As they approach retirement, many people are unaware that they may be eligible for spousal benefits through Social Security. Essentially, a spousal benefit means someone can receive a monthly Social Security payment based on the work record of a qualifying spouse.
The spousal benefit is usually thought of as a monthly payment a non-working housewife gets when her husband retires. In reality, a spousal benefit is gender-neutral and a spouse can claim a benefit even if he or she qualifies for Social Security benefits based on a personal work record. In some cases, divorced spouses are also eligible for benefits.
In general, the regulation enables a married partner to claim up to 50 percent of the Social Security benefit of a spouse. In other words, if a man or woman was eligible for a monthly Social Security payment of $2,000 at full retirement age, the spouse could receive up to $1,000 a month even if he or she never earned outside income or paid into Social Security.
As with many government regulations, while the concept is simple, the actual application can be quite complex. By carefully coordinating how and when they file and claim benefits - including the spousal benefit - a married couple can substantially increase their lifetime payout of Social Security benefits.
The book "Social Security Strategies" by William Reichenstein and William Meyer devotes nearly 50 pages to explaining strategies couples can use to maximize their coordinated household Social Security benefits. The book states: "Although strategies for married couples are more complex than strategies for singles, there is also more opportunity to add value to couples by helping them decide when each partner should begin benefits."
When meeting with pre-retirees and discussing these concepts, they often express surprise and disbelief that there can be such wide variations in the benefits available. Sometimes they even wonder if they are somehow gaming the system by trying to maximize benefits. But the Social Security Administration encourages those eligible to file in the manner that is most advantageous.
For example, according to information from the Social Security Administration, "If you have reached your full retirement age and are eligible for a spouse's or ex-spouse's benefit and your own retirement benefit, you may choose to receive only spouse's benefits and continue accruing delayed retirement credits on your own Social Security record. You then may file for benefits later and receive a higher monthly benefit based on the effect of delayed retirement credits."
In some cases, spousal benefits are available even after the dissolution of a marriage. When it comes to divorce, the Social Security Administration notes, "Your divorced spouse can get benefits on your Social Security record if the marriage lasted at least 10 years. Your divorced spouse must be 62 or older and unmarried."
It is important to note that the benefits for a divorced spouse have no impact on the amount of benefits the former spouse can receive. If an ex-spouse has not applied for retirement benefits, but can qualify for them, you can still apply as long as you meet the other criteria, and have been divorced for at least two years.
As with other Social Security benefits, the spousal benefit is based on full retirement age. Benefits begun prior to full retirement age will be permanently reduced.
Flint Stephens is a licensed investment adviser representative and has a Utah life insurance license. He works for Strategis Fiancial Group Inc. in Provo. He has a master's degree in communications from Brigham Young University.