Navigating Social Security: COLA Adjustments, Realities, and Maximizing Spousal Benefits
Starting this year, the 71 million Americans receiving Social Security benefits will benefit from a 3.2% raise due to the COLA. COLA, an acronym for Cost of Living Adjustment, serves as an adjustment to Social Security and Supplemental Security Income (SSI) payments. This adjustment is meticulously crafted to counteract the repercussions of inflation, a phenomenon defined by the escalating prices within the economy. Considering the COLA for 2023 was a rewarding 8.7%, retirees aren’t quite pleased with this year’s adjustment.
This is because while it is true that the COLA is meant to help seniors cope with rising prices, many seniors are in turn saying that it's falling short of the hikes. According to the Senior Citizens League, the cost of items that older adults are spending most of their money on is consistently outpacing the COLA. The biggest culprit is that of healthcare.
With that being said, the average Social Security Check for 2024 after the 3.2% COLA is $1,907 in 2024. However, retirees should be advised that this bump is only an “adjustment”, and not a bonus.
"If anything, these changes are a reminder that retirees' incomes aren't truly fixed. Social Security benefits can change from year to year, and retirees can and should adjust their spending as their situation and the broader economic and financial environment evolve."
BlackRock, Inc. (NYSE:BLK) seems to agree, stating that those who seem unhappy about the smaller COLA this year should be reminded that the Social Security Administration provides COLA to keep up with inflation. A notably reduced COLA signifies a substantial decline in inflation over the preceding year, as gauged by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). However, BlackRock, Inc. (NYSE:BLK) states that it must also be noted that lower COLA for 2024 is still higher than the historical average.
Some retirees might think the upcoming raise is a bit late, considering years of high prices and gas costs. However, The Charles Schwab Corporation (NYSE:SCHW) asserts that it's important to remember that this raise is here to stay. If the Federal Reserve's actions help lower inflation in the next months, retirees will still get to keep their increased benefits.
For those who have begun receiving social security, the COLA must have started reflecting on their checks since the beginning of the year. As such, the right time to file for these benefits depends on personal circumstances and family circumstances. Even more intricate is the navigation of these benefits, particularly when it comes to spousal ones. Social Security spousal benefits offer a range of opportunities for married individuals to optimize their retirement income. Beyond the straightforward benefits, there are some lesser-known benefits and loopholes, as we like to call them, that can be leveraged to maximize the financial advantages available to spouses. In this exploration, we delve into the realm of Social Security spousal benefits, shedding light on the conventional benefits and uncovering lesser-known aspects that couples can leverage to maximize spousal Social Security benefits.
14 Social Security Spousal Benefits and Loopholes You Need to Know Now
An elderly couple in a garden with a laptop, representing how the company empowers its customers to make the best retirement and tax-deferred investment decisions.
Methodology
To compile the list of 14 social security spousal benefits and loopholes you need to know now, we began by exploring information from the Social Security Administration, as well as other sources such as Investopedia, Nasdaq, BankRate, and Forbes, to name a few. Next, we adopted a consensus approach to allot scores to each benefit and loophole we could find. Scores were summed and benefits were ranked in an ascending order from the lowest to the highest scores.
By the way, Insider Monkey is an investing website that tracks the movements of corporate insiders and hedge funds. By using a similar consensus approach, we identify the best stock picks of more than 900 hedge funds investing in US stocks. The top 10 consensus stock picks of hedge funds outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). Whether you are a beginner investor or a professional one looking for the best stocks to buy, you can benefit from the wisdom of hedge funds and corporate insiders.
14. Receive a Higher Spousal Benefit
Insider Monkey Score: 2
As a prospective retiree, you may not be entitled to receive higher social security benefits due to possible gaps in your employment history, or even because you have a part-time job. Regardless of the reason, a spouse can claim social security benefits. According to the Social Security Administration, an individual can qualify for a spousal benefit if they are either 62 years of age or older, are any age and have in their care a child younger than age 16, or who has a disability and is entitled to receive benefits on your spouse's record. This spousal benefit could be one-half the amount their spouse is entitled to receive at their full retirement age. If the individual decides to wait until the full retirement age to receive these benefits, they will receive their full spouse's benefit amount, which is up to one-half the amount their spouse can receive. However, benefits do not grow beyond this.
