A long-standing Social Security spousal rule officially expires this year for all but those born before January 1, 1954. This rule previously allowed recipients to maximize their Social Security benefits by switching between their own and their spouse’s benefits at strategic times. As this option is no longer available to the majority, it’s crucial for married couples to explore alternative strategies to optimize their spousal benefits.
Here’s a breakdown of the changes and three essential steps to maximize your benefits in the absence of this rule.
Understanding The Expired Rule
Under the old spousal rule, a higher-earning spouse could claim spousal benefits at their full retirement age, allowing their own benefits to accrue delayed retirement credits until age 70. At that point, they would switch to their own benefits, significantly increasing their monthly payout. Meanwhile, the lower-earning spouse could claim a spousal benefit, which might be higher than their own.
With the expiration of this rule for most people, couples need to look at different ways to plan for their retirement and maximize Social Security payouts.
1. Plan Ahead for Social Security
Strategic planning is crucial when it comes to Social Security, especially for married couples. Social Security typically provides the higher of two options: either the individual’s benefit based on their work history or a spousal benefit, which can be up to 50% of the primary earner’s full retirement amount.
Couples are encouraged to create an online account with the Social Security Administration (SSA) to regularly check their projected benefits at different ages. This allows them to make informed decisions about the best time to claim benefits based on their financial needs and goals.
“Social Security planning is essential for married couples,” says Matthew Allen, co-founder and CEO of Social Security Advisors. Starting this process early can help prevent costly mistakes down the road.
2. Avoid Early Claims to Maximize Payouts
While it may be tempting to claim Social Security benefits as soon as possible — eligibility begins at age 62 — doing so comes with significant drawbacks. Claiming benefits before reaching full retirement age (which is 67 for most workers) results in a permanent reduction of monthly benefits, by as much as 30%.
For example, if your full retirement benefit is $2,000 per month, claiming at age 62 would reduce your monthly amount to just $1,400. This reduced amount affects not only the primary earner’s benefit but also the spousal benefit. If the primary earner claims early, the spouse’s benefit, which is based on the primary earner’s payout, will also be reduced.
Waiting until at least full retirement age ensures that you receive the full benefit amount you’ve earned. Delaying further, however, may not always be necessary, especially for the spouse.
3. Weigh the Benefits of Delaying Until Age 70
For the primary earner, waiting until age 70 can significantly increase the Social Security payout, thanks to delayed retirement credits. This strategy can be highly beneficial for those looking to maximize their own monthly check.
However, spouses should be aware that their benefits are capped at 50% of the primary earner’s full retirement age (FRA) benefit. This means that even if the primary earner waits until age 70 to claim benefits, the spouse’s payout will not increase beyond 50% of the primary earner’s FRA amount. So, while it makes sense for the higher earner to delay, the spouse may not benefit from waiting as long.
Final Thoughts
With the expiration of the spousal benefits rule, couples can no longer rely on the previous method of switching between spousal and personal benefits. Instead, they must carefully plan when and how to claim benefits to maximize their Social Security income. By planning ahead, avoiding early claims, and understanding the limitations of spousal benefits, married couples can make the most of their Social Security payouts, even without the old rule in place.
Proper retirement planning, including regular check-ins with the SSA and understanding the impact of claiming early or delaying, will help ensure you receive the maximum benefits available to you.
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