Spousal Benefits

Spousal Benefits are a feature of social insurance programs, most notably the U.S. Social Security system, that allows an individual to receive retirement payments based on their spouse's (or ex-spouse's) work history rather than their own. Think of it as a financial tag-team option for your golden years. This provision was designed to provide for spouses who had lower lifetime earnings or spent significant time out of the workforce, often to raise a family. The core idea is that a marriage is an economic partnership, and both partners should benefit from the contributions made during their working lives. Typically, an eligible spouse can receive up to 50% of the higher-earning spouse's full retirement benefit, known as their Primary Insurance Amount (PIA). This doesn't reduce the higher-earner's own benefit; it's an additional payment from the system. Understanding and strategically claiming these benefits can significantly boost a couple's total retirement income, making it a critical component of sound financial planning.

The mechanics are straightforward, but the timing of your claim can dramatically alter the outcome. It's crucial to understand the rules of the game before you start playing.

To claim spousal benefits on a current spouse's record, you generally must meet several conditions. The specifics can vary, but for the U.S. system, the primary requirements are:

• Your spouse must have already filed for their own retirement benefits.
• You must have been married to that spouse for at least one continuous year.
• You must be at least 62 years old.
• If you are also eligible for benefits based on your own work record, Social Security will pay your own benefit first. If your spousal benefit is higher than your own, you'll receive an additional amount to bring the total payment up to the higher spousal benefit level. You don't get both.

The magic number is 50%. If you wait until your Full Retirement Age (FRA) (which is typically 66 or 67, depending on your birth year) to claim spousal benefits, you are entitled to a payment equal to 50% of your spouse's PIA. However, patience is a virtue that pays. If you claim before your FRA, your benefit will be permanently reduced. For example, claiming at the earliest possible age of 62 could reduce your benefit to as little as 32.5% of your spouse's PIA. This presents a classic financial dilemma: take a smaller check for a longer period or a larger check for a shorter one. The right answer depends entirely on your family's financial situation, health, and longevity expectations.

Viewing Social Security as a financial asset is key. Like any asset, you want to manage it to maximize its value over your lifetime.

For years, savvy couples used a popular strategy called “File and Suspend.” It allowed one spouse (typically the higher earner) to file for benefits at their FRA and then immediately suspend them. This clever move unlocked spousal benefits for their partner while the higher earner's own benefit continued to grow until age 70. Unfortunately for new retirees, Congress closed this loophole with the Bipartisan Budget Act of 2015. It's a great example of how rules can change, reinforcing the need to stay current with your retirement planning.

Optimizing Social Security is a couple's game. The goal is to maximize your combined lifetime income.

• Let the Big Benefit Grow: In most cases, the optimal strategy is for the higher-earning spouse to delay claiming their own benefits for as long as possible (ideally until age 70). Each year they wait past FRA, their benefit increases by about 8%. This not only maximizes their own check but also establishes a higher potential survivor benefits for their spouse, as the survivor is typically entitled to 100% of the deceased spouse's benefit.
• Timing is Everything: The lower-earning spouse has a choice. They might claim their own smaller benefit early to generate cash flow while the higher benefit grows. Or, if their own benefit is negligible, they may simply wait to claim spousal benefits once the higher-earning partner finally files.

Good news for some: the economic partnership of marriage can extend beyond divorce. You can often claim benefits based on an ex-spouse's record if:

• Your marriage lasted 10 years or longer.
• You are currently unmarried.
• You are 62 or older.

Best of all, your claim has absolutely no effect on your ex-spouse's benefits or those of their current spouse. Your ex-spouse is not even notified. It is a separate entitlement you have earned.

Spousal benefits are a powerful, often overlooked tool in your retirement toolkit. They represent found value—a bonus payment unlocked through smart coordination and planning. Like a value investor finding a hidden asset on a company's balance sheet, a couple that properly plans their Social Security claims can unlock tens of thousands of dollars in extra lifetime income. Don't leave this money on the table. Treat your Social Security claiming decision like any major investment: do your homework, understand the variables, and make a coordinated decision that maximizes long-term value for your family.