Dear Rusty: I recently retired from my job after 35 years at the U.S. Department of Defense. I know I'm not eligible for Social Security because I was part of the CSRS pension program and never had FICA taxes withheld from my paychecks. My husband, on the other hand, has worked his entire life in the construction business paying FICA taxes and has earned more than enough credits to collect Social Security when he reaches that age in a few years. He is 58 and I am 59 years of age. He doesn't have a traditional pension plan through his employer, but does participate in an employer-sponsored 401(k). We are quite financially secure at this point, but as we look forward I'd like to make sure we can maximize any Social Security benefits available to us so we can continue to live comfortably as we age. So my question is, how can my husband maximize his Social Security benefit, and will I be able to collect any Social Security benefits as his spouse? Signed: Looking Ahead
Dear Looking: Oh how we wish more people would, like you, plan well in advance for their golden years! First let's deal with your question of how your husband can maximize this Social Security benefit.
The rules for this are pretty simple, but both physical and financial health need to always be a primary consideration. If your husband is both physically fit and financially able, waiting until well after he is first eligible to collect Social Security is the best strategy to increase his benefit amount. If he were to start collecting at age 62 he would only get about 71.67% of what he would get at his full retirement age (FRA) as defined by Social Security, which for him is 66 years and 8 months. After his FRA his benefit amount will increase by about 8% per year for each year he delays, up to age 70 when he will reach his maximum benefit amount. Delayed retirement credits are actually earned monthly, so it's not necessary to wait a full year to get credit for delaying benefits.
Now, as his spouse you would ordinarily be eligible for spousal benefits based upon your husband's work record but, since you are receiving a CSRS pension from the Federal Government, you are affected by a provision known as the Government Pension Offset, or GPO. In theory, the CSRS pension program was designed to be part pension and part replacement of Social Security, which is why you did not pay Social Security payroll taxes over your career. The GPO rules state that Spousal Benefits must be reduced by a factor equal to 2/3rds of a person's government pension. Just by way of example, that means that if you are receiving a CSRS pension of $1,000 per month, any Social Security spousal benefit you might be entitled to would be reduced by $667. So, if your spousal benefits (normally 50% of your husband's Social Security benefit at FRA) would be $667 or less, you wouldn't receive any spousal benefit. If it were more, you would receive only the excess over $667. So you may want to go to ssa.gov and get an estimate of your husband's benefit at his FRA, and then see if 50% of that amount is more than 2/3rds of your CSRS pension amount. If it is you will be entitled to spousal benefits; if it is not, you won't be entitled to spousal benefits from Social Security. You might not be surprised to find that GPO often completely offsets Social Security spousal benefits for many Government CSRS retirees. Note too that GPO will also affect your widow's benefit should you be the surviving spouse, because it will be subject to same calculation as your spousal benefit. However, if your husband is the surviving spouse, and he receives a survivor's annuity from your pension, his Social Security benefit will not be affected.