Welcome back to Financial Foundations brought to you by Base Wealth Management, where we are the foundation to your financial plan. I’m your host, Dustin Taylor.
I’m your co-host, Alex Wolfe, Certified Financial Planner. And we are here again with Jeremy Riggs. Welcome back again, Jeremy.
Thank you so much for having me. Today we’re diving into a topic that is crucial for many couples planning for retirement, and that is spousal Social Security benefits.
Jeremy, can you kick us off with explaining what are spousal Social Security benefits?
Absolutely. The spousal Social Security benefit is basically what a spouse would be entitled to when their partner starts drawing Social Security, regardless of their own work history and how many credits they may have.
So I know that eligibility is not automatic. What are some of the criteria for Social Security benefits?
I’ll start with the general Social Security benefit. It is going to look over the last 35 years, and you have to have worked at least 10 years. You get one credit per quarter. It basically guarantees you some type of benefit based on your income over the years. The spousal comes as kind of like an add-on. So, for example, if you have one spouse that’s been the main income earner and someone that, you know, maybe took a break from working because they’re raising kids, their spousal benefit is going to be a lot lower than what they could have earned over their working career. So what the spousal benefit adds in is they have their benefit and then the spousal layers on top of that. Generally, that brings them up to about half of what the other working spouse’s benefit is.
Alex, how does divorce affect the spousal benefit?
Yeah, so that’s a topic that comes up from time to time, especially when you have someone who you’re planning their Social Security benefit with, and you have to get into some sensitive topics about this from time to time. Is, okay, your earnings and your benefit, but I know that you were previously married and you have to talk to them about like, how long were you married? Did you get remarried? And there’s certain criteria for them to be able to claim their ex-spouse’s benefit, like being married for 10 years and what that benefit is. And do they know what their ex-spouse was entitled to? So there is a way that they may be able to claim an ex’s benefit.
If your ex-spouse claims your benefit, does that affect your benefit at all?
No, if you have an ex that is going to claim their spousal, meaning yours, it does not change your benefit.
Is it true that you may not even know that your ex-spouse has claimed your benefit?
Yes, you would never know unless they ask you for your benefit information.
So Jeremy, now let’s talk about the big question. How much can you receive in spousal Social Security benefits?
Great question. So with that, generally it’s going to be around 50% of your working spouse’s benefit. I’ll give you an example. Say you go to a Social Security admin website, you get your benefit, it’s telling you $3,600. The maximum that your spouse is going to receive is going to be $1,800. There’s going to be their benefit they would have earned plus the spousal benefit added on top to come to 50%. Now, that’s just the starting point. It can change depending on do you claim it early, do you claim it late, when are you as the primary spouse going to claim it. That’s one thing that also comes into play is that the spousal benefit cannot kick in until the primary Social Security recipient has basically turned that income stream on.
Right. So the spouse can’t claim the spousal benefit without the primary having already started.
Exactly. Basically, it’s kind of like a prerequisite. Okay. You know, the primary income earner has turned their Social Security on. Now that is a benefit available to you. Is that when you should take it? What if the primary spouse claims theirs at 62? Do you want to claim yours then as well? Or do we want to kind of build that into an income plan where you claim it where you get the most benefit for you?
Right. And there used to be some strategies, but some of these loopholes have since been closed where you could claim the spousal benefit and delay your own and let that grow. But they’ve done away with that. Is that correct?
Yeah. There’s a lot of loopholes that used to be there. Those are kind of closing. You’d have people like, well, I’m going to claim this and then I’m going to stop and defer.
Or really it comes down to what is it going to be your benefit on your own work history versus what is going to be your benefit on your spouse’s work history. And then we just run the numbers to see, okay, what’s going to be to the best benefit of you.
Even if, like you said, you know, one spouse didn’t stay home, but maybe one had an opportunity and was offered to move into like a higher tier in a company. Maybe they moved up to be an executive, but the sacrifice was like, hey, this job’s gonna be a lot more demanding. So one spouse is like, well, you know, I’m going to have a job that doesn’t take 60, 70 hours a week. Whereas the other spouse is like, I’m going to go and try to make as much money as I can possible. So it’s just going to make sense. Their benefit at 50 percent is going to be higher than what you earned even if there wasn’t a long break in your work history.
So we’ve already talked about one of the special cases and considerations being like what if you’re divorced, but what if you have multiple ex-spouses that can each claim the benefit?
The answer is potentially. The caveat is if none of them have remarried but you were married to them each for at least 10 years then yes. But if any of them had remarried since that divorce, no.
So in other cases, if you die, how does that affect the spousal benefit?
Yeah, so you can’t claim both, unfortunately, as much as you would like to be able to claim yours plus your deceased spouse’s. But you would just jump onto the higher one and claim that one, right, Jeremy?
Yeah, absolutely. You would look at what is your benefit versus your spousal benefit, even if they have passed. And then it’s just going to be based on that math, you know, what’s going to net the most money to you.
All right, Jeremy, why should people pay attention to spousal Social Security benefits?
It’s a guaranteed benefit to you, and there’s very few guarantees that we have when we’re building an income stream. They’re going to come from Social Security, they’re going to come from pensions, they’re going to come from annuity. I feel like if we’re leaving one of these off the table, that’s a detriment to all of our clients. Like, it’s our job as advisors to make sure they know all the options available to them, and then we can pick up the best option for them.
As Jeremy said, it’s important to consider all available income sources whenever planning for retirement. If you would like more insights about this topic and many more, you can visit our website at basewealthmanagement.com. Subscribe to our YouTube channel. Subscribe to this podcast. You can also submit any questions or future topics you want us to address on the podcast. You can send those in to us at question at basewealthmanagement.com. If you’d like to reach out to Jeremy and schedule an appointment, you can email him at Jeremy at basewealthmanagement.com.
Jeremy, thanks for joining us.
Thanks so much. I enjoyed it. Good to have you.
I’m Dustin Taylor. I’m Alex Wolfe. And happy listening.
