This post intends to clarify a question that comes up repeatedly: both spouses cannot collect Spousal Benefits at the same time.
If you stop and think about the mechanics of Spousal Benefits, it should become clear to you that this isn’t possible. Below is a recap of the rules that are necessary for Spousal Benefits to work.
Rules for Spousal Benefits
1. In order for a spouse to file for Spousal Benefits, the other spouse in the couple must have filed for benefits as well. It doesn’t matter if the other spouse is actually receiving benefits currently, just that he or she has filed for benefits. In other words, he or she may file and immediately suspend benefits and the first spouse is still eligible for Spousal Benefits.
2. If the spouse begins receiving Spousal Benefits prior to Full Retirement Age (FRA), he or she must also be currently receiving his or her own retirement benefit at the same time due to deemed filing, and both benefits (retirement and spousal) are therefore permanently reduced.
3. On the other hand, if the spouse begins receiving Spousal Benefits at FRA or later, deemed filing is not in effect, and so he or she is not required to receive retirement benefits at the same time.
4. The Spousal Benefit is always a differential between the currently-filed PIA and the factor-applied PIA of the other spouse. If Spousal Benefits are being applied for at FRA, the factor is 50%; it’s 35% at age 62, and phased for ages in-between. This differential is then added to the current benefit. If the spouse in question has not filed for retirement benefits (and of course is at FRA or older, see #3), then the Spousal Benefit differential is 50%, since there is no currently-filed PIA for that person.
Now, if all of that is confusing, don’t feel alone. It’s a very confusing set of rules. Let’s run through some examples to sort things out.
Spousal Benefit Examples
John and Priscilla are both age 62. John has a PIA of $800, while Priscilla has a PIA of $2,000. If John wants to file for Spousal Benefits now, he must file for his own benefit first, and it will be reduced to $600 since he’s filing early. The second thing that must happen is that Priscilla must also be collecting her benefit (remember, File and Suspend isn’t available until you reach FRA). Now John can also file for Spousal Benefits (in fact he must, if he is eligible when he files for his retirement benefit). John’s Spousal Benefit will be reduced to 35% of Priscilla’s PIA minus his PIA. But wait a minute: 35% of Priscilla’s PIA is only $700, and John’s PIA is $800. So the reduction means that John gets no Spousal Benefit at all.
How about if they decide to delay Priscilla’s filing until FRA. So now, John still started his own retirement benefit at 62, so that portion of his benefit is permanently reduced. Priscilla files for her own benefit now, at FRA. Since she has done so, John is now eligible for the Spousal Benefit. The differential is now 50% of Priscilla’s PIA minus John’s PIA ($1,000 – $800), which equates to $200. This is added to John’s reduced benefit of $600, for a total benefit of $800. Note that, even though they waited until FRA for John to file for Spousal Benefits, he will never receive 50% of Priscilla’s PIA, since his own benefit has been reduced by filing early. Had he waited until FRA to file for his own retirement benefit, he could have a total benefit equal to half of Priscilla’s PIA.
So – if you’ve been paying attention you might wonder: Could Priscilla Suspend her benefits at FRA and still leave John eligible for the Spousal Benefit? This way she could continue to accrue Delayed Retirement Credits (DRCs) on her larger benefit. The answer is yes, she could. Suspending Priscilla’s benefits would not change John’s situation at all.
There’s another way this could work out: What if Priscilla files for her retirement benefit at FRA (and she could suspend, it makes no difference) and John delays filing? Could John still receive a Spousal Benefit based on Priscilla’s record? Yes – and if John has delayed filing, he has no currently-filed PIA to factor Priscilla’s PIA against. So his Spousal Benefit will be 50% of Priscilla’s PIA, just the same as if he had filed for his own benefit at FRA as well. This being the case, it makes sense for John to delay his own benefit, rather than filing for his own benefit at FRA. This way his own benefit can increase by DRCs, so that at age 70 he will be eligible for a benefit that is actually greater than half of Priscilla’s PIA.
It could also play out the other way around: John could file for his own benefit at FRA, and Priscilla could then file solely for the Spousal Benefit, equal to half of John’s PIA (since she doesn’t have a currently-filed PIA). In the example we’re working with here it doesn’t make sense to do this though, because it results in a much lower overall benefit. But if the couple’s incomes were closer in size, such that John’s own PIA were greater than half of Priscilla’s PIA, and the ages were different, for example, this method could work out better for them.
The same could be true if Priscilla filed early. Then once they reach FRA, John could file solely for Spousal Benefits and receive a benefit equal to half of Priscilla’s PIA, while still accruing DRCs on his own record.
So now we come to the crux of the matter, the question that started this post off from the beginning: Can both John and Priscilla file solely for Spousal Benefits at FRA? If you think about what’s required for Spousal Benefits to be available, you’ll have your answer.
Clearly, John could file solely for Spousal Benefits when he reaches FRA, but in order to be eligible, Priscilla must have filed for her retirement benefit (and could suspend). On the other hand, Priscilla could file solely for Spousal Benefits when she reaches FRA, again under the condition that John must have filed for his own retirement benefit (and could suspend).
The act of filing for retirement benefits, whether suspended immediately or not, establishes the currently-filed PIA for that individual. So, while John could still receive a small increase over his PIA in terms of a Spousal Benefit (half of Priscilla’s PIA is $1,000, minus his PIA of $800 equals $200), Priscilla doesn’t have that luxury. Half of John’s PIA is only $400, and Priscilla’s PIA is $2,000, so there is no differential available for her Spousal Benefit since she’s already filed.
So the answer is: You can’t have receive Spousal Benefits for both spouses at the same time. I hope this helps to clear things up.