500 (half of John’s).
Additionally, Marie will receive $0 in spousal benefits if her own PIA exceeds 50% of Chris' PIA. When Sam files, it's for all eligible benefits.
What to Remember.
Keep in mind that spousal benefits are a subset of a worker's benefits. The spouse cannot receive spousal benefits until the worker claims but can receive their own benefit. The spousal Benefit is an aspect to consider. Many couples consist of a lower and a higher earner, but the differences might not be enough to trigger spousal benefits. The key to remember is that benefits are always based on the higher earner's PIA. While women are often the lower earners, that is not always the case. If it is, though, you need to know the ins and outs to maximize your benefit.
If you have more questions about this, we can help.