How to calculate Social Security spousal benefits

Keith: My wife attempted to apply for Social Security spousal benefits to begin once she turned 62. I am 69 and will soon turn 70. My full retirement age benefits would have been $1,885.70 per month, but due to unemployment, I filed early at age 64, which reduced my monthly benefits to $1,643.90 per month. My wife’s full retirement age benefits would be $976.10 per month. The Social Security representative we talked to seemed to be relatively new and had to consult with a supervisor several times. We were told that my wife could not draw spousal benefits off of my account because her full retirement age benefits ($976.10) were more than what half of my full retirement age benefits would be ($942.85). Is this correct?

Phil Moeller: The information you received from Social Security was correct. Here’s why: When your wife files for spousal benefits she will be “deemed” under Social Security rules to be simultaneously filing for other benefits to which she is eligible, including her own retirement benefit. In evaluating her claim, Social Security will compare the two benefits. If her retirement benefit is the larger of the two, she will not receive any spousal benefit. If the spousal benefit was larger, she would receive her own retirement benefit plus an “excess spousal benefit” equaling the amount by which her spousal benefit exceeded her retirement benefit.

Nick: I am 71 years old and just heard about spousal benefits. I was married for 23 years and have been divorced for almost 20 years. My ex- will be 62 this coming January. Is it possible to collect part of her Social Security?

Phil Moeller: You can only collect additional money if your divorce spousal benefit is larger than your own benefit. Spousal benefits max out at half of the other person’s benefit entitlement. For this amount to be larger than your own benefit, your former wife would have to have earned a much larger salary than you. If this is the case, you can apply for a spousal benefit, and Social Security should tell you whether you would get any additional money. Your additional payment would roughly equal the amount by which the spousal benefit exceeds what you’re already getting from Social Security.

Steve: My wife intends to draw a spousal benefit on my earnings record when I retire and draw Social Security. I am currently 66 and a half years old and plan on working until 67 and a half. If I apply for benefits then, and elect the six-month retroactive payment, will my wife be eligible for the same treatment? If so, does this make financial sense?

Phil Moeller: The key date here is not when you retire, but how old your wife is when she applies for a spousal benefit. Her spousal benefits would max out at half of the benefit you’re entitled to at your full retirement age, which is now 66, not half of what you actually collect. And to max out at this level, your wife has to wait to file for the benefit until she is of full retirement age.

Also, please keep in mind that spousal benefits are not retroactive in this case. Your wife is not eligible for a spousal benefit until you have filed for your own retirement benefit. And she is only eligible for retroactive benefits if she is older than her full retirement age. So if you filed when you were 67 and a half, and she was at least 66, she would only get retroactive benefits if she then delayed her filing for up to six months. But unless I’m missing something, there would be no reason for her to delay in this case.

Further, your retroactivity is hardly free money and comes at a price. By claiming that six-month retroactivity, you would be giving up six months of delayed retirement credits. Doing so would reduce your monthly benefit by 4 percent for the rest of your life. You might think this trade-off is worth it, and that’s fine. But if you live into your late 80s or 90s, you might wish you had that extra money. You might want to consider just delaying your filing and thus boosting your monthly benefit.