Social Security spousal benefits can be confusing, but it is well worth your time to do your homework and learn how to take full advantage of them. You may receive thousands of dollars of additional income when you had no idea that it was available. The American Association of Retired People states that $10.1 billion in Social Security (SS) benefits are left unclaimed each year and a major part of that amount is left by senior couples who do not understand how to take full advantage of their Social Security spousal benefits.
Too many seniors only think about their own SS accounts when they are planning their retirement. They do not realize that they can take draw Social Security spousal benefits on their spouse’s account as well as their own accounts. Let’s take a typical couple, John and Linda. John is three years older than Linda. Both John’s and Linda’s full retirement age is 66.
Linda’s benefit at 66 will be $705 per month. John’s benefit at 66 will be $2150 per month.
Original Plan
Linda is planning to wait until age 66 to start drawing her benefit and John is planning to wait until age 70 to draw his benefit. Then John reads a retirement planning book that explains how to maximize Social Security benefits and they formulate a new plan.
New Plan – Part 1
Linda will start drawing on her own SS account at 62 at the reduced rate of $518 per month. When she reaches 66, she will stop drawing on her account and start drawing spousal benefits on John’s account. Drawing on her account from age 62 to 66 (48 months) will give her $28,864 additional benefit income during the 48 months ($518 x 48 = $28,864).
New Plan – Part 2
At age 66, when she starts drawing spousal benefits on John’s account, the amount will be one half of his benefits at his full retirement age ($2,150 / 2 = $1,075). This will be $370 more per month than the full retirement benefit from her account.
Remember that John is not going to start drawing his benefit until age 70. However, for Linda to start receiving her spouse benefit from his account, John must apply for his benefit. SS has a provision that allows a person to apply to receive her/his benefit and then suspend receiving it. John will apply for his own benefit at age 66 and immediately suspends its collection. This will allow Linda to start drawing her Social Security spousal benefits on John’s account when she hits 66.
New Plan – Part 3
Since Linda will start drawing her benefits at 62, John can start drawing his spouse benefits on Linda’s account when he reaches age 66. This amounts to $352 per month which is one half of her benefit. John will draw this benefit until age 70 when he discontinues the spousal benefit and starts to draw his own benefit which will be 32% higher than if started drawing his benefit at age 66.
A recap of the increased Social Security benefits received:
- Linda will receive 48 months of her reduced benefit she was not planning to receive ($28,864).
- Linda will receive SS spousal benefits on John’s account at age 66 which will be $370 more than her own benefit at age 66. This increased benefit will continue until she dies.
- John will receive 48 months of spousal benefits from Linda’s account he was not planning to receive ($16,896).
The take home ideas from this article:
- Determine what the benefits are for both individual’s SS accounts
- Determine what the Social Security spousal benefits will be for each spouse’s account for the other spouse.
- Consider all combinations of individual and spousal benefits.
- Develop a plan to utilize the individual and spousal benefits to maximize your Social Security income.
You must take action on your own. Social Security will not notify you that you are not taking full advantage of all your benefits.
