Social Security spousal benefits serve as an important source of income for retirees who either had lower lifetime earnings or who did not work enough quarters to qualify for their own Social Security retirement benefits. These benefits allow the spouse who earned less to receive up to 50% of the worker's Social Security benefit at that worker's full retirement age (FRA). However, one significant limitation often overlooked is the inability to increase spousal benefits by postponing the start of payments beyond the full retirement age.
When individuals claim their own Social Security retirement benefits, they have the option to delay taking their monthly checks past their FRA. Doing so increases their benefits through delayed retirement credits, potentially boosting their monthly payments by up to 24% if they wait until age 70. This strategy is widely recommended by financial advisers because Social Security benefits are inflation-protected and guaranteed for life, so maximizing the monthly benefit can enhance long-term retirement income security.
Unfortunately, this mechanism for benefit growth does not extend to spousal benefits. Once a retiree reaches full retirement age, claiming spousal benefits earlier or later affects the amount differently compared to individual retirement benefits. If you claim spousal benefits before your FRA, the monthly amount is reduced to reflect the longer expected payout period. But if you delay claiming spousal benefits beyond your FRA, the benefit amount does not increase further. This means there is no financial gain from postponing spousal benefits once you reach full retirement age.
Determining Full Retirement Age and Its Impact on Spousal Benefits
The exact full retirement age for Social Security depends on the year you were born. For those born between 1943 and 1954, FRA is age 66. It gradually increases by two months every birth cohort until it reaches 67 for individuals born in 1960 or later. Here is a breakdown:
| Birth Year | Full Retirement Age |
|---|---|
| 1943-54 | 66 |
| 1955 | 66 and 2 months |
| 1956 | 66 and 4 months |
| 1957 | 66 and 6 months |
| 1958 | 66 and 8 months |
| 1959 | 66 and 10 months |
| 1960 or later | 67 |
If you claim spousal benefits at exactly your FRA, you will receive an amount equal to 50% of your spouse's primary insurance amount (PIA). Claiming any earlier reduces your benefit proportionally due to the extended period over which you will receive payments.
When Might Delaying Spousal Benefits Make Sense?
Even though delaying spousal benefits past full retirement age does not increase your monthly payment, specific circumstances may require you to wait. Firstly, you cannot claim spousal benefits until your higher-earning spouse starts receiving their own Social Security retirement benefits. If your spouse chooses to delay their own benefit claiming to maximize their retirement credits, possibly up to age 70, this would mean a corresponding delay before you could start receiving spousal benefits.
This delay can have additional implications. Because survivor benefits allow you to receive the highest of your own benefit or a survivor’s benefit based on your deceased spouse’s earnings, if your spouse delays claiming their retirement benefit, this can result in higher survivor benefits for you in the future. As a result, aligning the timing of your spousal benefit claim with your spouse's strategy might require you to postpone your spousal benefits even though no incremental increase will occur from waiting.
In some cases, it may be advisable to claim your own retirement benefits first, if you qualify, and then switch to spousal benefits once your spouse files. This approach may suit individuals whose own retirement benefit is near or above what they would receive from spousal benefits, providing income while awaiting eligibility for spousal payments.
Summary and Takeaways
In summary, Social Security spousal benefits do not grow if you delay claiming them beyond your full retirement age, unlike individual retirement benefits which increase due to delayed retirement credits. The best time to claim spousal benefits typically aligns with your FRA to avoid a reduction in monthly payments due to early claiming. However, your spouse's benefit claiming decisions can dictate when you become eligible for spousal benefits, possibly necessitating a delay in claiming spousal payments without an increase in benefit amount.
Planning the timing of Social Security spousal benefits is a nuanced decision that depends on your age, your spouse’s claiming strategy, and your own benefit eligibility. Understanding these rules can help ensure your retirement income strategy is optimized within the confines of Social Security regulations.