April 26, 2013, 7:15 a.m. EDT
Maximize Social Security spousal benefits
By Jeffrey B. Miller
In the past I was surprised when an otherwise financially savvy acquaintance did not know that Social Security
provided a spousal benefit. By now I expect it but the reason for the lapse in social security knowledge is
nevertheless puzzling and concerning.
Spousal benefits have a curiously low profile in the key table in the Your Social Security Statement sent to eligible
workers by the Social Security Administration each year.
Below is the table for Wanda Worker , Social Security's favorite retirement example.
The only reference here to spousal benefits is under "Family,” and unlike the other benefits described in the table,
there are no monetary amounts included under this category. So even for the diligent reader of Your Social Security
Statement it is easy to miss, a serious problem considering how substantial spousal benefits can be.
The Chief Actuary of Social Security does periodic studies of the rate of return to retirees of various ages and income
levels from Social Security tax contributions. A medium-income single male worker born in 1949 can expect an
inflation-adjusted rate of return from Social Security of 4.92%; a one-earner married couple which takes advantage of
spousal benefits can expect a rate return of 7.43%. Not a bad return considering today's low interest rates.
Here are three different scenarios where spousal benefits can
make a significant difference in retirement:
Married couple, single earner : If Wanda Worker's husband waits until full retirement age to claim his benefit, he will
receive $706 a month or $8,472 a year. To get this benefit he does not have to qualify for Social Security benefits on his
own record, even if he has been a stay-at-home dad his entire adult life. Taking his spousal benefit will not affect how
much money Wanda will receive from Social Security.
Divorcées: If Wanda is divorced, her ex-partner can get a spousal benefit and he does not have to wait for her to claim
her retirement benefits. If they were married for 10 years or more, he can obtain spousal benefits once she reaches 62.
In fact, all her ex-partners can receive full spousal benefits as long as they have been married to her for 10 years or
longer. Even when ex-partner(s) are getting a spousal benefit, her present spouse can also get full spousal benefits.
Two-earner households: If Wanda's husband has worked, they can still benefit from spousal benefits.
By comparison with the rates of return above, the return for a two-earner couple is 5.3%, higher than for a single
person but much less than the return for a one-earner couple. However, the study does not take into account special
strategies that two-earner married couples can use to increase this return. Two important strategies are “file and
suspend” and “restricted application.” These strategies involve having one partner taking spousal benefits for a few
years and then taking their own benefit later.
File and suspend is a way to get around the restriction that Wanda must claim benefits before her husband can claim
spousal benefits. With file and suspend, Wanda claims a retirement benefit. Then her husband claims a spousal benefit.
Wanda then suspends her benefit. The advantage here is that she can claim a higher benefit later and her husband will
receive a spousal benefit in the interim period.
Restricted application is similar to file and suspend except that Wanda does not suspend. In both cases her husband
can receive “free spousal” benefits while waiting to claim his own benefit. By waiting to claim his own retirement
benefit, the benefit will be much higher and he receives a spousal benefit while he waits. An important caveat is that he
must wait until full retirement age to use these special strategies.
As all these examples show that the spousal benefit is important for almost everyone who is married (or has been
married) if they want to maximize their return from their Social Security contributions.