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Piershale: Coordinating spousal Social Security benefits

Social Security is very supportive of marriage. Thanks to spousal and survivor benefits, a spouse who has little or no work history can receive Social Security benefits based on their current spouse, ex-spouse, or deceased spouse's work record.  

By paying a non-working spouse half of the working spouses benefit (boosted to 100 percent after the working spouse dies), married non-working spouses could have some measure of security in their old age, even if their primary work between the ages of 22 and 65 was for little or no pay. Also, many spouses earn enough over their working career that their Social Security benefit based on their own record is higher than their spousal benefit would be.

As an example, let's say Bill and Barbara are married. Barbara spent her time raising children and doing volunteer work, and therefore has little or no earnings record under Social Security. When Bill applies for his Social Security benefit, Barbara can apply for her spousal benefit as long as she is at least 62. If Bill's Social Security is $2,600 a month, Barbara's spousal benefit will be half of that, or $1,300 a month, if she applies at full retirement age, which for most people right now is age 66. If she applies at 62, her spousal benefit will be 35 percent of her husband's Social Security, or $910.  

It may also be possible for two working spouses, both with good income, to make use of spousal benefits. Let's say Barbara worked in a better-paying job and has a Social Security benefit of $1,800 at full retirement age. After she files for her benefit and as soon as Bill turns full retirement age, he may do something called "restrict his application" to his spousal benefit. This would give him an income of $900 per month, which is 50 percent of Barbara's $1,800 Social Security benefit, while his own benefit builds delayed credits. A delayed credit simply means that for every year Bill waits to take his Social Security between his full retirement age and age 70, the benefit will increase 8 percent.  When Bill turns 70, he switches to his own, higher benefit (note: under the Bipartisan Budget Act of 2015, a person born after Jan. 1, 1954, can no longer file a restricted application for spousal benefits at full retirement age).

Coordinating spousal benefits is one of the most complex areas of Social Security planning, and there is much more to this story. There are a number of different options to maximize a married couple's combined benefits, but the rules are beyond the scope of this short article.  There is a wealth of information on the Social Security website, at www.socialsecurity.gov.

• Mike Piershale is president of Piershale Financial Group. If you have financial questions on this column contact us at Piershale Financial Group Inc., 407 Congress Parkway, Crystal Lake, IL 60014. You may also email him at Mike@PiershaleFinancial.com.

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