Social Security Spousal Benefits Could Be Headed for a Big Increase: What Married Retirees Need to Know

Quick Read Social Security spousal benefits max out at 50% of a qualifying spouse’s full retirement age benefit and cannot grow with delayed claiming. A projected 2027 COLA somewhere between 3.4% and 3.6% could push the average spousal benefit above $1,000, up from roughly $987 today. Working in retirement can help spousal benefit recipients qualify for their own Social Security, potentially earning higher monthly payments. Many financial professionals are salespeople paid on what they push, not whether you end up wealthier. A fiduciary is the opposite. The SEC legally requires them to put your interests first. Advisor.com’s free matching tool pairs you with vetted fiduciaries from major national firms, all in under three minutes. See who you match with today. Many people earn Social Security by working and paying taxes on their wages. Anyone who accumulates 40 work credits in their lifetime can qualify for Social Security benefits in retirement. The value of credits changes yearly, and up to four credits per calendar year can be earned. oneinchpunch / Shutterstock.com For those who don’t qualify for Social Security based on their own earnings, spousal benefits may be available. People who are married to seniors who are eligible for Social Security can often claim benefits on their spouses’ records. And eligible divorcees can get spousal benefits, too. The problem with spousal benefits, though, is that they’re not as generous as benefits earned directly. Spousal benefits max out at 50% of a qualifying spouse’s full retirement age benefit. For someone eligible for a $2,000 benefit based on their own record, the associated spousal benefit would have a maximum value of $1,000. And while spousal benefits can be reduced for being claimed prior to full retirement age, they also can’t get a boost for a delayed claim. That’s different from benefits earned directly, which are eligible for delayed retirement credits until age 70. The good news, though, is that Social Security spousal benefits may be headed for a big increase in 2027. Here’s why. Are You Ready To Retire, Or Years Behind? Most Americans suspect they’re behind on retirement and never find out. Advisor.com’s free matching tool pairs you in about three minutes with a vetted fiduciary advisor who can help you with investing, taxes, retirement, estate planning, and more. No minimums. No sales call. Find out where you stand. A generous COLA could boost spousal benefit payments Social Security benefits are eligible for a cost-of-living adjustment, or COLA, every year. The purpose of COLAs is to help benefits keep pace with inflation. Story Continues It’s too soon to know what 2027’s COLA will amount to exactly. That number is calculated based on third quarter inflation data, and a lot of that puzzle is still missing. But based on recent estimates, it’s looking as though Social Security benefits could receive a COLA between 3.4% to 3.6% in the new year. And COLAs apply to spousal benefits, too. The average spousal benefit today is about $987. If next year’s COLA is 3.4%, it will add about $33.50 to the typical spousal benefit. If the COLA comes in a bit higher at 3.6%, it will add $35.50. Even if next year’s COLA ends up being a bit smaller than the lower end of the range above, it will likely push the average Social Security spousal benefit above the $1,000 mark. That’s a win for seniors who need that money to cover their expenses. Don’t just rely on spousal benefits While Social Security’s spousal benefits can be instrumental in helping people without a robust earnings history manage their bills in retirement, those payments are typically modest at best. So it’s important to have other income streams to rely on, whether it’s savings, investments, or earnings from part-time work. In fact, spousal benefit recipients who work in retirement might eventually qualify for Social Security on their own. In that situation, Social Security pays the highest benefit available. If someone’s benefit based on their own wage history is $1,100 a month and their spousal benefit is $1,000, they’ll get the $1,100. But if the opposite is true, the spousal benefit would be payable. This means there’s extra incentive to hold down a job in retirement, since it could lead to larger monthly checks than what Social Security spousal benefits allow for. Are You Ready To Retire, Or Years Behind? Most Americans have no idea where they actually stand. Most guess, or hope Social Security and a 401(k) will work out. Advisor.com’s new matching tool gives you a real answer, free. They pair you with a fiduciary (required by law to put YOUR interest first) with questions related to taxes, estate planning, retirement, insurance analysis, and more. See who you match with today, and get the answers you need. Contact editorial@247wallst.com for any questions or corrections. View Comments