Social Security Benefits for Married Couples Who Both Worked

For married couples where both individuals have careers, Social Security presents unique complexities. The interaction between two separate work records and the rules governing spousal and survivor payments can significantly alter a household’s financial trajectory in retirement.

Calculating Individual and Spousal Benefits

The Social Security Administration (SSA) calculates each person’s individual retirement benefit, known as the Primary Insurance Amount (PIA). This is the monthly payment an individual is due at their Full Retirement Age (FRA). The calculation is based on a worker’s 35 highest-earning years, with past wages adjusted for inflation.

For married couples, a spousal benefit may also be available. A person may be entitled to a benefit based on their spouse’s work record, which can be as much as 50% of the higher-earning spouse’s PIA. For the spousal benefit to be paid, the higher-earning spouse must have already filed to receive their own retirement payments.

An individual does not receive both their own earned benefit and a spousal benefit. Instead, the SSA pays the person’s own retirement benefit first. If the spousal benefit is larger than their own, the SSA adds a “top-up” amount to equal the higher spousal benefit.

Consider a couple where Spouse A has a PIA of $2,800 per month and Spouse B has a PIA of $1,200 per month. Spouse B is potentially eligible for a spousal benefit of up to $1,400, which is 50% of Spouse A’s PIA. Because Spouse B’s potential spousal benefit is greater than their own earned benefit, the SSA will pay them $1,400. This payment consists of their own $1,200 plus a $200 spousal addition, while Spouse A receives their full $2,800 benefit.

Coordinating Claiming Strategies

The timing of when each spouse claims benefits has significant financial consequences. The amounts calculated at Full Retirement Age serve as a baseline, but these figures are adjusted based on the age benefits begin. Claiming before FRA results in a permanent reduction in monthly payments, while delaying past FRA results in a permanent increase.

If both spouses in the prior example claim benefits at age 62, their payments will be reduced. Assuming an FRA of 67, claiming at 62 results in a benefit reduction of approximately 30%. Spouse A’s monthly benefit would fall from $2,800 to about $1,960, and Spouse B’s spousal benefit would also be reduced based on their claiming age.

A common strategy involves the lower-earning spouse claiming their benefit while the higher-earning spouse delays their claim until age 70. By waiting, the higher-earning spouse accrues delayed retirement credits, increasing their benefit by 8% for each year they wait past FRA. For Spouse A with a $2,800 PIA and an FRA of 67, waiting until 70 would increase their monthly benefit to $3,472, creating a larger base for future survivor benefits.

Certain claiming strategies that were once popular are no longer available to most new retirees. The Bipartisan Budget Act of 2015 eliminated the “File and Suspend” and “Restricted Application” loopholes for anyone born after January 1, 1954. These changes limit the ability of a spouse to claim only spousal benefits at FRA while allowing their own retirement benefit to grow.

Understanding Survivor Benefits

The rules for survivor benefits are distinct from spousal benefits and become active after one spouse passes away. A surviving spouse is eligible to receive up to 100% of the benefit the deceased spouse was receiving or was entitled to receive at their death.

The surviving spouse receives the larger of their own individual benefit or the survivor benefit. The two benefits are not combined; the SSA simply pays the higher of the two amounts.

The claiming decision made by the deceased spouse directly impacts the amount the survivor will receive. If the higher-earning spouse claimed benefits early, the survivor benefit is based on that reduced amount. Conversely, if the higher-earning spouse delayed claiming until age 70, that increased amount becomes the new potential benefit for the survivor.

Using the same couple, if Spouse A claimed early at 62 and received $1,960 per month before passing away, the maximum survivor benefit for Spouse B would be $1,960. If Spouse A had waited until age 70 and was receiving $3,472, that larger amount would become the survivor benefit. For Spouse B, whose own benefit is $1,200, this difference highlights the importance of the higher earner’s claiming strategy.

Taxation of Combined Benefits

A portion of a couple’s Social Security benefits may be subject to federal income tax, depending on their total income. The Internal Revenue Service (IRS) uses a figure called “provisional income” to make this determination. This is calculated by taking a couple’s Adjusted Gross Income (AGI), adding any nontaxable interest, and then adding 50% of their total Social Security benefits.

The provisional income is then compared against two thresholds for couples filing a joint tax return. If a couple’s provisional income is less than $32,000, their Social Security benefits are not taxed. If it falls between $32,000 and $44,000, up to 50% of their benefits may be included in their taxable income.

For couples whose provisional income exceeds $44,000, up to 85% of their Social Security benefits may be subject to federal income tax. This does not mean 85% of the benefits are taxed, but that up to 85% is included in the income that is taxed at the couple’s marginal rate. At least 15% of Social Security benefits remain free from federal income tax.

For example, a retired couple filing jointly with an AGI of $50,000 and combined Social Security benefits of $40,000 would have a provisional income of $70,000 ($50,000 AGI + $20,000). Since this is above the $44,000 threshold, up to 85% of their benefits would be exposed to taxation.