U.S. Pensions- Q&A (Part 2)

The U.S. Social Security system provides benefits not only to retirees but also to their spouses and surviving family members. Below is a detailed explanation of spousal and survivor benefits:

1. What Is a Spousal Benefit?

Spousal benefits allow a non-working or lower-earning spouse to receive Social Security retirement payments based on their spouse’s work record—even if they do not have enough work credits themselves (typically, 40 credits are required).

A. Eligibility for Current Spouses:

• The current spouse must be at least 62 years old.
• Benefits can only be claimed after the working spouse starts collecting their retirement benefits.
• The marriage must have lasted at least one year (except in the case of divorced spouses).

Benefit Amount:

• If the current spouse begins collecting benefits at full retirement age, they can receive up to 50% of the working spouse’s full retirement benefit. If benefits are claimed early, the amount is reduced. Delayed claiming will not increase the spousal benefit beyond 50%.
• If the spouse has their own work record, the Social Security Administration will calculate both amounts and pay the higher of the two.

Note: The spousal benefit is based on the working spouse’s full retirement benefit and is not affected by whether the working spouse claims early or late.

B. Eligibility for Divorced Spouses:

• The marriage must have lasted at least 10 years.
• The divorced spouse can claim benefits regardless of whether the ex-spouse has begun collecting retirement.
• If the divorced spouse is remarried, they cannot collect on the ex-spouse’s record—unless they remarried after age 60.

Benefit Amount:

• Divorced spouses who did not work or earned less receive the same benefits as current spouses.
• A divorced spouse who remarries after age 60 typically cannot receive benefits from both the ex-spouse and the new spouse. The SSA will pay whichever benefit is higher, not both.

2. What Is a Survivor Benefit?

Survivor benefits allow a non-working or lower-earning spouse—or qualified family members—to receive benefits based on a deceased worker’s record.

A. Eligibility:

Widow/Widower:

• Must be at least 60 years old (or 50 if disabled).
• No age restriction if caring for the deceased’s child under 16 or disabled child.
• Marriage must have lasted at least 9 months (exceptions for accidental or military-related death).

Divorced Surviving Spouse: Must have been married to the deceased for at least 10 years.

Children: Under 18 (or 19 if still in high school), or any age if disabled (disability must have started before age 22).

B. Benefit Amount:

• Survivors can begin collecting reduced benefits at age 60 (or 50 if disabled). If benefits start at full retirement age, survivors can receive 100% of the deceased’s benefit. Delaying beyond full retirement age does not increase the survivor benefit.
• If the deceased left behind minor children, both the surviving spouse and the children can receive benefits. However, the combined family benefit is capped at 150%-180% of the deceased’s benefit.

Suggestion: If there is a large age gap between spouses, it is often recommended that the older and higher-earning spouse delay collecting retirement. If the working spouse dies before claiming benefits, the survivor can receive benefits based on the full retirement amount. If the working spouse had already started collecting, the survivor benefit is based on the actual monthly benefit received.

3. Are Social Security Benefits Taxable?

If Social Security is your only source of income in the year, it is generally not taxable. However, if you have other sources of income—such as wages, interest, or withdrawals from traditional retirement accounts (e.g., 401(k) or IRA)—part of your Social Security may become taxable, depending on your combined income. Some states do not tax Social Security, while others do impose state income taxes on it.

Summary: The U.S. Social Security and retirement system is complex. If you’d like to learn more, feel free to contact TransGlobal. Our tax advisors and financial planners can help you minimize the tax burden on your retirement benefits through smart income planning and tax strategies.

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