When most people think about Social Security, they normally think of retirement benefits. But about 1/5 of all Social Security benefits are spousal or survivor benefits, so when you are planning for retirement, it's vital to think about the fact that you or your spouse might collect Social Security survivor benefits or spousal benefits at some points in their life.
Here, we're going to talk about the basics of Social Security spousal benefits.
Generally, a married person could get a spousal benefit equal to half of her husband's basic benefit, also called the PIA (primary insurance amount).
Social Security spouse benefits usually come into play when a spouse takes time away from work to raise a family, and thus has little or no income.
Calculating the Spousal Benefit:
The spousal benefit is actually a combination of both spouses' benefits. If a married person has sufficient credits to be eligible for Social Security on her own, then her credit will be figured first. If it's less than her spouse's benefit, she will get her benefit together with an adjustment to equal half of her husband's primary benefit.
When Should You Begin the Spousal Benefit:
You can apply for the spousal benefit as early as at the age of 62, as long as the working or more earning spouse is eligible and has applied for benefits.
It does not good for the lower earning spouse to wait beyond her full retirement age to apply for spousal benefits because the spousal benefit won't earn credits beyond the complete retirement age. So, spouses applying for the spousal benefit must do so as soon as they reach complete retirement age.
How Early Retirement Impacts The Spouse Benefit:
Spouses who apply for the spousal benefit before she is complete retirement age will receive a reduced benefit just like she would if she applied for her own Social Security benefit before complete retirement age. This reduced benefit is permanent, even though she takes her spousal benefit at age 62 and switches to her own benefit at complete retirement age.
Other Issues:
Persons who begin collecting retirement benefits before full retirement age can only earn up to a definite amount before they've to pay back part or all of their Social Security benefits. In 2009, that amount is $14,160. If you earn higher than $14,160, you have to pay back $1 for each $2 you earned over the limit.
This earnings test applies to spousal & survivor benefits along with retirement benefits, so if you expect to work before you reach full retirement age, you should delay your retirement and spousal benefits.
In this article, I've referred to the wife as the lower earning spouse out of convenience. However, in today's world, it is not uncommon for the wife to be the higher earning spouse. The good news is that Social Security is gender neutral, therefore the Social Security spouse benefits can apply to the wife or husband, and the higher or lower earning spouse.
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