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September 6, 2011

Special Social Security benefits for married boomers

This coming January will see the first baby-boomers turning 66, a pivotal age in the world of Social Security benefits.

For all of those born in 1946 through 1954, the age 66 is called full retirement age (FRA), the age at which the eligible worker is entitled to start collecting 100 percent of the Social Security benefit earned. Starting to collect before age 66 will result in a permanent benefit reduction.

Waiting until age 70 to start collecting will result in a permanent benefit of 132 percent of the FRA figure. Between the ages of 66 and 70, the FRA benefit is prorated from 100 percent to 132 percent.

In addition to benefits due workers based on their earnings histories, two other types of benefits are relevant to married retirees: spousal benefits and survivor's benefits.

Survivor's benefits apply when the spouse with higher monthly benefit dies. Upon the death of the higher earner, the survivor begins receiving this higher benefit and forfeits his or her lower benefit. If the survivor has a government pension, then Social Security survivor's benefits may be reduced.

Spousal benefits apply in situations in which the Social Security benefit of lower-earning spouse is zero or less than half of that of the higher-earning spouse. While there are exceptions, generally speaking a husband and wife together can collect benefits based on the combination of their own individual work histories or 150 percent of the benefit of the higher earner, whichever of those two options is higher.

Because benefits calculations are actuarially based, the age at which a husband or a wife elect to start collecting, whether worker benefits or spousal benefits, will affect the actual benefit amount.

Here's why age 66 is so critical in planning the Social Security claims process for married couples: From age 62 up to age 66, an eligible claimant must accept the higher of his benefit or 50 percent of his spouse's benefit. At age 66, an eligible claimant can choose between her own or half of her spouse's benefit, even if the spousal benefit is lower than her own earned benefit.

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