Today’s column addresses questions about whether a spousal benefit should always be half the other spouse’s retirement benefit, whether the Windfall Elimination Provision applies to spousal benefit and how divorced spousal benefit rates are determined. Larry Kotlikoff is a Professor of Economics at Boston University and the founder and president of Economic Security Planning, Inc, which markets Maximize My Social Security and MaxiFi Planner.
See more Ask Larry answers here.
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Why Isn’t My Wife’s Spousal Benefit 50% Of My Social Security Retirement Benefit?
Hi Larry, My wife started collecting her Social Security retirement benefit at 62. I waited until my full retirement age to file for my retirement benefit. At that time, my wife also filed for her spousal benefit which I’ve always heard is supposed to be half of my retirement benefit. But when that sent her spousal benefit, it was not even close to half. I’m receiving $1,954 and she only getting $765. Can that possibly be right? Thanks, Douglas
Hi Douglas, Probably. If a person starts drawing reduced retirement benefits on their own record prior to full retirement age (FRA), the resulting reduction for age that’s applied to their benefit rate continues even if they subsequently become entitled to spousal benefits. And spousal benefits are 50% of the record holder’s retirement benefit at their full retirement age, not half of an actual retirement benefit that may be either increased or decreased depending on when the person filed for it.
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For example, say Amy filed for her benefits in 2018 at 62. Amy’s primary insurance amount (PIA), or full retirement age rate, would be $800, but Amy’s rate is reduced for age to $590. This year, when Amy is 64, her husband applies for his benefits. Amy’s husband’s PIA is $2,000, so Amy’s unreduced excess spousal rate is calculated by subtracting her PIA from 50% of her husband’s PIA. In Amy’s case, that amounts to $200 (i.e. $2000 / 2 – $800).
However, since Amy is only 64 when she becomes eligible for spousal benefits, her addition, or excess, spousal rate is reduced to $161. That amount is then paid in addition to Amy’s own reduced rate of $590 to give her a combined rate of $751 (i.e. $590 + $161). And even if Amy became eligible for her spousal benefit at or after her FRA, while her excess spousal benefit would not be reduced, the portion of her benefit drawn on her record will continue to be reduced so her spousal benefit would still be less than her husband’s PIA. Best, Larry
Is It Correct That WEP Wouldn’t Apply To Spousal Benefits?
Hi Larry, This month I’m at my full retirement age of 66, and I’m currently receiving a government pension, but I haven’t retired through Social Security. My husband retired at 65, 7 years ago. His monthly Social Security retirement benefit is $2,612 and according to my Social Security statement, my monthly retirement benefit amount at 66 would be $997 before WEP. Since I was born after 1/2/1954, it is my understanding that I can’t apply under my husband’s record, and suspend filing on my record until I’m 70 years of age, though I’m not sure if I have any of that right.
And I read your response someone else today that said something to the contrary. Specifically regarding applying under a spouses record, and that WEP wouldn’t apply in that instance. Would you please clarify this for me? Thanks, Brooke
Hi Brooke, First note that you’re conflating filing a restricted application for spousal benefits only with filing for and suspending a retirement benefit. These are two separate, and mutually exclusive, actions. Restricting an application means filing for only one benefit when eligible for more than just that one. By definition, you can’t restrict your application to your spousal benefit only if you also file for and suspend your retirement benefit.
The new law did not eliminate spousal benefits. It just extended deeming for those born on or after 1/2/1954. Deeming means that when you apply for either your spousal benefit or your retirement benefit, you’re deemed to have filed for both and you only receive essentially the larger of the two. If your retirement benefit is larger, you receive it instead of your smaller spousal benefit. And if you were to suspend your retirement benefit, you wouldn’t be able to receive any other benefits while your retirement benefit is suspended.
What you may have read is that the Windfall Elimination Provision (WEP) does not directly apply to spousal benefits. WEP can only apply to Social Security retirement or disability benefits payable based on a person’s own work record. WEP can indirectly affect spousal benefits, though, in that spousal benefits are paid based on a percentage of the worker’s primary insurance amount (PIA). A person’s PIA is equal to their Social Security retirement benefit rate if they start drawing their benefits at full retirement age (FRA). Therefore, if a worker’s PIA is lower due to WEP, any auxiliary (e.g. spousal, child) benefits payable from that worker’s record would also be lower.
However, there is another provision called Government Pension Offset (GPO) that does apply to spousal and survivor benefits. Based on the GPO provision, if a person receives a government pension based on their earnings that were exempt from Social Security taxes, any Social Security spousal or survivor benefits for which the person qualifies would be offset by 2/3rds of their government pension.
Based on your description, it sounds like your own benefits would likely be lower as a result WEP, and you’ll only be able to qualify for spousal benefits if your excess spousal rate would be more than 2/3rds of the amount of your government pension. My company’s software — Maximize My Social Security or MaxiFi Planner — is programmed to handle both WEP and GPO calculations, so you and your husband may want to consider using the software to do your Social Security planning. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry
Does My Husband Have A Right To Any More Of My Payout?
Hi Larry, I am 63 in 2020 and my soon to be ex will be 61. We do not plan to file for Social Security benefits until full retirement age. Our current Social Security benefit payouts show I will receive $2,000 and he will receive $1,500. As I have read and tried to understand on the Social Security website, I think he may file for half of the difference between our payouts (so $250) which the government will take care of. Am I understanding this accurately? Do he have a right to any more of my payout? Thanks, Patricia
Hi Patricia, I think you must have misread something. Your husband/ex-husband couldn’t qualify for spousal or divorced spousal benefits from your record unless 50% your primary insurance amount (PIA) is more than his own PIA. A person’s PIA is equal to their Social Security retirement benefit rate if they start drawing their benefits at full retirement age (FRA).
It sounds like your husband’s PIA is much higher than 50% of your PIA, in which case he would never be able to collect spousal or divorced spousal benefits from your record as long as you’re living. Even if your husband could collect benefits from your record, though, it would have no adverse effect on your benefit rate. If you were to predecease him, he could be eligible for divorced survivor’s benefits from your record. Best, Larry