Understanding Social Security Spousal Benefits
Strategic Insights for Married Investors
For high net worth couples, Social Security spousal benefits offer a valuable opportunity to enhance your combined retirement income. The rules are complex, but a financial professional can help build a coordinated claiming strategy that helps maximize your lifetime payment.
At Fisher Investments, we specialize in helping investors like you navigate these complex rules and decisions to ensure your Social Security plan aligns with your broader wealth management strategy.
Personalized consultations are available for investors with $1,000,000 or more in investable assets.
What Are Social Security Spousal Benefits?
Spousal benefits allow an individual to claim Social Security based on their spouse's work record rather than their own. This provision is designed to provide for spouses who may have lower lifetime earnings. For a high net worth couple, this can be strategic tool to help maximize your household income.
An individual can receive up to 50% of their spouse's full retirement benefit amount. However, the actual amount depends on several factors, most notably the age at which the benefits are claimed.
How Spousal Benefit Claiming Works
To claim a spousal benefit, your spouse must have already filed for their own retirement benefits. The amount you receive is influenced by your age and whether you have your own qualifying work record.
If you claim at your Full Retirement Age (FRA), you are eligible to receive the full 50% of your spouse's Primary Insurance Amount (PIA), assuming you have under 40 credits (which you earn by working and paying Social Security taxes). If you have 40 credits or more, you are eligible to receive 50% of your spouse’s PIA minus 100% of your own.
If you claim before your FRA, your spousal benefit will be permanently reduced. The reduction is calculated based on how many months early you file.
If you are eligible for both your own benefit and a spousal benefit, the Social Security Administration (SSA) requires “Deemed Filing.” The SSA will generally pay your own benefit first, and if the spousal benefit is higher, you will receive an additional amount to equal the higher benefit. You cannot choose to receive only the spousal benefit while delaying your own to let it grow (unless you were born before January 2, 1954).
For high net worth couples, coordinating when each spouse files is a critical decision that can significantly impact your total income over a long retirement.
Optimizing Spousal Benefits
A simple calculation can’t reveal the optimal strategy for your unique financial situation and goals. For many high-earning investors, the goal is to maximize total household benefits over your lifetimes. This requires a comprehensive analysis of your personal situation.
Key strategic considerations include:
Timing the Higher Earner's Claim: By delaying their own claim until age 70, the higher-earning spouse maximizes their individual benefits. This not only increases their own payment but also establishes a higher potential survivor benefit for the lower-earning spouse.
Coordinating Both Claims: The decision for one spouse to claim spousal benefits must be weighed against the impact on their own future benefits. We can help you model different scenarios to find the most advantageous timeline for you.
Managing the Impact on Survivor Benefits: Survivor benefits are one of the most powerful features of Social Security. A surviving spouse can receive up to 100% of what their deceased spouse was receiving. By delaying your claim as the higher-earning spouse, you can provide a larger, inflation-adjusted income stream for your surviving spouse.
Integrating With Your Overall Plan: Your claiming strategy should not exist in a vacuum. It should align with your overall portfolio withdrawal strategy and long-term financial goals.
