The Social Security Administration estimates that retirement benefits provide 40 percent of pre-retirement income to a retiree. Spousal benefits allow one spouse to collect benefits on the work history of the other. Calculation of spousal Social Security benefits requires some knowledge of how Social Security functions to provide income to seniors. Full retirement age for those born from 1943 to 1954 is 66, the most common base for calculations in 2010. Full retirement age for those born in 1955 or later edges toward 67, and calculations are not the same.
Determine the amount of Social Security retirement benefits at full retirement age for the spouse whose work history is used. A Social Security statement mailed each year provides the estimates for this figure. For purposes of this calculation, assume this figure is $1,000 and full retirement age is 66.
Use the age of the collecting spouse to calculate benefits. The collecting spouse must be age 62 to receive Social Security retirement, even to collect spousal benefits using the work history of the spouse who is full retirement age.
Apply the percentages to your figures. The collecting spouse can receive 50 percent of the working spouse’s benefits at full retirement age. At 62, spousal benefits are about 35 percent of the full benefits. The reason is that with full retirement age at 66, collecting benefits early reduces the 50 percent by 30 percent, to 15 percent less of the working spouse’s benefit.
Determine the benefits. Based on $1,000 for the working spouse, the maximum spousal benefit would be 50 percent, or $500. This figure is available when the collecting spouse reaches full retirement age, but not before. If the collecting spouse receives spousal benefits at age 62, she will receive $350 monthly benefit based on the work history of the spouse. This is 35 percent of $1000.
Understand the math: At age 64, spousal benefits are $425 because 64 is halfway between ages 62 and 66, and $425 is halfway between $350 and $500.
The collecting spouse who has a work history can save benefits based on personal work history by collecting spousal benefits, allowing personal benefits to accumulate.
A spouse caring for a minor child of the worker can receive full benefits without reduction for early retirement.
A spouse must file for Social Security benefits before the collecting spouse can receive benefits. The working spouse can file and suspend benefits, or not take them.
Working while claiming spousal benefits may incur a penalty once income is over $14,160 in 2010.