The Social Security Spousal Benefit “Loopholes” Are Gone—Here’s What Couples Need to Know

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Rebecca Davis

The Social Security Spousal Benefit “Loopholes” Are Gone—Here’s What Couples Need to Know

For many married couples, Social Security spousal and survivor benefits can be a valuable part of retirement planning, particularly when one spouse has earned considerably less income or has spent several years away from the workforce.

Spousal benefits can offer additional retirement income based on a spouse’s earnings history. In some cases, divorced individuals may also be eligible to receive benefits using their former spouse’s earnings record.

However, two widely used strategies that were previously used to maximize a couple’s total Social Security income—file and suspend and restricted application—are no longer available for claiming spousal benefits.

Understanding the current rules can help couples make informed decisions, avoid claiming benefits too early, maximize available opportunities, and prevent choices that could lower their long-term retirement income.

What Are Social Security Spousal Benefits and How Do They Work?

A married individual may be eligible to receive benefits based on their spouse’s earnings record if:

The couple has typically been married for at least one year.
The working spouse has already filed for retirement benefits.
The spouse applying for benefits is age 62 or older.
In some situations, a spouse may qualify if they are caring for a child under age 16 or a qualifying adult child with a disability.

Receiving a spousal benefit does not decrease or affect the retirement benefit that the working spouse receives based on their own earnings record.

The maximum spousal benefit may be up to 50% of the wage earner’s primary insurance amount (PIA). The PIA represents the monthly retirement benefit the wage earner would receive if they claimed benefits at their full retirement age.

For most individuals born in 1960 or later, the full retirement age for Social Security benefits is 67.

A spouse who begins claiming benefits before reaching full retirement age will typically receive a reduced amount. For example, a person who claims at age 62 may receive approximately 32.5% of the wage earner’s PIA instead of the full 50% benefit.

A key detail that many couples overlook is that spousal benefits do not receive delayed retirement credits. Unlike personal retirement benefits, waiting past full retirement age will not increase the amount of a spousal benefit.

You Do Not Receive Both Benefits in Full

When an individual qualifies for both a retirement benefit based on their own earnings record and a spousal benefit, Social Security does not combine the two full benefit amounts into one payment.

Instead, Social Security typically pays the higher available benefit amount. The payment may consist of the individual’s own retirement benefit along with an additional spousal “top-off,” but the total amount will not exceed the maximum benefit the person is eligible to receive.

This is one of the most frequently misunderstood aspects of Social Security planning.

Understanding Social Security Benefits for Divorced Spouses

A divorced individual may be eligible to receive benefits based on a former spouse’s earnings record if:

The marriage lasted for at least 10 years.
Both former spouses are age 62 or older.
The individual applying for benefits is currently unmarried.
The divorce has been final for at least two years if the former spouse has not yet filed for Social Security benefits.

The former spouse may be remarried, and claiming benefits based on an ex-spouse’s earnings record does not reduce the former spouse’s benefits or impact the benefits available to their current spouse.

What Were the Former Social Security “Loopholes”?

Two strategies previously allowed some married couples to have greater flexibility and control over how they claimed their Social Security benefits.

File and Suspend Strategy

Under the former file-and-suspend strategy, the higher-earning spouse could file for Social Security benefits at full retirement age and then immediately suspend those payments.

Because the higher earner had officially filed, the other spouse could become eligible for spousal benefits. At the same time, the higher earner’s suspended retirement benefit continued to grow through delayed-retirement credits until age 70.

This strategy allowed couples to receive some Social Security income while increasing the potential future benefit for the higher earner.

Survivor Benefits Work Differently

Although restricted applications are no longer available for standard spousal benefits, surviving spouses may still have additional claiming flexibility.

A widow or widower may be able to claim survivor benefits first and later switch to their own retirement benefit, or choose their own benefit initially and later switch to a higher survivor benefit.

This distinction is important because Social Security spousal benefits and survivor benefits are governed by different rules.

How Social Security Rules Changed

The Bipartisan Budget Act of 2015 effectively ended the use of both strategies for most spousal benefit planning.

Under current rules, when an individual suspends their own retirement benefit, any benefits being paid to a spouse or child based on that earnings record are generally suspended as well. This change prevents couples from using the former file-and-suspend strategy.

The law also expanded the deemed filing rule. When someone applies for Social Security benefits and is eligible for both their own retirement benefit and a spousal benefit, they are generally considered to have applied for both benefits at the same time.

This means they cannot choose to receive only a spousal benefit while allowing their own retirement benefit to continue growing.

The restricted application option remained available for certain older individuals under a limited exception, but those who qualified for that provision have now reached age 70.

A Social Security Strategy Couples Can Still Consider

One option that remains available for some couples is known as a split strategy.

With this approach, the lower-earning spouse begins receiving their own retirement benefit, either at full retirement age or earlier. Meanwhile, the higher-earning spouse delays claiming benefits, ideally until age 70.

When the higher earner eventually files, the lower-earning spouse may qualify for a spousal top-off if the spousal benefit amount is higher than their own retirement benefit.

This strategy can help provide household income while allowing the higher earner’s benefit to grow over time.

Delaying the higher earner’s benefit may also increase the survivor benefit available to the lower-earning spouse if the higher earner passes away first.

Restricted Application Strategy

Under the former restricted application strategy, an individual who qualified for both their own retirement benefit and a spousal benefit could choose to receive only the spousal benefit after reaching full retirement age.

Meanwhile, their own retirement benefit could continue increasing through delayed-retirement credits until age 70. The individual could then switch to their higher retirement benefit amount.

There Is No Single Social Security Claiming Strategy That Works for Everyone

The right time to claim Social Security depends on several important factors, including:

Each spouse’s earnings history and benefit amount.
Current savings, investments, and other sources of retirement income.
Health conditions and expected longevity.
Whether either spouse plans to continue working.
The household’s ongoing monthly income needs.
The potential survivor benefit available to the lower-earning spouse.

Some couples may benefit from delaying their Social Security benefits, while others may need to claim earlier to help cover essential living expenses.

The goal is not always to maximize the total lifetime benefit. For many households, the greater priority is ensuring they have a reliable source of income to meet their financial needs throughout retirement.

Before filing for benefits, couples should carefully evaluate their options and consider consulting a financial professional who understands Social Security retirement, spousal, and survivor benefit rules.

Source: bottomline.com

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The Social Security Spousal Benefit “Loopholes” Are Gone—Here’s What Couples Need to Know