For married retirees, Social Security benefits can be a crucial part of their retirement income. However, many are unaware of certain lesser-known rules that can significantly impact their benefits. Understanding these rules can help maximize the financial security of both spouses. Here are three little-known Social Security rules that every married retiree should be aware of.
1. The “File and Suspend” Rule
What is the File and Suspend Rule?
Before 2015, married retirees could take advantage of the File and Suspend strategy. This allowed one spouse to file for Social Security benefits and then suspend them, while the other spouse could collect a spousal benefit based on the first spouse’s earnings record. However, this strategy was eliminated in 2015.
What’s the Impact?
Now, both spouses must begin collecting benefits to qualify for spousal or survivor benefits, unless a few exceptions apply.
2. Restricted Spousal Benefits at Full Retirement Age
What is a Restricted Spousal Benefit?
If one spouse has never worked or has lower earnings, they may be eligible to receive a spousal benefit based on their spouse’s earnings history, even if they have not yet claimed their own Social Security benefits.
- This is available once the other spouse reaches Full Retirement Age (FRA) (currently 66 or 67 depending on birth year).
How Does This Work?
The non-working or lower-earning spouse can receive up to 50% of their spouse’s Full Retirement Age benefit amount, but only if the primary earner has claimed their benefits.
3. Impact of Survivor Benefits
How Survivor Benefits Work
When one spouse passes away, the surviving spouse is entitled to survivor benefits. In some cases, this could mean receiving a benefit based on the higher-earning spouse’s earnings record, even if they had been receiving a smaller benefit while the other spouse was alive.
- Special Considerations: If the surviving spouse was receiving a spousal benefit that was higher than what their own benefit would be, they will receive the larger of the two amounts after their spouse’s death.
Example:
If a lower-earning spouse was receiving 50% of their deceased spouse’s benefit while alive, upon the primary earner’s death, the survivor could receive 100% of the higher benefit.
Conclusion
Understanding these lesser-known Social Security rules can help married retirees optimize their benefits and secure a more stable retirement income. From the elimination of the File and Suspend rule to leveraging spousal and survivor benefits, being informed can make a significant difference.
FAQs
What was the File and Suspend rule, and why was it eliminated?
The File and Suspend rule allowed one spouse to file for Social Security and then suspend benefits, allowing the other spouse to collect spousal benefits. It was eliminated in 2015, meaning both spouses must claim benefits before either can receive spousal or survivor benefits.
Can I still collect spousal benefits if my spouse hasn’t claimed their benefits yet?
Yes, you can collect a spousal benefit once your spouse reaches Full Retirement Age (FRA) even if you haven’t claimed your own benefits. However, your spouse must have claimed their benefits first.
How do survivor benefits work for married couples?
Survivor benefits provide a higher amount based on the deceased spouse’s earnings record. The surviving spouse can receive either their own benefit or 100% of the higher amount, whichever is greater.
Can a non-working spouse receive Social Security benefits?
Yes, a non-working or lower-earning spouse can receive spousal benefits based on the higher-earning spouse’s record once they reach Full Retirement Age.
What happens if my spouse and I both worked?
If both spouses have earned Social Security credits, they can choose to receive benefits based on the higher-earning spouse’s record or combine their benefits to get the best possible outcome.