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How Spouses Can Maximize Social Security Benefits

A guide for couples on understanding how the spousal benefit works.

Lower-earning spouses who claim their own Social Security benefit before full retirement age take a cut of as much as 25%. But all's not lost. They can boost the payout when they collect a spousal benefit, and the size of the increase depends in part on the age at which they claim.

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To figure out the best strategy, you need to understand that the spousal benefit has two parts. The first part is the lower earner's own retirement benefit based on her earnings record. The second part is based on the higher earner's benefit. The two parts together could provide the lower earner with a payment of up to 50% of the higher earner's full retirement benefit. (Full retirement age is 66 for those born between 1943 and 1954.)

Say a 66-year-old wife's benefit based on her work record is $800 a month, and half of her husband's benefit at his full retirement age is $1,200. If she claims a spousal benefit, she gets her own $800 benefit, plus $400 based on her husband's earnings record -- for a total spousal benefit of $1,200. A spousal benefit can be claimed as early as age 62, as long as the other spouse has claimed his benefit.

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Recently a Kiplinger's Retirement Report reader was considering filing for his benefit at full retirement age. His wife had filed for her own benefit before she reached full retirement age. Once he claims his benefit, how much would she get as a spousal benefit? The answer depends on when the lower earner claims her spousal benefit.

Her best bet is to wait until full retirement age to switch to her spousal benefit. Her own benefit will remain reduced, but she'll get the full spousal portion based on her husband's earnings record, says Jim Blair, a partner at Premier Social Security Consulting, in Sharonville, Ohio. If she claims a spousal benefit before full retirement age, both her own benefit and the spousal portion will be cut.

By waiting until her full retirement age to switch to a spousal benefit, she'll do better. Say Mary took Social Security at age 62. By claiming early, her full retirement benefit of $1,100 was reduced to $825. Once John claims his full retirement benefit of $2,500, Mary will be eligible for a spousal benefit.

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If Mary is full retirement age when she switches to the spousal benefit, her own portion will remain at $825. But she will get the full spousal portion of $150 -- the difference between $1,250 (half of John's full benefit) and her full benefit of $1,100. Her total benefit: $975. If, instead, she claims her spousal benefit before she turns full retirement age, she would get less than $975 because the spousal portion will also be reduced.

Unintended Claiming Consequences

But beware the "deeming" provision. Say John applies for his benefit first. Then Mary applies for her own benefit before her full retirement age, intending to delay taking the higher spousal benefit. Not possible, says the Social Security Administration. It automatically "deems" her as taking the highest benefit she's eligible for -- in this case, the spousal benefit.

To get around the deeming provision, the lower earner should apply for her retirement benefit before the higher earner applies for his. The Social Security Administration will not automatically switch her to the spousal benefit once she is eligible; the wife will have to file an application for the spousal benefit, Blair says.

Having the lower earner file early could make sense for couples who want to bring in some money while the higher earner delays. But couples who regret having the wife take her own benefit early could boost her benefit by waiting to collect her spousal portion.

In all cases, the lower earner will be eligible for a survivor benefit of 100% of the higher earner's benefit if he dies first. And lower earners should not delay beyond full retirement age to claim a spousal benefit.

You won't find an estimate for the spousal benefit on either spouse's Social Security statement. To get that estimate, call Social Security at 800-772-1213 or visit your local field office.

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