Calculating The Reduced Social Security Spousal Benefit

Among the pile of very confusing calculations for various Social Security benefits is the incredibly confusing Spousal Benefit.  This calculation becomes even more confusing when filed for prior to Full Retirement Age (FRA), as it is further reduced.

Briefly, the maximum amount that a Spousal Benefit can be is 50% of the other spouse’s Primary Insurance Amount (PIA).  PIA, if you’ll recall, is equivalent to the amount of benefit that the other spouse would receive in benefits at his or her own Full Retirement Age.  The calculation is actually a bit more complicated than that.

The Spousal Benefit for Jane (on her husband John’s record) is calculated as follows:

John’s PIA times 50% minus Jane’s PIA times the early-filing reduction factor

That amount is then added to Jane’s benefit, which could be reduced by filing early or enhanced by Delayed Retirement Credits for filing later, to come up with Jane’s total benefit.

If Jane is filing for Spousal Benefits before she reaches FRA, not only will her own benefit be reduced, but the Spousal Benefit will be reduced as well.

The calculation used to determine the reduction to the Spousal Benefit is calculated in two different ways, depending on whether Jane is filing within 3 years of FRA, or more than 3 years earlier than FRA.

If her filing is 3 years or less before her FRA, the early-filing reduction factor is as follows:

(144 minus ((Jane’s FRA – Jane’s Filing Age) times 12)) divided by 144

If Jane files more than 3 years before her FRA, the early-filing reduction factor is this equation:

(180 minus ((Jane’s FRA – Jane’s Filing Age – 3) times 12)) divided by 240

Working this out for Jane and John, where Jane’s PIA is $600 and John’s PIA is $2,000, and Jane is filing for Spousal Benefits at age 64:

(($2,000 * 50%)-$600)*((144-((66-64)*12))/144)

($1,000-$600)*((144-24)/144)

($400)*(120/144)

$400*.8333 = $333

Since Jane is 64, her own benefit is reduced to 86.66% of her PIA, or $520.  Her total benefit will be the sum of the two – $520 + $333 = $853.

If Jane files for Spousal Benefits at age 62, the calculation would go like this:

(($2,000 * 50%)-$600)*((180-((66-62-3)*12))/240)

($1,000-$600)*((180-12)/240)

$400*(168/240)

$400*.7 = $280

Since Jane is 62, her own benefit is reduced to 75% of her PIA, or $450.  Her total benefit is the sum of the two – $450 + $280 = $730.

In the above equations, Jane’s ages for filing and FRA have been assumed to be exactly on her date of birth, thus her age is an exact year.  If she is, for example, 62 years and 3 months of age when filing, you should use the exact number of months in her age for the calculation.

Hope this helps you to better understand how this particular benefit is calculated.

About the author

Jim Blankenship, CFP®, EA

Jim Blankenship is the founder and principal of Blankenship Financial Planning, Ltd., a financial planning firm providing hourly, as-needed financial planning and advice. A financial services professional for over 25 years, Jim is a CFP professional and has earned the Enrolled Agent designation, a designation that qualifies him as enrolled to practice before the IRS. Jim is also a NAPFA-registered financial advisor, which designates him as a Fee-Only Financial Advisor.

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  • How would it look if you were to do the math on a person who claims at 62 years and 3 months using the exact number of months in her age?

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