Ask Rusty – Computing Spousal Benefits

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Dear Rusty:

I read an article today, which talked about how one spouse’s benefits should be 50% of the other spouse’s and about something called a “spousal boost”.  I do not make 50% of my husband’s Social Security benefit and am wondering if I qualify for this “spousal boost.”  Signed:  Feeling Cheated

Dear Feeling Cheated:

Oh, so many times I have seen written that “a low income spouse gets one half of the other spouse’s benefit,” or something similar to that.  Unfortunately this is a very misleading oversimplification of Social Security’s spousal benefit rules.  To illustrate, we need to start with a few definitions:  First, all Social Security benefits start with an eligible worker’s Primary Insurance Amount, or “PIA”.  The PIA is the amount that a worker is gets at their full retirement age (FRA).  Retirement benefits (what the worker gets) and spousal benefits (what a lower-earning or no-earning spouse gets) are both reduced if the benefit is started before full retirement age.

For ease of discussion, let’s assume here that the husband is the higher-earning spouse (it could easily be the other way around) and that the husband’s PIA is $2000.  To show how spousal benefits work let’s use a couple of different scenarios:

If the wife was a stay at home Mom who is not eligible for her own Social Security retirement benefits because her lifetime career was running the household, raising the kids, and caring for elderly parents, she would get ½ of the husband’s PIA if (and only if) her spousal benefit started at her FRA.  If it started any earlier than that it would be reduced to as little as 35% of the husband’s PIA if the spousal benefit started at age 62 and the wife’s FRA is 66.  The portion of her husband’s PIA that the wife is entitled to is reduced by a fraction of a percent for each month before her FRA that the benefit starts. Example at age 62 with an FRA of 66:  Instead of 50% of husbands PIA, wife gets 35%, or $700 (instead of $1000).

If, instead, the wife is eligible for her own Social Security retirement benefits because she worked enough years, but she took some years off for family purposes and has a smaller PIA of $750, her spousal benefit is computed somewhat differently.  The wife’s PIA is compared to one half of her husband’s PIA to arrive at a “spousal boost” – an amount that will be added to her own retirement benefit if her spousal benefit starts at her full retirement age.  In this example, half of the husband’s PIA ($1000) minus the wife’s PIA ($750) equals $250.  If the wife’s spousal benefit starts at or after her full retirement age, the full $250 will be added to her own retirement benefit.  But if her spousal benefit starts earlier, the $250 will be reduced by a fraction of a percent for each month taken early.  To illustrate:  Taken at age 62 with an FRA of 66, the wife’s retirement benefit would be reduced by 25% for early retirement and she would get $562.  If her spousal benefit starts (her husband starts his retirement benefit) when she is 66, the full “spousal boost” will be added to her reduced retirement benefit and her new benefit would be $812 ($562 plus $250).  But if the spousal benefit starts before her FRA, say at age 65, the spousal boost will be reduced to about $229 (about an 8.3% reduction) making her total benefit $791.  Which is, again, less than one-half of the husband’s PIA.

Essentially, a low-earning (or no-earning) spouse gets half of the higher-earning spouse’s Primary insurance Amount only if the spousal benefit starts at their full retirement age – otherwise it will be less than 50%.  And this is why the blanket statement “a low income spouse gets one half of the other spouse’s benefit” is a very misleading oversimplification of how spousal benefits work.

The information presented in this article is intended for general information purposes only. The opinions and interpretations expressed in this article are the viewpoints of the AMAC Foundation’s Social Security Advisory. To submit a request, contact the Foundation at info@amacfoundation.org.

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