In this conversation, Mike and Amy delve into the complexities of Social Security for couples and the different types of benefits as they pertain to couples. They discuss the two primary benefits that couples need to be aware of: spousal benefits and survivor benefits. The conversation highlights the importance of understanding how these benefits interact, especially in the context of claiming strategies and the implications of previous marriages. The hosts emphasize the need for personalized financial advice to navigate these intricate decisions effectively.

Takeaways

• Understanding Social Security benefits is crucial for married couples.
• Decisions regarding benefits are more complex for couples than individuals.
• Couples should be aware of spousal and survivor benefits.
• Claiming strategies can significantly impact benefits received.
• The higher earner should ideally wait until age 70 to claim.
• Survivor benefits can be claimed as early as age 60.
• Previous marriages can affect eligibility for benefits.
• It’s essential to consider the timing of claims for optimal benefits. Financial planning is vital for navigating Social Security complexities.

Chapters

• 00:00 Understanding Social Security Benefits for Couples
• 03:16 Exploring Spousal Benefits
• 08:53 Navigating Survivor Benefits
• 14:33 Considering Previous Marriages and Benefits

Links

Operation Retirement Readiness: www.operationretirementreadiness.com

Schedule a consultation with Mike: https://nextmissionfinancialplanning.com/contact/

Schedule a consultation with Amy: https://www.instarfp.com/contact

 

Transcript

Mike Hunsberger (00:04)
Last week we talked about social security and retirement benefits and how they are calculated for, know, primarily along your own record. And so today we want to dig a little deeper into the things that apply to couples because there’s some nuances there. And, you know, it’s important to understand those if you’re married.

Amy (00:30)
And there’s two primary benefits that couples need to be aware of. First, are special benefits and second is survivor benefits. So both of these aspects of social security can influence a couple’s claiming strategy and how you think about how to maximize your benefits.

Okay, let’s see. Okay, Mike, can you just remind us, give us sort of an overview of the podcast, the key takeaways from last week?

Mike Hunsberger (01:00)
Here, courage to everybody if you didn’t listen to it to go back and if you really want the deep dive into the overall pieces of social security. basically, you can qualify for benefits after 40 quarters of work earning a minimum amount, which is actually just under $1 ,500 per month.

get you quote unquote a good quarter. And so after about 10 years of earnings, you’ll be able to qualify. Payout is then based on your highest 35 years of inflation adjusted pay. And there’s a complex formula that they use to determine what that replacement rate’s gonna be.

And then some of the key points on when you claim is based on your full retirement age. For most people, probably listen to this, age if you’re born in 1960 or later, your full retirement age is going to be 67. That’s what the benefits are going to be based on. But you can claim as early as 62, or you can delay and claim a 70.

If you claim early, you’re going to get reduced benefits. If you wait, you’re going to get increased benefits. So I think that’s the two -minute recap. Anything I missed,

Amy (02:36)
No, I mean…

Last week we covered quite a lot in detail. there’s, know, taxation issues, things like that. So probably worth going back if you don’t already have a good foundational understanding of social security because the single decision is complex enough. But today we’re going to get into how a couple’s decisions interact with each other. So haven’t missed anything for the big overview, Mike, but would encourage people to go back if they don’t have an already pretty good solid foundation on social

security.

Mike Hunsberger (03:11)
Yeah, that sounds good. So Amy, you mentioned there’s two different pieces, the spousal benefits and the survivor benefits. So you want to kick off by talking about the spousal benefits?

Amy (03:28)
Sure, so as Mike pointed out, there is a requirement that you work for 40 quarters. You earn enough money to qualify for 40 quarters or about 10 years of work.

If you’re a spouse, especially military spouses who were either unemployed or underemployed while you supported your spouse’s career, you may not actually qualify for benefits on your own record. That’s where a spousal benefit can come in. And even if you do qualify, your benefit might be quite a bit lower, but you might still qualify for some portion of a spousal benefit depending on your spouse’s earnings. So that’s the one aspect.

