When it comes to Social Security (SS) planning, the client is not alone. Spouses and children may be eligible to collect benefits based on your client. This can increase the family’s Social Security income — but it also adds a layer of complexity to the decision-making process.
Spousal benefits
At full retirement age (FRA), a married client may be eligible to collect spousal benefits equal to 50% of his or her spouse's primary insurance amount (PIA). If also entitled to individual benefits, your client will receive his or her own PIA plus an adjusted spousal amount. At FRA, the total amount your client could receive is his or her own individual benefit or 50% of the spouse’s PIA, whichever is greater.
Make sure your clients are aware that:
- They cannot collect spousal benefits unless their spouse is collecting benefits.
- Their spousal benefits are not impacted by when their spouse collects individual benefits, but are impacted by when they choose to take spousal benefits.
- The reduction for collecting spousal benefits before FRA is greater than the reduction taken on their own benefits.
- Spousal benefits do not grow after FRA (whereas individual benefits can grow to age 70).
Survivor benefits
If your client’s spouse passes away, he or she may be eligible to collect benefits based on the deceased spouse’s earnings history. Unlike spousal benefits, which max out at 50% of the spouse’s PIA, survivor benefits are usually equal to the benefits the deceased spouse had been receiving. Therefore, your client’s survivor benefits will be impacted by when the deceased spouse began collecting benefits. This why married couples’ strategies should account for the life expectancies of both spouses.
If one spouse has a high likelihood of substantially outliving the other, the couple’s best overall strategy may involve maximizing survivor benefits.
Additionally, a client who qualifies for both individual and survivor benefits can choose which benefits to collect. This option enables him or her to collect survivor benefits, potentially as early as age 60, while allowing his or her own benefits to increase. The client can then switch to his or her own benefits at a later date.
Continuing the conversation
Other considerations related to family benefits include:
Divorce: Divorced clients may be eligible for additional benefits. If your client was married for at least 10 years and is currently unmarried, he or she may be eligible for divorced spouse and/or survivor benefits.
Minor children: Children under age 18 (19 if in high school) are eligible for benefits once one or both parents have started collecting benefits.
Dependent parents: Parents who are dependent upon your client for at least 50% financial support at the time of your client’s death may be entitled to survivor benefits.
Pensions: Government pensions (i.e., pensions from work where your client did not pay into the SS system) can reduce your client’s spousal or survivor benefits due to the Government Pension Offset (GPO). Under GPO, your client’s spousal and survivor benefits will be reduced by two-thirds of the client’s government pension.
Disability: Additional rules apply if one or both spouses also qualify for disability benefits. We recommend setting up a call with your client and the Social Security Administration to discuss their options.
