INmail: Step-up to larger spousal benefit is automatic

Judy: A friend turns 70 on Nov. 18. His wife will be 70 next year. She is already collecting her own Social Security benefit of about $700 per month. His benefit will exceed $3,000 per month. Will she be eligible to receive a spousal benefit when he turns 70?

MBF: Once the husband begins collecting his Social Security, his wife should automatically step up to a larger Social Security benefit.

Although retirement benefits earn delayed retirement credits worth 8% per year for every year a worker postpones claiming them beyond full retirement age up until age 70, spousal benefits do not. The wife’s spousal benefit would be worth up to 50% of her husband’s full retirement age benefit that he was eligible for at 66, not half of his larger age 70 benefit.

The Social Security Administration will calculate the “excess spousal amount,” which is the difference between her FRA amount and half of his FRA amount. For example, assume the husband’s benefit at full retirement age was $2,300 per month and assume the wife’s FRA benefit was $700 per month. The excess spousal amount would be $450 per month ($2,300/2 – $700).

The excess spousal amount will be added to her full retirement benefits if she claimed at 66 or to her reduced benefit if she claimed before FRA. Once her husband claims his Social Security, she will step up to a larger benefit of about $1,150 ($700 + $450). If she claimed her own benefit early, the combined total of her retirement and spousal benefit would be worth less than half of his age 66 amount.

Presumably, the husband’s benefit application included details about his wife, so her larger benefit should begin soon after he receives his first payment. If not, she should contact SSA. Given the fact that Social Security field offices have been closed since March 17 as a result of the pandemic, some transactions are taking longer than usual.

Mary Beth Franklin, a certified financial planner, is a contributing editor for InvestmentNews.