Social Security benefits are usually an important part of an individual’s retirement nest egg. In fact, it’s so critical that many actually depend on it in order to ensure they can pay their monthly expenses. However, you also hear a lot from people that if you don’t work a certain number of years, then you won’t be able to receive benefits after you officially retire from the work force. The good news is, that might not be totally accurate.
According to Maurie Backman of The Motley Fool, even if you don’t actually qualify to receive Social Security due to your earnings record, you could potentially be eligible for what is called “spousal benefits” due to either your current or former spouse is entitled to receive income from the program. It’s really important to understand how these kind of benefits actually work, you know, to avoid any potential pitfalls.
Backman states in the article that one of three major pitfalls you want to do your best to avoid is counting on more than one retirement benefit. If, at some point during your life, you worked, then you could be eligible to receive a monthly Social Security benefit of your own based on your wage history. When it comes to spousal benefits, you might actually be able to get a higher amount than from your own.
But you should be careful of thinking you can collect your own Social Security income based on the income history of both yourself and your spouse, because the reality is, you’ll get one benefit. However, they will always payout the higher of the two.
If you are counting on drawing both, Backman says you should probably recalculate how much you’re expecting in monthly retirement income.
Secondly, you want to avoid delaying your spouse’s benefit claim past the full retirement age.
If you’re claiming Social Security based on your own earnings record, then it could make financial sense to delay your filing past full retirement age. For each year you do, up until age 70, your monthly benefit gets to grow 8%. And whatever increase you snag is yours to enjoy for life.
But the rules are different for spousal benefits. At full retirement age, you’re eligible for your complete spousal benefit, which is the equivalent of 50% of what your spouse collects. But you can’t grow a spousal benefit, so delaying your claim isn’t going to boost your monthly income. If anything, it’s only going to keep you from accessing money you could’ve had sooner.
Thirdly, you want to avoid assuming you’re eligible to receive benefits in the first place. It’s not a given that you’ll qualify for the program, so you need to prepare for the worst case scenario and create a retirement budget that does not rely on Social Security income, so that if you do qualify it will be a pleasant surprise.
If you’re currently married, you should know that you need to be married for at least a year to be eligible for spousal benefits. If you’re divorced, your marriage needs to have lasted for at least 10 years to be eligible in that regard. Make sure to familiarize yourself with the rules so you don’t end up counting on income you can’t actually claim.
Social Security is a complex program that’s loaded with rules, and the rules of spousal benefits can be somewhat confusing in their own right. So if you think you’ll be in line for spousal benefits, read up on what that entails so you get all the right information.
Another pro-tip is to make sure you have a conversation with your spouse about filing for Social Security benefits to make sure you are both in agreement. If you’re married to your spouse, you will not be able to file for spousal benefits until they have already applied for the program themselves.