26 Dec How can I maximize my spousal benefit?

Q. My full retirement age will be 66 years and 4 months. If at 63 I draw from my Social Security benefits, I know they will be reduced. But if I switch at my full retirement age to spousal benefits, will I receive half of my husband’s at that time, or will it be reduced by the same percentage as mine was?
— Spouse

A. Deciding how and when to take Social Security benefits is important.

Optimizing your benefits takes some strategizing, but it can be done.

“It is possible for you to claim the reduced benefit if you elect to collect your benefits prior to your full retirement age (FRA) and later collect the spousal benefit,” said Laurie Wolfe, a certified financial planner and certified public accountant with Lassus Wherley, a subsidiary of Peapack-Gladstone Bank, in New Providence. “This works only if your spouse is not yet receiving retirement benefits.”

If your spouse is already collecting their benefit when you initially file, you are subject to the “deemed filing” rule, Wolfe said.

Under this rule, you are deemed to be applying for spousal benefits at the same time you file for your own benefit.

When you are eligible for your own benefit and you collect the spousal benefit, you are actually paid a combination of benefits, Wolfe said. The payment will be broken out between your own benefit and the spousal benefit.

“If your benefit was claimed early, this portion of the payment will remain reduced,” she said. “Then, if you wait until your FRA to claim the spousal benefit, that portion of the payment will be the excess of the spousal benefit over your FRA benefit – not the reduced benefit.”

She offered this example about Elizabeth and Andrew, a married couple:

Elizabeth claims Social Security at age 62 and receives a reduced benefit. Her FRA benefit was $1,200 and the reduced benefit is $880.

Andrew waits until FRA and his benefit is $3,000.

When Andrew files, Elizabeth becomes eligible for a spousal benefit. Assuming that Elizabeth waits until her FRA to claim it, her benefit will be a combination of her reduced benefit, $880, and the excess of half of Andrew’s benefit ($1,500) over Elizabeth’s full benefit ($1,200), or $300. Her total payment will now be $1,180.

If, on the other hand, Elizabeth claims the spousal benefit before she reaches FRA, the spousal portion of her benefit will also be reduced, Wolfe said.

“The reduction is determined by using a prescribed percentage based on the number of months prior to retirement age that the benefit is claimed,” she said.

The best way to calculate your benefit is by contacting Social Security directly, and it will lay out the numbers for you under different scenarios based on your earnings records.

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