IB#9-9

Introduction

Under Social Security, married individuals are entitled to a retired worker benefit based on their own earnings and/or to a spousal benefit equal to one half of their spouse’s benefit claimed at the Full Retirement Age (currently 66).  If a married individual claims before the Full Retirement Age, the Social Security Administration assumes that the individual is claiming both types of benefits, compares the worker and spousal benefits, and awards the highest.  Upon reaching the Full Retirement Age, individuals can choose which benefit to receive.  As a result, married individuals can claim a spousal benefit at 66 and switch to their own retired worker benefit at a later date.  This approach allows a worker to begin claiming one type of benefit while still building up delayed retirement credits, which will result in a higher worker benefit later.

In the past, providing these benefit options for spouses was not particularly valuable, since those who postponed benefits beyond the Full Retirement Age were giving up expected lifetime benefits.  With the recent advent of an actuarially fair delayed retirement credit, lifetime benefits are roughly the same whether claimed at the Full Retirement Age or at age 70.  As a result, today the availability of benefit options has real value for couples and therefore inevitably increases the cost of the Social Security program...

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