Calculating Social Security Benefits Before FRA

How is the partner allowance calculated? I’ve covered this topic in several previous posts, but I thought I’d give it another try, to hopefully close this chapter for now. I have heard conflicting answers from different corners of the SSA world – both personally and from communications with readers. Too often there is a one-size-fits-all answer that the spousal benefit, if taken at FRA (full retirement age), is always 50% of the other spouse’s PIA (basic insurance amount). This is not always the case; if the person started receiving a retirement benefit based on his or her own records with the FRA and later begins receiving the spousal benefit, the spousal benefit will be just under 50%.

When an individual begins receiving retirement benefits based on his or her own records, this will have a lasting effect on the amount of all retirement benefits that individual will receive, including spousal benefits. This is due to the fact that the spousal benefit, when the pension benefit is present, is a compensation amount, based on the difference between the maximum spousal benefit (50% of the other spouse’s PIA) and the first spouse’s PIA.

The calculation of the early retirement benefit is quite simple (you will find a detailed explanation via the link). The individual’s PIA is reduced by a factor based on the number of months before full retirement age that he or she filed for benefits.

If you know the individual’s PIA, the next factor in the calculation is the other spouse’s PIA. The maximum amount of partner benefit is 50% of that PIA. This factor is available if the person is at least full retirement age. The reduction in total benefits is the difference between 50% of the second spouse’s PIA and the first spouse’s PIA. This is also called the home ownership allowance.

Example

Okay, this is confusing because everyone gets away without an example. Let’s say Dick and Jane are a married couple, with PIAs of $2,200 and $800, respectively. Dick and Jane are both 66 years old and of full retirement age. Jane began receiving her own retirement benefits at age 62, which has been reduced to $600 since she started early. Dick plans to defer his retirement benefits until age 70 for the maximum benefit. So at age 70 (for both), Dick files for his own deferral credit-enhanced benefit, in the amount of $2,904.

How much of the total benefit will Jane receive if Dick files under these circumstances? Here’s how it works: Jane’s PIA is subtracted from half of Dick’s PIA: $1,100 minus $800 = $300. This amount is Jane’s excess spousal benefit, which is added to her own benefit to obtain her total benefit. Adding $300 to $600 equals $900. This is $200, less than 50% of Dick’s PIA (remember the correct answer from before?).

Another example

Okay, what if there are a few changes to the example above: Dick is two years older than Jane – she is 64 and he is 66. He files for his own benefit at age 66, his full retirement age, which results in Jane getting the spousal benefit at her current age of 64, via a deemed filing. In other words, she cannot postpone receiving the spousal benefit.

Here’s how this calculation works (and a quick summary for the reductions):

• Determine Jane’s reduced monthly benefit ($600)
• Take Jane’s unreduced PIA and subtract it from half of Dick’s unreduced PIA ($1,100 minus $800 = $300). This amount is called the excess spousal benefit amount.
• If Jane is not yet at full retirement age (FRA), determine the number of months before FRA. In her case it is 24, since age 64 is 24 months before age 66.
• Multiply the excess spousal benefit amount by the amount determined by subtracting her number of months prior to FRA from 144. ($300 times (144 minus 24) equals $36,000).
• Then divide that number by 144 ($36,000 divided by 144 equals $250). Then $250 is added to her own retirement benefit amount to calculate the total benefit ($250 plus $600 equals $850).

We go one step further: if Jane qualifies for spousal benefits more than 36 months before the FRA (for example, if Jane was 62 while Dick is 66 and he files at that age), the above calculations are slightly modified:

• Determine Jane’s reduced monthly benefit ($600)
• Take Jane’s unreduced PIA and subtract it from half of Dick’s unreduced PIA ($1,100 minus $800 = $300). This amount is called the Excess Partner Benefit amount.
• If Jane is not yet at full retirement age (FRA), determine the number of months before FRA. In this case it is 48, since age 62 is 48 months before age 66.
• Multiply the excess amount of spousal benefit by the amount determined by subtracting her number of months greater than 36 before FRA of 180. ($300 times (180 minus 12) equals $50,400).
• Then divide that number by 240 ($50,400 divided by 240 equals $210). Then $210 is added to her own retirement benefit amount to calculate the total benefit ($210 plus $600 equals $810).

It should be noted that if Jane has not filed for her own benefit with FRA and she waits for FRA to file for the spousal benefit, she will be eligible for a spousal benefit equal to 50% of Dick’s PIA – assuming Dick has filed for his own benefit.

I hope this helps to clear things up a bit. If not, please leave your questions in the comments section below so we can come up with answers together.