A reader sent me the following question:
My husband filed for Social Security when he was 62 and is now 76. I am 67 years old and have not filed. If I have the correct understanding of your article, My SS benefit will be 50% of my husband’s benefit. Will I also get the cost of living increase each year?
The answer to the question is not as straightforward as you might think. There are a few factors that we need to consider before we can know for sure what this reader’s benefit might be.
First of all, let’s define the possible amount of spousal benefit that is available. When applying at or after your full retirement age, you are eligible to receive a spousal benefit that is equal to 50% of your spouse’s Primary Insurance Amount. The Primary Insurance Amount is the amount of benefit that your spouse was eligible to receive at exactly his or her own full retirement age (FRA).
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If your spouse started receiving benefits at an age before his or her FRA, and is thereby receiving an amount less than the Primary Insurance amount, then your maximum spousal benefit could be something more than 50% of the benefit that your spouse is receiving. On the other hand, if your spouse started receiving benefits at some point after his or her FRA, then your maximum spousal benefit would be something less than 50% of the benefit that your spouse is receiving.
The point is, your spousal benefit is not directly related to the actual benefit that your spouse is currently receiving. It is related to the Primary Insurance Amount, which may be more or less than the benefit being received.
Secondly, if you have worked in Social Security-covered jobs in your career, you may be eligible for a retirement benefit based on your own earnings record. If the Primary Insurance Amount based on your own earnings record is something more than half of your spouse’s Primary Insurance Amount, then you are not eligible for a spousal benefit at all.
This is because you are not allowed to separate these two benefits if you are currently eligible for both, due to a rule known as deemed filing. Deemed filing says that if you are eligible for a spousal benefit and a retirement benefit based on your own earnings, when you file for one of these benefits you are deemed to have filed for both.
In filing for both benefits, your own retirement benefit is calculated first. Then an “excess” spousal benefit is calculated based on 50% of your spouse’s Primary Insurance Amount minus your own Primary Insurance Amount. The excess spousal benefit is then added to your own retirement benefit, producing your total monthly benefit amount.
If subtracting your own Primary Insurance Amount from 50% of your spouse’s Primary Insurance Amount results in a negative number, you are not eligible to receive a spousal benefit. For more details and examples of how this works, see this article about calculating the spousal benefit.
One other factor to apply is the age for applying for spousal benefits.
In a case where the individual (in this case, the reader) either has no retirement benefit of her own, or her own benefit is small enough that it would never grow to a point where it is larger than the spousal benefit, she should file for the spousal benefit no later than her Full Retirement Age. This is because the spousal benefit does not increase after you have reached Full Retirement Age, other than by the annual COLA increases.
There are a few other situations where an individual’s spousal benefit might increase after Full Retirement Age, but those increases would be applied to a spousal benefit that is currently being received. The only reason not to file for a spousal benefit is if you would like to delay filing your own benefit in order to accrue delayed retirement credits, and it is expected that your own benefit will at some point grow to where it is larger than the maximum spousal benefit.
I mentioned earlier that you can’t split up your own benefit from the spousal benefit when filing, due to the deemed filing rule. It is possible that you could file for your own retirement benefit before you become eligible for the spousal benefit, so you could split up the two in that fashion. This is possible because your spouse must have applied for his or her own benefit before you are eligible for the spousal benefit. So if your spouse waits a few years (after your own filing) to file for his or her own benefit, you won’t be eligible for the spousal benefit until your spouse files for his or her own benefit.
Lastly, answering the final question on the email: Yes, spousal benefit recipients get the COLA increases each year just like all other retirement benefit recipients.
Readers, do you have a Social Security question? Email us at HelpMeRetire@marketwatch.com and we may use your question in a future column