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Tag Archive for Spousal Benefit

Social Security Planning For Spouses

iStock_Elderly Pig SS CardXSmallStart with the previous post about the basics of Social Security.  Now that’s out of the way, let’s go over some of the extra complexity when you have a spouse.  One of the most overlooked and unknown aspect of Social Security is the spousal benefit.

If your spouse is at full retirement age (66), they are eligible for their full retirement benefit or 100% based on their work history.  Sometimes both spouses have been working and paying in a similar amount to Social Security so their benefits are similar.  Other times one spouse has been working while the other one either did not work or was paying in much less to Social Security because they had a lower paying job.  This can lead to some large discrepancies in the full retirement benefit.  Bill Johnson’s Social Security benefit might be $40,000 per year, but if his wife Barb hasn’t worked as much, her retirement benefit might be only $16,000.

The spousal benefit would allow Barb the option of claiming her $16,000 benefit at age 66 or 50% of her husband’s full benefit, which would be $20,000 (50% of his $40,000).  That spousal benefit is going to add $4,000 a year to her Social Security benefit for the rest of her life.  That certainly seems nice, but wait, there is more.  At age 66, Barb can claim her spousal benefit and receive the $20,000 per year.  She will collect $80,000 by age 70.  When she Read more

Social Security Starter Pack

iStock_Social Security CardsXSmallThere is a lot to consider when deciding when to take your Social Security, but let’s start off with the basics.  Every year you get a statement from Social Security that tells you what your benefit will be when you retire.  Full retirement age is currently 66, but forty years from now I assume it will be much higher for me.  The statement will tell you the benefit is $20,000 (depending on your earnings history) when you are 66 years old.

But there are choices, so many choices to be made.  If you claim Social Security early (before you are 66) you get a smaller amount.  If you claim when you are 62 years old, you get 75% of the full amount which would be $15k a year in this case.  If you claim at 63 it’s 80%, 64 it’s 87% and at 65 it’s 93% of the full value.

Taking your Social Security early will pay off if you are planning on getting hit by a bus at your 71st birthday party, but if you are planning to live to 100 it probably won’t work out well.  Another choice is to claim the Social Security later at 67, 68, 69 or 70 years old.  For every year you wait after 66, you get an additional 8%.  Meaning if you wait until 70 years old, you get 132% of the full value every year for the rest of your life.  $26,400 instead of $20,000 a year is a big difference and over the long haul you will come out ahead. Read more