By Randy Neumann |
Uncle Sam is partial to matrimony. Married couples benefit through the tax system as well as the Social Security system. Taxes for a married couple are cheaper than those for individuals. Another example can be found in the treatment of Individual Retirement Accounts. At the death of a spouse, the surviving spouse can treat the IRA as if it were their own. Everyone else has to treat the IRA as “inherited,” which has fewer tax advantages.
Social Security was created by legislation in 1935. In 1939, it was modified to add benefits to the spouse or minor children of a retired worker. So, according to Uncle Sam, “Social Security also added a survivor’s benefit, paid to the family in the event of a premature death of a covered worker. Thus, with the 1939 amendment, the idea of economic security became a family-based program rather than an individual-based one, and one that provided benefits for retirement, disability, premature death and medical costs after retirement.”
If you are receiving Social Security retirement benefits, some members of your family can also receive benefits if the following criteria are met.
- Spouses who are age 62 or older
- Spouses who are younger than 62, if they are taking care of a child, entitled on your record, who is under age 16 or disabled
- Former spouses, if they are age 62 or older (they will have to have been married to you for at least 10 years)
- Children up to age 18, or up to 19 if they are full-time students who have not yet graduated from high school
- Disabled children, even if they are age 18 or older (this includes adopted children)
A spouse who has not worked or who has low earnings can be entitled to as much as one-half of the retired worker’s full benefit. If you are eligible for both your own retirement benefits and for benefits as a spouse, Uncle Sam will always pay you your own benefits first. If your benefits as a spouse are higher than your own retirement benefits, you will get a combination of benefits equaling the higher spouse’s benefit.
For those who have reached full retirement age and are eligible for a spouse’s or ex-spouse’s benefit and your own retirement benefit, you may choose to receive only spouse’s benefits and continue accruing delayed retirement credits on your own Social Security record. You may then file for benefits at a later date and receive a higher monthly benefit based on the effect of delayed retirement credits.
If you are receiving a pension based on a job where you did not pay Social Security taxes, your spouse’s benefit may be reduced. If spouses want to get Social Security retirement benefits before they reach full retirement age, the amount of the benefit is reduced permanently. The amount of reduction depends on their full retirement age.
Here are some examples.
- If full retirement age is 65, a spouse will receive 37.5% of the worker’s unreduced benefit at age 62.
- If full retirement age is 66, a spouse will receive 35% of the worker’s unreduced benefit at age 62;
- If full retirement age is 67, a spouse will receive 32.5% of the worker’s unreduced benefit at age 62.
The amount of the benefit increases at later ages up to the maximum of 50% at full retirement age. If full retirement age is other than those shown here, the amount of the benefit will fall between 32.5% and 37.5% at age 62.
If your spouse is taking care of a child who is under age 16, or disabled and receives Social Security benefits on your record, your spouse will receive full benefits, regardless of age. An example would be: Mary Ann qualifies for a retirement benefit of $250 and a spouse’s benefit of $400. At her full retirement age, she will receive her own $250 retirement benefit, and we will add $150 from her spouse’s benefit, for a total of $400. If she takes her retirement benefit before her full retirement age, both amounts will be reduced.
For those with children eligible for Social Security, each will receive up to one-half your full benefit. But there is a limit to the amount of money that can be paid to you and your family – usually 150%-180% of your own benefit payment. If the total benefits due to your spouse and children are more than this limit, their benefits will be reduced, whereas your benefit will not be affected.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual. Randy Neumann CFP® is a registered representative with securities and insurance offered through LPL Financial. Member FINRA/SIPC. He can be reached at 12 Route 17N, Suite 115, Paramus, 201-291-9000.