When choosing a retirement date, it’s important to consider the financial impact it’ll have on your family. Timing matters when collecting social security benefits; the age at which you choose to retire will not only determine how much you’ll receive for the rest of your life, but it will also impact how much your spouse can receive via spousal or survivor benefits.
If you have been married for 2 years or more, then you and your spouse are entitled to spousal social security benefits. Typically, you’ll receive 50% of what your spouse is entitled to at their normal retirement age if that amount is higher than what you are entitled to through your own individual benefit. This means that if you are entitled to $2,000 a month based on your work history, and your spouse is entitled to $800 a month based on their work history, then you will collect $2,000, and your spouse will collect $1,000 (i.e. 50% of your amount).
However, you might benefit from waiting to file for spousal benefits. The moment you file for spousal benefits, your spouse is required to start collecting their benefits as well. This means that regardless of your spouse’s age, your spouse will stop earning credits on their social security benefit. For example, if you start collecting spousal benefits when your spouse is 62, you are essentially locking your spouse’s benefit at their minimum monthly amount.
Keep in mind that a similar penalty applies to your spousal benefits — you can start collecting spousal benefits as early as age 62, but doing so will result in a penalty on the benefit amount. You’ll only collect the full 50% of spousal benefits once you reach your Normal Retirement Age (also known as full retirement age) which is age 67 for anybody born in 1960 or after. Unlike individual benefits, there is no additional advantage to collecting spousal benefits after your normal retirement age.
Many people rest easier knowing that their loved ones will be taken care of if they were no longer around to contribute financially. Waiting longer to begin collecting your benefits is a wise choice if you have concerns about the financial well being of your spouse in the event of your passing, especially if you were the higher earner between the two of you. If you choose to start collecting your benefits early and made more money than your spouse, then your spouse will get less money in survivor benefits if you pass away first. For example, let’s assume you are collecting $2,000 a month. If you pass away, your spouse will be entitled to that full $2,000 at their normal retirement age (again, 67 for those born in 1960 or after). If you choose to collect your benefits early, your spouse will be entitled to a lower amount. However, if your spouse made more money than you, they will likely continue to collect their own benefit (rather than switching to survivor benefits) in the event that you pass away.