Social Security Benefits

Robert DowdJuly 24, 2020

Financial Planning

Recently, there have been many questions surrounding Social Security benefits, mainly directed towards spousal and survivor benefits. Ever since the Bipartisan Budget Act of 2015, which altered Social Security claiming strategies, such as file and suspend, there has been some confusion surrounding these types of benefits.

Individual Social Security Basics:

Social Security (SS) benefits are earned based on an individual’s earnings, work history, and the amount paid into SS system. An individual’s birth year will determine their full retirement age (FRA), which ranges from age 66 to 67, and allows them to collect 100% of their SS benefit. If some individuals collect their benefits prior to their FRA, as early as age 62, their benefits there could be discounted up to 30%. Anyone who would like to delay their SS benefits past their FRA will receive a guaranteed 8% increase each year up to age 70.

Bipartisan Budget Act of 2015 Changes:

Voluntary Suspension of Benefits:

Before the Act, a worker at FRA or older would apply for their own benefits and then suspend the payment of those benefits. This would allow a spousal benefit to be paid to their spouse and delay their own benefit to receive an 8% increase per year until a maximum age of 70.

After the Act, any requests submitted on or after April 30, 2016, benefits could be suspended past one’s FRA, but all other benefits payable on their record, such as spousal benefits, would be suspended as well.

Timing of Multiple Benefits:

Before the Act, individuals could receive spousal benefits at FRA and let their own retirement benefits continue to grow by delaying their filing.

After the Act, individuals born prior to January 2, 1954, are eligible for both their own and a spousal benefit, have not claimed their own benefits, and reached FRA, are eligible to file restricted application. This is when one spouse claims a spousal benefit while letting their own benefit grow.

Those born after January 2, 1954 cannot use restricted application (except for survivor benefits) and deemed filing is applied. Deemed filing means that when one files for retirement or spousal benefits, they are required to file for all benefits available to them at that time. So, restricted application is not available to these individuals.

Spousal Benefits:

There are certain criteria that need to be met to claim SS spousal benefits, which includes being at least 62 years old in most cases. All spousal benefits at FRA are equal to 50% of the spouse’s individual FRA benefit. It does not matter if that spouse started collecting SS before or after they reached FRA, the benefit stays the same.

Married Spousal Benefits:

If an individual is married, their spouse must already be collecting SS for them to claim spousal benefits. Also, the claiming spouse’s individual SS benefit must be lower than the potential spousal benefit and they must have been legally married for at least one year. The one claiming a spousal benefit can start them earlier than age 62 if caring for a child under the age of 16 or is disabled.

Divorced Spousal Benefits:

If an individual is divorced and would like to claim spousal benefits, they must have been married to each other for at least 10 years and they must be divorced two years or longer, or the ex-spouse must already be claiming SS benefits. They both must be at least 62 years old and the one claiming spousal benefits must be unmarried. The ex-spouse does not need to provide any consent to claim spousal benefits. If an individual is eligible for spousal benefits and has been divorced multiple times, their spousal benefits will be based on the highest-earning spouse.

Survivor Benefits:

If a spouse, or ex-spouse, dies and their own SS benefits are higher that the surviving spouse, they could be eligible for survivor benefits. The size of the survivor benefits is based on the deceased spouse’s total benefit. If they started SS before or after to their FRA, will result in the surviving spouse receiving a reduced or increased amount going forward.

Survivor benefits are an exception to the deemed filing rule stated above. Widows or widowers can start survivor benefits independently of their own retirement benefits, which will allow them to delay and grow their personal benefit.

If you have additional questions related to Social Security benefits, feel free to reach out your advisor, or, call our office at 610-651-2777.



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