So spousal benefit has to do with benefits as they relate to your spouse while your spouse is still alive. The survivor benefit part is what you might be entitled to if your spouse passes away. So those are survivor benefits and they have nothing to do with your your own record for the most part whereas survivor benefit or the spousal benefit does. Is that about cover it Mike?

Mike Hunsberger (04:39)
I think so. Yeah, I think that’s a good overview of the spousal piece and we’ll run through an example. So let’s talk about our favorite couple, Jack and Jill. Jack is age 70, Jill 67, and they’re both planning to take Social Security. Jack’s benefit at 70 will be $4 ,500 per month.

and his full retirement age benefit at 67 would have been $4 ,000. Bill was a military spouse, as Amy said, and worked some after retirement, but also spent a lot of time raising the kids. So doesn’t have as large of a benefit. So we’ll just assume that

her benefit was say $1 ,500 at her full retirement age. So when they both apply, they will look at that and they’ll say, okay, Jill qualifies for her $1 but Jack’s benefit was 4 ,000 at his full retirement age. So 50 % of that is $2 ,000.

So they will add an extra $500, the difference between that $2 ,000 and the $1 ,500, the Jill’s benefit to kind of top her up to 50 % of Jacks. So that is basically how the survivor math works if you wait till full retirement age. If you claim at a different age, so let’s say Jill decided she was going to claim at 62.

And, you know, in this case, the one main point is both people have to be claiming to get the spousal benefit. can’t just have the one who wants the spousal benefit claim because then they’d only get their own. But a certain of the ages were adjusted and, you know, both are claiming. If Jill claimed at 62, while Jack was still claiming at his full retirement age,

Her benefit would be reduced. let’s say instead of that $1 ,500, she’s getting $1 ,100 a month. They would still compute the spousal offset at the full retirement ages. So she’d still only get that $500. They wouldn’t bring her all the way up to that $2 ,000 because she claimed early. So in that case, she’d be getting $1 per month versus the $2 ,000 if they both waited to full retirement age.

Amy, any questions on that? know talking numbers on a podcast is sometimes difficult, but did that kind of illustrate the numbers we wanted to?

Amy (07:53)
Yeah, I mean, I think the key takeaway here for people to understand is that when, you know, your benefit is calculated first and then the spousal benefit is added to it. So there’s two components coming in and sometimes people don’t understand that. They just think that, you know, it’s all their spouse benefit or whatever.

But the key takeaway is that, you it depends on when you’re claiming it. It depends on your age at claim and it depends on your spouse’s age at claim. So I think that’s the key takeaway because like you said, sometimes it’s hard to visualize the numbers. So turning then to survivor benefits. So this, what we just talked about, spouse will benefit. Your spouse is alive and you’re making that decision together. Now let’s talk about survivor benefits where one spouse has passed away.

Mike Hunsberger (08:48)
Sure. So survivor benefits are a little bit easier. Basically, if you’re both above that full retirement age, the larger of the two individual benefits will continue. So again, in our example, Jack and Jill, the first part where they were 67 and 70, Jack was getting $4 ,500 per month and Jill was getting $2 ,000 per month.

Fortunately, Jack died when he’s will just, instead of giving Jill her $2 ,000 benefit, she’ll get that $4 ,500 benefit of Jack’s, and that will continue for the rest of her life. If a spouse dies early or the other member is much younger,

Spousal benefit or survivor benefits, excuse me, can actually start, you know, be claimed at age 60 again for reduced rate. But, you know, so if there is a large age difference and, you know,

Amy (10:03)
I’m so sorry. I’m sorry.

Mike Hunsberger (10:10)
Nope, you’re good. Nope, you’re good. So if there is that large age difference, say 10 plus years, the younger spouse could claim and get a survivor benefit starting at age 60. But again, it’ll be reduced from what they could get if they waited until full.

their own full retirement age.