“Spousal benefits are capped at half your spouse’s benefit at full retirement age. If [the worker] waits beyond that to claim, the spousal benefit cannot grow further”.
13. Receive a Spousal Benefit Even if You Haven’t Worked
Insider Monkey Score: 3
For those individuals who are either stay-at-home parents or simply don't work for pay, Social Security still allows non-working spouses to receive benefits based on the earning records of their working spouse. These retirement benefits for a non-working spouse typically equal 50% of the working spouse’s benefits. The exact percentage, however, depends on when the nonworking spouse begins to receive benefits. These benefits are decreased if taken before reaching the full retirement age (FRA).
12. Claim Spousal Benefits Despite Divorce
Insider Monkey Score: 3
An ex-spouse may be eligible for spousal benefits based on the earning record of their former spouse even if that former spouse has remarried. This is a major social security spousal benefit and loophole you need to know now. To be eligible for the Social Security divorced spouse benefits, the spouse claiming the benefits must be at least 62 years old and not married, be divorced from a person who receives Social Security retirement or disability benefits, have been married to their ex-spouse for at least 10 years before the finalization of the divorce date, and have not been entitled an equal or higher retirement or disability benefits.
11. Survivor Benefits
Insider Monkey Score: 4
In the case an individual is claiming spousal benefits when their spouse passes away, the Social Security spousal benefits are converted into survivor benefits. Survivors' benefits generally grant eligibility for up to 100% of the deceased spouse's benefit, incorporating any delayed retirement credits they earned before passing away. Widows or widowers can initiate the receipt of survivor benefits at age 60 (or at age 50 if dealing with a disability). However, similar to spousal benefits, claiming them before reaching full retirement age means they will receive reduced benefits.
10. Ex-spouse Survivor Benefits
Insider Monkey Score: 5
Generally, remarriage tends to terminate the right of an individual to receive Social Security benefits under their ex-spouse’s earning records. However, there are two exceptions to this rule that retirees should be aware of. The first exception, which can be deemed as the Social Security spousal benefits loophole, works where an individual who remarries at 60 or later may still be entitled to Social Security survivors' benefits if the second marriage ends before the death of the first spouse. This social security spousal benefit and loophole you need to know now will help you be aware of retaining benefits even in the case of remarriage.
9. Retaining Survivor Benefits for Disabled Ex-Spouses
Insider Monkey Score: 6
Another exception to the Social Security termination after remarriage is that ex-spouses with a disability who remarry at age 50 or older will also be able to retain their Social Security survivor’s benefits. The provision understands that disabled individuals have unique circumstances and offers continued access to them.
8. Child-in-Care Spousal Benefit
Insider Monkey Score: 7
If you are a worker filing for retirement benefits, your spouse may be eligible for a benefit based on your earnings. However, they must be at least 62 years of age, or older, to claim these benefits. There is one social security advantage, however, that nullifies this age requirement. This is that the spouse has a qualifying child in his/her care. A qualifying child is a child who is under the age of 16 or who receives Social Security disability benefits.
7. Switching from Survivor Benefits
Insider Monkey Score: 8
The next pointer on our list of social security spousal benefits and loopholes you need to know about is that an individual can switch from their survivor benefits. According to the SSA, the earliest that a widow or widower can start receiving reduced benefits is as early as the age of 60. If the benefits start at an earlier age, they are reduced by a fraction of a percent for each month before full retirement age. The hack that you need to know, however, is that if the person receiving widow/widower benefits will be qualifying for a retirement benefit that's more than their survivor benefits, they can even switch to their retirement benefit. Switching can be made as early as age 62 or as late as age 70, notes the SSA. Since the rules are complicated and vary depending on the situation at hand, it's probably best to discuss it with a Social Security Representative.
6. Spousal Benefit Tactics: Maximizing Lifetime Income
Insider Monkey Score: 9
As discussed, survivors are allowed to switch to their retirement benefits if they are larger. As such, they are advised to optimize their Social Security benefits by deferring the collection of the larger benefit to the last possible moment. This approach ensures that the higher benefit, which forms the foundation for future cost-of-living adjustments, will be sustained throughout their lifetime.
