Ask Larry: How Are My Wife’s Social Security Spousal Benefits Calculated?

Social Security may be one of your largest assets. What and when you collect will make a huge difference to your lifetime benefits.

Today’s column addresses how spousal benefits are determined, automatic payments of Medicare premiums after filing, whether to file for and suspend a retirement benefit or file a restricted application for spousal benefits only, benefits for grandkids and the foreign work test. Larry Kotlikoff is a Professor of Economics at Boston University and the founder and president of Economic Security Planning, a company that markets Maximize My Social Security and MaxiFi Planner. Both tools maximize lifetime Social Security benefits. MaxiFi also finds retirement account withdrawal strategies and other ways to lower your lifetime taxes and raise your lifetime spending. Most important, it suggests how much to spend and save each year to enjoy a stable living standard through time.

See more Ask Larry answers here.

Ask Larry about Social Security:

How Are My Wife’s Social Security Spousal Benefits Calculated?​​

Hi Larry, I’m planning on retiring at 63 when my wife will be 62 and will retire at the same time. How will they determine the spousal benefit she’ll be able to file on my record? She has never worked outside of the home. Thanks, Neil

Hi Neil, Your wife’s spousal rate wouldn’t be calculated as a percentage of your reduced rate. Regardless of at what age you start drawing your benefits, if your wife waited until her full retirement age to start drawing spousal benefits she could receive 50% of your Primary Insurance Amount (PIA), which is equal to your full retirement age (FRA) retirement benefit amount. However, if either or both of you start drawing your benefits before you reach FRA, the reduction in your benefit rates will be calculated independently.

For example, say Bob turned 63 in 1/2019 and filed for his retirement benefits that month. Bob’s PIA is $2,000, but he receives a reduced rate of $1,566 in return for starting his benefits at 63. Bob’s wife Jane turned age 62 on 1/2/2019 and files for spousal benefits that month. Jane is not eligible for retirement benefits on her own record, so if she waited until FRA to start her spousal benefits, she could get a full 50% of Bob’s PIA, or $1,000. However, since Jane started drawing at 62, she receives a reduced spousal rate of $675.

One factor that you may not have considered is that if you do start drawing your retirement benefits at 63 and you end up dying before your wife, her widow’s rate will be limited to the higher of a) your reduced benefit amount, or b) 82.5% of your PIA. Best, Larry

Will I Need To Contact Social Security To Stop My Part B Premiums From Being Paid By Bank Draft When I Start Drawing Benefits?​​

Hi Larry, Because I am waiting until 70 to claim my Social Security retirement benefit, I pay for Medicare Part B by bank draft. This November I will begin to collect a spousal benefit based on my wife’s work record. Will Social Security automatically cancel my bank draft and begin to deduct my Part B premium from my spousal benefit, or do I need to contact Social Security to request this change? Thanks, Roger

Hi Roger, Social Security will withhold your Part B Medicare premiums from your spousal benefits, which will in turn stop the quarterly billing of your premiums. You don’t need to contact Social Security to end the quarterly billings, but depending on the type of arrangement you’ve set up with your bank you may want to check with them to make sure that they won’t continue to make payments after the quarterly billings stop.

By the way, there are sometimes temporary overlaps where Social Security withholds premiums for the same month(s) that you’ve already been billed for and paid. If that occurs, Social Security should refund any duplicate premiums within about 60 days. Best, Larry

What About Filing And Suspending?​​

HI Larry, I will turn 66 in December and my retirement benefit will be $1,700. My wife’s benefit is $2,600 now. Is the filing and suspending strategy right for us? She turns 70 in 2020. Thanks, Victor

Hi Victor, You’re allowed to voluntarily suspend your Social Security retirement benefits between full retirement age (FRA) and 70, but it’s very unlikely that that would be advantageous in your case. You don’t need to file for and suspend your retirement benefits in order to potentially earn delayed retirement credits (DRC). You can earn DRCs simply by waiting past your FRA to claim your retirement benefits.

Furthermore, if a worker voluntarily suspends their benefits after 4/29/2016, they couldn’t then draw spousal benefits while their own benefits are suspended, nor could their spouse receive spousal benefits on the worker’s suspended record.

Instead of filing and suspending, you may want to file a restricted application for spousal benefits only at your FRA and wait until 70 to file for your retirement benefits. You may want to use one of my company’s two tools — Maximize My Social Security or MaxiFi Planner — to help maximize your lifetime Social Security benefits. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry

Can I Get Benefits For My Grandkids?​​

Hi Larry, Can I get benefits for my grandkids since I’m disabled now? We have guardianship for our 13 and 11 year old grandkids for the past 6 years and had them for 8 years total. My daughter gets disability benefits and the kids get $121 each a month. They’re our dependents and I just was just granted disability and my husband is 70 and wants to retire. Can they draw off of us now? Thanks, Sarah

Hi Sarah, In order for a child to qualify for benefits on the record of a grandparent, the child must either be a) adopted by the grandparent, or b) both of the child’s natural parents must be deceased or disabled. So unless your grandchildren’s father has been approved for disability benefits by Social Security, it sounds unlikely that they would meet the requirements for child’s benefits on your or your husband’s records unless they’ve been adopted. However, you could always file a claim with Social Security on their behalves in order to get a formal determination of their eligibility. Best, Larry

Will My Friend Still Be Limited On How Much She Can Work Once She Reaches Full Retirement Age?​​

Hi Larry, I am asking for a friend. She is claiming a widow’s benefits, which she started in 2/2017 when she was 61. She turned 62 in 3/2017. She is not US citizen and resides in Germany. There seems to be a rule that she cannot work more than 45 hours per month, which she does not. Once she reaches her retirement age, will whatever income she makes still matter? She never makes more than the equivalent of $10,000 to $12,000. Thanks, Roy

Hi Roy, What you’re describing is the foreign work test, which only applies until a person reaches their full retirement age (FRA). Since your friend was born in 1955, her FRA for work test purposes is 66 and 2 months, so there would be no limits on how much she could work or earn starting with 5/2021. Best, Larry

To learn more about your Social Security options, visit Economic Security Planning, Inc.

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