How to Calculate a Social Security’s Spousal Benefit

If you’re married to someone who works outside the home and contributes to Social Security through payroll tax, you might be entitled to a Social Security benefit based upon your partner’s income.(1)

The maximum amount you will receive is 50% of their Primary Insurance Amount (PIA)-- this is the monthly income they are eligible to receive at full retirement age (FRA). However, you will only receive 50% of this amount if you postpone filing until you are full retirement age- currently 66.

If you file for a spousal benefit before age 66, the percentage you receive depends upon your age. There’s a two-stage process as to how Social Security calculates the reduction and it's based upon how many months ahead of your FRA you are filing:

For the first 36 months before age 66 that you apply for a spousal benefit, your check is reduced by 25/36 of one percent. For each additional month that you file “early,” the reduction is 5/12 of one percent.

The following example illustrates how this applies. It assumes that your full retirement age is 66 and your partner’s PIA is $2,000/month. (Amounts are rounded.)

There’s a calculator on the Social Security website that allows you to enter your information to find out how your spousal benefit will be affected if you file prior to your full retirement age.

Although you can currently file for a spousal benefit as early as age 62, that doesn’t mean you’ll receive a dime. You are not entitled to a spousal benefit until your partner has applied for Social Security benefits him/herself.

Here are some other things you need to be aware of when claiming spousal benefits:

• If you are eligible for a Social Security benefit based upon your own work history, you will either receive this amount or the spousal benefit you’re entitled to, whichever is higher. (In other words, you don’t get both amounts.)
• If you receive a lower spousal benefit because you filed prior to reaching full retirement age (currently 66), the reduction is permanent and the amount is not re-calculated once your reach FRA.
• If you are receiving income from a job (investment income doesn’t count), your spousal benefit may be reduced. The “income limit” for 2012 is $14,640. Assuming you are not going to reach full retirement age this year, for every $2 above this amount that you’re paid, Social Security will withhold $1 of your spousal benefit.(3)
• If your partner started receiving Social Security before his/her full retirement age, this has no impact on the size of your spousal benefit.

Coming Up Next week: Social Security and divorce: What it takes to collect on your ex’s earnings history. (P.S. S/he will never know!)

1. Many state, municipal and some federal workers do not pay into the Social Security system. In this case, neither the worker nor their spouse is entitled to Social Security benefits.

2.The federal law known as the Defense of Marriage Act only recognizes “marriage” as between a man and a woman.  Same-sex partners are not considered “married” for Social Security or other federal programs. This law is being challenged as unconstitutional. (PLEASE INSERT link to column titled “The Costs and Implications of Re-defining Marriage, July 25, 2012.)

3. If you are turning 66 this year, the earnings limit is $38,880. Once your earnings from a job exceed this amount, Social Security will withhold one out of every three dollars in benefits. Visit the following website and enter your date of birth and income to find out how your Social Security benefit might be affected by your earned income: http://www.socialsecurity.gov/OACT/COLA/RTeffect.html

Ms. Buckner is a Retirement and Financial Planning Specialist and an instructor in Franklin Templeton Investments' global Academy. The views expressed in this article are only those of Ms. Buckner or the individual commentator identified therein, and are not necessarily the views of Franklin Templeton Investments, which has not reviewed, and is not responsible for, the content. 

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