Amy (10:43)
Yeah, so I think one of the things that you’ll hear planners say a lot of times is that you want the higher earner to wait until age 70. And this is why, because as Mike explained, if both members of the couple are older, then…

One benefit is going to drop off and it’s going to be the benefit that is lower that drops off. So you’ll keep the higher benefits. You want that benefit to be as high as possible. As Mike was explaining with the, if somebody’s younger, then there’s different nuances. And one of those nuances can be that, you you can use a claiming strategy.

where it’s a little bit more complex. You wanna do your homework on it. You wanna make sure you understand what it means because it may result in less money, things like that. But survivors, okay, survivors can file a restricted application which would enable the lower paying spouse to claim just the survivor benefit.

while their own benefit continues to grow, especially if they’re working. And then they can later switch to their own benefit. Now the key here is not to be confused with the old restricted filing technique that was used for the spousal benefit. So that option is pretty much off the table at this point. Everybody who was allowed to do that has already…

done it and you know that ship has sailed but for the survivor benefit piece of it, it is something that you should take a look at. It is a complex decision so this is a case where you would probably want the advice of a financial planner if you are going to go down that road. What do you think, what are your thoughts around that Mike?

Mike Hunsberger (12:42)
Yeah, again, it is complex, but there are still a little bit of nuances around that. And I guess the one other thing is that we really didn’t touch on, but does kind of overlap with the survivor piece is, and sometimes we see this with military members where if the

you say, unfortunately, the military member dies early, you know, combat related death, but had a, you know, family at home. There are some benefits, survivor linked benefits that the, you know, family can get while they have young children. And so that is another kind of safety net feature of that that is available that, you know,

Unfortunately, some people in the military do have to take advantage of. But again, and that doesn’t affect that doesn’t preclude the later claiming of survivor benefits at age 60. So if you’ve got younger kids, the spouses in their 40s, the kids could age out, say, by 50. The benefits will turn off at that point. And then

you know, again, they’ve got those claiming options for the survivor benefits starting at age 60 if they need that, or they can wait till full retirement age if that’s more advantageous. So that’s that’s kind of the only thing I’d add around that. But how about you? Anything anything else along these lines of these two decisions?

Amy (14:28)
Yeah, so one of the things that comes up too with couples, if there are previous spouses, prior spouses, so if you’re married for at least 10 years, you may be eligible for benefits under your former spouse’s record. There are a lot of nuances around this, you know, it’s best to seek advice on whether or not that comes into play, but the key takeaway here is that if

a worker, okay, so the person whose benefit record we’re talking about was married say two or three times and those two or three spouses all, you they were married for all ten years, all were married for ten years each.

All two or three of those spouses, let’s just say two, both of those spouses are eligible for benefits under the workers benefit and they don’t depend on each other. So one of the things I hear a lot of times is, you know, claiming first or something like that. It doesn’t have anything to do with the other. If there’s another spouse that’s eligible for benefits, it has nothing to do with them.

So making that decision again, it’s complex. A lot of rules there, too much to get into for this podcast, but it’s important to understand how that works.

Mike Hunsberger (15:54)
All right. So a little bit shorter episode this time, but think hitting this specifically was important. next time, we’re going to dive into kind of an example, just really walk through the numbers and scenarios of how this could, your claiming decision could play out. Again, we’ll say that

You know, these are complex and you’re talking, you know, significant amounts of money over a lifetime. So, you know, really do your homework. This isn’t advice to anybody specifically on what they should do because you know, Amy hit on you. You want to take into account a broad array of your financial life in total to make these decisions.

optimal for your situation. So Amy, anything else before we end?

Amy (16:57)
No, I’ll just say this one was shorter, but mainly because it’s probably more important to get some additional input from experts on a couple’s cleaning strategy. So the individual stuff is complex, but a little bit more straightforward. So that’s why this one’s a little bit shorter. We could give you a lot more detail to, you know, sort of empower you to make decisions if you’re by yourself. But if there’s two of you, it’s a lot more complex.

So I think key advice is to get good advice specific to your situation when it comes to claiming as couple.

Mike Hunsberger (17:38)
All right, so well, until next time, great to talk to again, Amy, and we’ll do it again soon.

Amy (17:47)
Sounds good, Mike. Looking forward to it.