SPOUSAL BENEFITS A LOOK AT
No matter what age you begin receiving Social Security benefits, your payout will receive an automatic annual cost of living adjustment when there is a comparative increase in the consumer price index.
Spousal or “derivative” Social Security benefits are determined by the work history and earnings of each spouse and the age at which they apply for and/or begin drawing benefits. The spousal – or derivative – benefit is 50% of the higher earner’s accrued benefit at the spouse’s full retirement age. Should the higher-earning spouse start taking benefits earlier than full retirement age, the spouse’s derivative benefit will be less. 5 When spouses take time off from the workforce to have children, raise children or even provide care for senior parents, years with part-time or zero earnings may factor into the 35 years and result in a much lower benefit than people who work full time throughout their adult lives. This is why many women might qualify for a higher benefit based on their husband’s work history.
Plan for Surviving Spouse Common sense may tell you that – among couples – the higher earner should claim benefits as early as possible and the lower earner should delay in order to receive a higher benefit. In reality, the exact opposite may be the better option because if the higher earner claims early and then dies first, he or she is likely to have shortchanged the lower earner’s survivor benefit. In this scenario, the higher earner should consider delaying claiming benefits so the lower earner can claim the highest possible benefit for life – whether it’s the lower earner’s own benefit or a derivative of the higher earner’s highest available benefit. If the lower earner dies first, there is no lost benefit, as the higher earner simply keeps his or her own benefit.
5 Social Security Administration. January 2020. “Retirement Benefits.” https://www.ssa.gov/pubs/EN-05-10035.pdf. Accessed Feb. 29, 2020. 6 Social Security Administration. “Retirement Planner: Other Things to Consider: Will other family members qualify for benefits on your record?” https://www.ssa.gov/planners/retire/otherthings.html. Accessed Feb. 29, 2020.
:4: This document is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market or recommend any tax plan or arrangement. Individuals are encouraged to consult with a qualified professional before making any decisions about their personal situation. This content is not endorsed by the Social Security Administration, and our firm is not affiliated with the United States government or any other governmental agency. This document is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market or recommend any tax plan or arrangement. Individuals are encouraged to consult with a qualified professional before making any decisions about their personal situation. This content is not endorsed by the Social Security Administration, and our firm is not affiliated with the United States government or any other governmental agency.
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