Today’s column explains how spousal benefits are calculated, how the earnings test and the adjustment of the reduction factor work, whether benefits might increase at 70, restricted applications for spousal benefits only and the effects of divorce on spousal benefits. Larry Kotlikoff is the founder and president of Economic Security Planning, a company that markets Maximize My Social Security, a Social Security benefits calculator referred to in this post.
See more Ask Larry answers here.
Ask Larry about Social Security:
Why Isn’t My Wife Receiving 50% Of My Benefit?
Hi Larry, I am receiving a retirement benefit of $2933 but my wife is only receiving $1110. I am 71 and she is 72. Why does she not get 50% of my amount? Thanks, Reg
Hi Reg, Unreduced spousal benefits are calculated based on 50% of the worker’s full retirement age retirement benefit amount, not the benefit rate that the worker is receiving. So, if the worker starts reduced benefits prior to their full retirement age, it does not reduce the spousal benefit payable on their record. And, if the worker delays filing past full retirement age in order to receive delayed retirement credits (DRC), that doesn’t increase the spousal benefit rate payable on their account. Furthermore, if the spouse starts receiving benefits prior to their full retirement age, their spousal rate would be even lower than 50% of the worker’s full retirement age rate.
For example, say your full retirement age benefit rate was $2200, but you waited until age 70 to start drawing benefits. Your monthly rate would be increased by 32%, or to $2904, due to delayed retirement credits. However, the most that could be paid to a spouse on your record would be $1100, or 50% of your full retirement age rate. Widow’s benefits do include delayed retirement credits earned by the worker, though, so if you die first your wife will be paid your full rate including DRCs. My company’s software or another very precise program can show you how this works in your case. Best, Larry
Are Benefits Lost To The Earrings Test Repaid?
Hi Larry, How does Social Security adjust monthly benefits for withheld excessive earnings upon reaching FRA? Is it based on remaining life expectancy or some other time period. For example, if I exceed the exempt amount by $10K a year from 62 until 66 (four years), Social Security will withhold $20K. Is that $20K repaid to me? Thanks, Ken
Hi Ken, First, the benefits withheld are not repaid at all ––– they are gone forever and you don’t get them back. If a person files for reduced benefits prior to full retirement age (FRA), but does not receive some or all of their payments due to the earnings test, Social Security adjusts the reduction in their benefit amount when they reach FRA to the percentage appropriate based on the number of months that they were actually paid prior to FRA. In other words, you don’t incur an early filing reduction for the months you didn’t actually receive benefits due to the earnings test.
The percentage reduction assessed for taking early retirement benefits is 5/9ths of 1% for the first 36 months of reduction, and 5/12ths of 1% for any months of reduction in…