Last week we had an interesting question come our way regarding Social Security. There is often fear around making the wrong decision regarding financial matters. We wanted to share this with you as our firm's mission is to help our client's make good financial decisions.
The question that was posed to us was:
My ex-spouse's social security benefit is greater than mine and I am coming up on my full retirement age. What benefit do I apply for (spousal or my own)? If I apply for my own and then sometime later in the future my ex-spouse passes away am I entitled to any of his benefit?
There are a few things to consider when deciding whether to apply for your own Social Security benefit or your ex-spouse's benefit.
- Your age: If you are at least full retirement age (FRA), you will receive 100% of your benefit regardless of which benefit you choose. However, if you are younger than FRA, your benefit will be reduced. The reduction is 5/9 of 1% per month for each month you are under FRA.
- Your ex-spouse's benefit: If your ex-spouse's benefit is greater than your own, you will receive a higher benefit by applying for their benefit. However, you will not be able to collect both benefits at the same time.
- Your future income: If you expect to have other sources of income in retirement, such as a pension or a 401(k) plan, you may not need as much from Social Security. In this case, you may want to consider applying for your ex-spouse's benefit, which will give you a higher overall income.
- If you are unsure which benefit is right for you, you can contact the Social Security Administration for help. They can provide you with an estimate of your benefits based on your age, work history, and other factors.
If you apply for your own benefit and then your ex-spouse passes away, you may be eligible to receive survivor benefits. Survivor benefits are based on the deceased worker's earnings record, and they are paid to the worker's spouse, children, and parents. The amount of survivor benefits you receive will depend on your relationship to the deceased worker and your age.
If you were born before January 2,1954, you may be able to use a strategy called "file and suspend" to maximize your Social Security benefits. File and suspend allows you to file for your retirement benefits at any age, but you will not start receiving payments until you reach full retirement age. By suspending your benefits, you will allow them to grow until you reach age 70, at which point you will receive your full retirement benefit plus a delayed retirement credit.
If you are considering using the file and suspend strategy, you should talk to a financial advisor to see if it is right for you.