The recent end of the Social Security spousal rule has significant implications for couples planning their retirement benefits. This rule allowed spouses to optimize their Social Security benefits by switching between their own benefits and their spouse’s to maximize payouts.
However, this option is no longer available for anyone turning 70 after January 1, 2024, effectively closing a door for many retirees who could have benefited from this strategy.
Overview of the Changes
This Article Includes
- Rule Expiration: The ability to switch between benefits and claim spousal benefits to maximize Social Security payouts ended for the last eligible retirees born before January 1, 1954.
- Impact of the 2016 Law Change: The Bipartisan Budget Act of 2015 altered the landscape for claiming benefits. Now, anyone who turned 62 after January 1, 2016, cannot use the strategy that allowed them to delay their own benefits while collecting spousal benefits.
Strategies to Maximize Spousal Benefits
With the expiration of this rule, couples should explore alternative strategies to ensure they maximize their Social Security benefits. Here are three essential steps to consider:
- Plan Ahead
- Couples should have discussions about when to claim benefits and who should claim what. It’s essential to strategize around claiming ages and understand how spousal benefits work.
- Creating an online account with the Social Security Administration allows couples to review their estimated benefits at different claiming ages, helping them make informed decisions.
- Avoid Claiming Benefits Too Early
- Claiming Social Security benefits early (at age 62) can result in a permanent reduction of benefits. For instance, if someone’s full retirement benefit is $2,000 at age 67, claiming at age 62 would reduce it to $1,400.
- If one spouse claims early, it not only affects their benefits but also the spousal benefits, which are directly tied to the primary beneficiary’s payout.
- Consider Timing for Filing
- While waiting until 70 can maximize retirement benefits, spouses should be aware that their spousal benefit is capped at 50% of the primary beneficiary’s full retirement benefit amount, regardless of when the primary beneficiary files.
- Couples should weigh the benefits of claiming at their full retirement age (67) versus delaying until 70, considering their financial situation and health needs.
Summary
Although the spousal rule has ended, careful planning can still lead to optimized Social Security benefits for couples.
By understanding the new landscape and strategically planning when and how to claim benefits, couples can navigate the complexities of Social Security to make the most of their retirement income.
Consulting with a financial advisor specializing in Social Security may also provide additional insights tailored to individual circumstances.