Social Security Options for Spouses
With the changes brought on by the 2015 budget act, most spouses no longer have the option to choose between claiming benefits based upon their own work history or benefits based upon their spouse’s work history. Only those who were 62 years old or older by Dec. 31, 2015, retained the option to claim only spousal benefits when they reach full retirement age (assuming their spouse had either claimed benefits or was able to file and suspend their benefits). Doing so allowed them to continue working and accruing earnings contributions, as well as DRCs until they turn age 70. At that time, they can begin claiming their own, higher benefit amount.
If you turned 62 after Dec. 31, 2015, you are no longer able to claim spousal benefits only. Instead, you will be subject to what are known as “deeming rules.” Based on the 2015 budget act, deeming rules apply through age 70 and mean that once you reach age 62, if you file for benefits and are eligible for both your own retirement benefit and a spousal benefit, you will be deemed to have applied for both benefits. The benefit paid out to you will be the higher of the two amounts.9
This new provision also eliminated the restricted benefit option, which had allowed anyone who had reached full retirement age to apply for a restricted benefit based on his or her spouse’s earnings, provided the spouse was already receiving benefits. This was true even for the spouse who was the higher earner. He or she could restrict the benefit to the spouse’s lower benefit, allowing their own benefit to accrue DRCs up to age 70, and then switch to their higher benefit amount.
With the new deeming rules, the restricted benefit is no longer available to anyone who was not 62 years old by the end of 2015.10
In 2015, the average monthly Social Security benefit received by retired women was $1,182, compared to $1,500 for men.11
If a couple was married for at least 10 years and then divorces, either one of the spouses may qualify for Social Security benefits at age 62 under the other’s work history. Even if the higher-earning ex-spouse has not applied for benefits yet, as long as he or she is eligible for them and the couple has been divorced for at least two years, the other ex-spouse may apply for a derivative benefit.
Once an ex-spouse remarries, he or she is no longer eligible to receive a benefit based on the first spouse’s work history unless the second (third, fourth, etc.) marriage ends in divorce, annulment or death. You are eligible for the highest derivative available from any number of ex-spouses as long as each marriage lasted at least 10 years and you are not currently married.
Divorced spouses who turned 62 prior to the end of 2015 are able to restrict their claim to only spousal benefits, even if they qualify for their own retirement benefit. 13
Among married couples, the age at which the higher-earning spouse applies for Social Security benefits is very important, since the surviving spouse is entitled to the higher of his or her own or the deceased spouse’s benefit. The higher earner can increase the survivor’s benefit by waiting to receive any benefits until age 70.
If the higher-earning spouse dies, the widow(er) is entitled to the higher earner’s full retirement benefit and may begin receiving benefits starting at age 60 (or at any age if he or she has a dependent who is under age 16 or disabled). Should the widow(er) remarry prior to reaching age 60 (or age 50 if the widow(er) is disabled), the Social Security benefit for the widow(er) will terminate, but the benefit for the eligible child will not. If the widow(er) continues to receive survivor benefits and would be eligible for a higher spousal benefit after age 62, the benefit amount will switch to the higher spousal benefit upon reaching the eligible age.
A surviving spouse may also claim a reduced benefit on the deceased’s working record and then switch to his or her own later. The surviving spouse may wait until full retirement age or delay benefits until age 70 to accrue DRCs based on his or her own work history. Once the survivor applies for his or her own benefit, the payout will automatically be at the highest amount.
Want to learn more about what this means for you? Request a call from a Bayntree advisor today or join us at a Social Security Workshop on January 30th or February 1st.
Bayntree Wealth Advisors, located in Phoenix and Scottsdale, Arizona, provides comprehensive financial planning and wealth management. The Bayntree team specializes in all aspects of financial health, including retirement planning, risk management, investment advice, tax strategies, estate planning and insurance.
Bayntree does not provide specific legal or tax advice. Please consult with your tax advisor or legal professional for guidance with your individual situation.
9Jamie Hopkins. Forbes. Oct. 29, 2015. “New Budget Deal Is Cutting Your Social Security Benefits And It’s A Good Thing.” www.forbes.com/sites/ jamiehopkins/2015/10/29/new-budget-deal-is-cutting-your-social-security-benefits-and-its-a-good-thing. Accessed Nov. 4, 2015.
10 Social Security Administration. 2015. “Retirement Planner: Deemed Filing FAQS.” https://www.ssa.gov/planners/retire/deemedfaq.html . Accessed April 4, 2016.
11 “Facts and Figures About Social Security 2016.” August 2016. Page 20. https://www.ssa.gov/policy/docs/chartbooks/fast_facts/2016/fast_facts16.pdf. Accessed Nov. 30, 2016.
12 Social Security Administration. “Retirement Planner: If You Are Divorced.” https://www.ssa.gov/planners/retire/divspouse.html Accessed Dec. 12, 2016.
13 Mary Beth Franklin. Investment News. Oct. 30, 2015. “Who is affected by the new Social Security rules?” http://www.investmentnews.com/article/20151030/ FREE/151039996/advisers-rethink-retirement-plans-amid-social-security-changes. Accessed Nov. 4, 2015.
14 Social Security Administration. Feb. 10, 2014. “Survivor’s Planner: How Much Would Your Benefit Be?” https://www.ssa.gov/planners/survivors/ifyou5.html