Many retired couples rely on their monthly Social Security benefits to help make ends meet. Nearly half of all households with a person age 65 or older receive at least 50% of their family income from Social Security, according to data compiled by the Social Security Administration. With the government program accounting for such a significant portion of household budgets, it is important for recipients to maximize what they receive from the program.
One benefit for married couples is the Social Security spousal benefit. Spousal benefits can provide a significant boost to overall household income, but they can also complicate Social Security claim strategies. So it’s important to understand how spousal benefits are calculated, when you can claim them, and what the maximum benefits are.
The basis of spousal benefits
Spouse benefits are available to anyone who meets the following criteria:
A person can skip the first two criteria if they are caring for a spouse’s child who is younger than 17 or is disabled.
The maximum spousal benefit for an individual is equal to half of their spouse’s primary insurance amount. Primary insurance is what a person is entitled to claim when they reach full retirement age.
The Social Security Administration calculates a person’s primary insurance amount by adding their 35 highest-paid years of earnings, adjusted for inflation. It then takes the average earnings from age 35 and plugs it into the Social Security benefit formula.
If you want to increase your primary insurance amount, you must earn more than the “contribution and benefit base” set annually by the Social Security Administration for at least 35 years. For 2024, that amount is $168,600.
So to get the maximum spousal benefit possible, your spouse must have earned at least the amount of the contribution and base benefit for 35 years.
On top of that, you have to wait until you reach your own full retirement age, which falls between 66 and 67 depending on when you were born. In 2024, people born in 1957 and 1958 will reach full retirement age at 66 years and 6 months (1957 birthday) or 66 and 8 months (1958 birthday). Claiming before you reach full retirement age will reduce your spousal benefit.
On the other hand, waiting to claim beyond your full retirement age does not provide any benefits. That’s a key difference between spousal benefits and personal retirement benefits, the latter of which increase every month you delay until age 70.
Get the maximum spousal benefit in 2024
You now know that in order to maximize your spouse’s Social Security benefit, your spouse must have earned a very high salary for most of their career, and you must wait until you reach the full age of retirement.
With that in mind, the maximum spousal benefit for 2024 is $1,924 per month, but only a small percentage of people will qualify for that amount this year (or any year).
In fact, that benefit only applies to people who reach full retirement age (or older) in 2024 with a spouse who turns 62 this year so they can also claim benefits. That’s a lot of pieces falling into place.
The reason the maximum spousal benefit only applies to spouses of retirees who turned 62 this year has to do with a quirk in how the Social Security Administration adjusts earnings for inflation and calculates the primary. insurance amount. Those calculations are based on the year a person turns 60, so the maximum primary insurance amount changes slightly for each group of people as they become eligible to claim Social Security.
Those who turn 62 this year (born in 1962) have the highest primary insurance amount of $3,849.10. On the other hand, someone born in 1958 has the highest primary insurance amount of about $3,822, and someone born in 1954 has the highest primary insurance amount of $3,692.
Maximizing family income
Taking the maximum spousal benefit is rarely optimal because the higher-earning spouse must claim their benefits at age 62 in order for the lower-earning spouse to qualify for spousal benefits. .
For most couples, waiting for the high-earning spouse to reach age 70 maximizes lifetime benefits for the household. On the other hand, the lower-income spouse needs to determine if they would benefit more from taking their own benefit at full retirement age and eventually transfer to spousal benefits, or if they would be better off wait until age 70 to claim their own benefit. One of the options that is likely to help maximize their lifetime income is from Social Security.
So even though you may be eligible for the maximum spousal benefit in 2024, a smart strategy may be to claim your personal benefit now, even if it is significantly less than the maximum. Then, wait for your partner to increase their well-being as well. Once your spouse receives their larger benefit, you may qualify for the maximum spousal benefit for your age group, which will be $1,924 plus any cost-of-living adjustments over the next eight years .
That said, everyone’s situation is different. It pays to crunch the numbers yourself, or hire help to determine your family’s optimal Social Security claim age.
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Here is the Maximum Spousal Social Security Benefit in 2024 originally published by The Motley Fool