Calculating Spousal Social Security benefits

[question everything]

Someone asked on the advice column of the WSJ and thought it was interesting

My wife is 62, and I am 64. She worked for about 12 years and has 40 Social Security credits, but she also spent many years raising our children while I worked. Her primary Social Security amount is about $685 a month, while mine is about $3,050. I intend to defer collecting my own benefits until I attain age 70. If my wife starts collecting her benefits now, will that reduce the amount of her spousal benefit that she will be eligible for when I retire?

In a word: yes.

Here’s how the math works:

If your wife waits until her full retirement age to claim Social Security — and let’s assume, for the moment, that you have already filed for benefits — she will get a “combined benefit.” That means she will get her own $685 benefit, plus a spousal benefit. That spousal benefit amounts to whatever is needed to get your wife to half of your benefit. In your case, she would receive an additional $840, which would leave her with a monthly payout of $1,525. (Which is 50% of $3,050.)

Now, let’s return to your original question, where your wife begins collecting Social Security today, at age 62, and you (for the moment) are still waiting to file. As I’m sure you know, the earlier a person claims benefits, the smaller the benefit. At 62, your wife will receive about $490 a month. This becomes her “base” benefit.

First, still assuming that your wife has already filed, if you claim your benefit after your wife reaches her full retirement age, your wife will get the same $840 spousal benefit mentioned above. (Note: Social Security will calculate this number based on your expected benefit at your full-retirement age.) And the $840, in this case, will be combined with the $490 that your wife has been receiving—for a total of $1,330.

Second, if you claim your benefit before your wife reaches her full retirement age, the Social Security Administration will reduce her spousal benefit (set initially at $840) by an amount depending on the number of months before she reaches her full-retirement age. That figure will be added to the $490 base your wife is already receiving.

The point: In both scenarios, your wife doesn’t reach the $1,525 benefit that she would receive if she waits until her full retirement age to begin collecting Social Security.

https://www.wsj.com/articles/where-to-check-up-on-the-health-of-your-pension-plan-11591278517 (subscription)