About the Mystery of Spousal Benefits

Dear Seeking:

Yes, the spousal benefit formula is complicated, especially when both of you are entitled to your own Social Security benefits. And there’s never a simple answer to whether it is a good idea for the lower earning spouse to start benefits first at age 62. For one thing, it depends upon whether they are still working, but it also depends upon health, life expectancy, and need for the money early. Nevertheless, if your wife’s current age 62 benefit is $656, then her benefit at her full retirement age (had she waited) would have been about $895. This is known as her Primary Insurance Amount, or “PIA.” Spouse benefits are computed using PIA amounts, so if your full retirement age (FRA) benefit will be $2850, here’s how your wife’s spousal benefit will be calculated if you claim your SS after your wife has already reached her FRA:

• 50% of your FRA benefit (PIA) is $1425. Because your wife’s PIA is $895, her spousal boost is $530 ($1425 - $895). Her spousal boost ($530) will be added to her actual early benefit ($656) and her new benefit amount as your spouse, at her FRA, will be about $1186. Obviously, less than half of your FRA benefit amount.

The computation changes if you claim your SS benefit now, before your wife has reached her full retirement age, because getting her spouse benefit before her FRA means her spousal boost will be reduced (she automatically gets her spousal benefit when you claim). The reduction to the spousal boost is actuarial, according to the number of months before her FRA that it is taken. If you were to claim now when your wife is 64, her spousal benefit would be computed like this:

• The spousal boost amount of $530 would be reduced because your wife hasn’t yet reached her FRA. Instead of the full $530 spousal boost, it would be reduced to about $442. The reduced spousal boost is added to your wife’s early SS benefit of $656, for a total benefit of about $1098. Once again, less than 50% of your FRA benefit amount.