Money Matters
5:00 am
Tue January 22, 2013

How to get paid for not collecting Social Security

When it comes to collecting Social Security, there’s a way for some people to “have their cake and eat it, too”.

On this week's Money Matters, Greg Heberlein explains a spousal benefit that is sometimes overlooked.

If your spouse is already collecting Social Security and you decide to postpone collecting your own benefits, you may be able to collect payments equal to half of what your spouse is getting. 

Every day for the next 20 years, 10,000 Americans will retire. Nearly half elect to take their Social Security benefits early. That suggests that many need the payments for day-to-date expenses and would be less likely to take advantage of this strategy.

All those contemplating their Social Security payouts should determine whether this benefit will help. They should get an estimate of their benefit, and add it to any other pension and savings, and factor in any special health issues.

Getting through the Social Security maze can be daunting. The Social Security rules total 2,728. 

The provision some overlook is called the spousal benefit. 

Put simply, that means one spouse can collect half of the other’s full benefit at age 66, then switch to his or her own at age 70. 

Not only do you get more on a normal basis by waiting until 70, you’re paid extra to wait!

Here’s how it works:

Let’s say John collects $1,500 a month at age 66. We use age 66 because that is the full retirement benefit for all those born from 1943 through 1954.

Mary, the spouse, then reaches age 66. If Mary selects the spousal benefit, she gets half of what John got – in this case $750. 

Here’s a wrinkle that makes this even more attractive. Say John starts collecting Social Security at age 62, and gets a reduced amount of $1,000. When Mary files for the spousal benefit at age 66, she gets half of what John would have gotten had John waited to collect at the full retirement age of 66. So instead of half of $1,000, Mary gets half of $1,500.

John’s monthly check for practical purposes never changes (for simplicity we skip Medicare payments that come from Social Security and inflation increases). But Mary, at age 70, now substitutes the full benefit due her. 

So, if you play it right, the higher-earning spouse take the higher benefit first, then the lower-earning spouse would apply for the spousal benefit.

The spousal benefit can apply before one turns 66, but the amount is reduced each year before age 66, maxing out at about a 37 percent cut if the partner selecting the spousal benefit does so at age 62.

More information on spousal benefits is available at www.ssa.gov.