Latest / VoraPrep Audio — Professional Licensure & Certification Exam Prep / CFP-RET: Social Security Auxiliary Benefits: Spousal, Survivor, and Ex-Spousal Claiming Strategies
Transcript
- Welcome to VoraPrep Audio. Let's talk about a heavy moment in a client's life. Imagine your client, Eleanor, is 62. Her husband, Robert, just passed away. She's grieving. She's completely overwhelmed. And she walks into a Social Security office just looking for some stability. The person there tells her she can start getting checks right away. So she files for whatever seems like the highest payment at that moment. That one decision, made under enormous stress, could easily cost her over a hundred thousand dollars in lifetime income. This is why mastering Social Security’s auxiliary benefits is so critical for the CFP exam, and for your career. These benefits are for spouses, ex-spouses, and survivors. You’re the one who needs to see the whole chessboard. You’re the one who prevents that costly mistake. Let's start with the foundation: the spousal benefit. The whole idea is to help a spouse who has a lower earnings history. The basic rule sounds simple. A spouse can get a benefit equal to fifty percent of the higher-earning spouse's Primary Insurance Amount, or PIA. But there's a catch. They only get this if the higher-earner has already filed for their own benefits. You receive that full fifty percent amount at your Full Retirement Age, or FRA. If you claim it early, say at age 62, that benefit gets permanently reduced. For someone with an FRA of 67, claiming at 62 doesn't get you fifty percent. It gets you just thirty-two point five percent of your spouse's PIA. That's a huge difference. Now, a massive rule change came in that you absolutely have to know for the exam. It’s from the Bipartisan Budget Act of 2015. And it introduced a concept called "Deemed Filing." Before this act, there was a popular strategy. You could reach your full retirement age, file just for spousal benefits, and let your own retirement benefit keep growing until age 70. It was a great deal. Well, that deal is mostly off the table now. For anyone born on January 2nd, 1954, or later, the Deemed Filing Rule applies. This means when you file for either a spousal benefit or your own retirement benefit, the Social Security Administration considers you to be filing for both. You're "deemed" to have filed for both. They will simply pay you whichever amount is higher. You can't pick and choose anymore. Think of it like a package deal. If you were born after that 1954 cutoff, you can't just order the "spousal benefit" by itself. You have to get the combo meal that includes your own "retirement benefit." The Social Security Administration is only going to bring you the bigger of the two. You take the higher amount, and that's it. Of course, there's an exception for people who got to keep the old rules. Anyone born on or before January 1st, 1954, is "grandfathered" in. If they've reached their full retirement age, they can still file a "restricted application." That's the term for filing for just the spousal benefit while letting their own benefit grow. So on the exam, the first thing you should look for is the client’s birth year. It completely changes the available strategies. If they were born in 1953, can they file a restricted application at their FRA.? Yes. What if they were born in 1955? Nope. They're under the new deemed filing rules. That date is everything. Okay, what about divorced spouses? This is the ex-spousal benefit. The amount is the same—up to fifty percent of the ex-spouse's PIA. But to be eligible, your client has to pass a strict three-part test. First, the marriage had to have lasted ten years or longer. Not nine and a half. Ten years. Second, the person claiming the benefit must be currently unmarried. And third, the ex-spouse they're claiming on has to be at least age 62. Now here's a key difference from the regular spousal benefit. For an ex-spouse, the worker does not have to have filed for their own benefits yet. As long as the divorce was at least two years ago, your client can claim on their ex's record. This is true even if the ex hasn't started their own checks. That's a big deal. And that brings us to the third type: the survivor benefit. This is for a widow or widower, and it operates under its own powerful set of rules. A surviving spouse can receive up to one hundred percent of what the deceased worker was getting. One hundred percent. Not fifty. That's a huge jump. But they only get that full amount if they wait until their own full retirement age to claim it. You can start survivor benefits as early as age 60, or even 50 if the survivor is disabled. But just like other benefits, claiming early means a permanent reduction. The amount you get is also tied to when the deceased spouse claimed. If they took benefits early, the survivor's benefit is based on that smaller amount. But if the deceased spouse waited past their FRA, the survivor gets the benefit of those delayed retirement credits. The check is bigger. Remarriage is a huge factor here. If your client remarries before they turn 60—or 50 if disabled—they forfeit the survivor benefit. But if they remarry at or after age 60, it has no impact. They can get remarried and still claim survivor benefits on their deceased first spouse's record. That age-60 line is a critical planning point. So you can see how different these benefits are. Spousal and ex-spousal benefits are capped at fifty percent of the worker's PIA. The survivor benefit goes up to one hundred percent. Spousal benefits can start at 62. Survivor benefits can start at 60. But the most important difference, the one the exam will test you on, is how they interact with deemed filing. For spousal and ex-spousal benefits, deemed filing applies if you were born after January 1st, 1954. But for survivor benefits? Deemed filing does NOT apply. Ever. This is the exception to the "package deal." It's a separate menu. And that opens up a massive strategic opportunity. So when you see one of these questions on the exam, here's how to think it through. First, identify the client's status. Are they a spouse, an ex-spouse, or a survivor? That's your first fork in the road. If they’re divorced, run that three-part test: Was the marriage ten years? Are they currently unmarried? Is the ex at least 62? Second, check the birthdate. This is the big one for spousal and ex-spousal claims. Are they born on or before January 1st, 1954? If so, the restricted application is on the table. If they're born after, they're stuck with deemed filing. Third, figure out the full, unreduced benefits. What's fifty percent of the worker's PIA for a spousal claim? What's one hundred percent of the deceased's benefit for a survivor claim? Get those baseline numbers. Then, apply the age adjustments. Finally, put it all together to find the highest payable amount. Let's walk through that Eleanor scenario to see how this works. The facts are: Eleanor is 62. Her Full Retirement Age is 67. Her own PIA is eighteen hundred dollars. Her deceased husband's PIA was twenty-five hundred dollars, and he hadn't filed yet. Because survivor benefits are exempt from deemed filing, she has two completely separate options. Option one: She could claim her own retirement benefit now, at age 62. She's claiming sixty months before her FRA of 67. This means her benefit is reduced by thirty percent. So you take her PIA of eighteen hundred dollars, and reduce it by thirty percent. That gives her twelve hundred sixty dollars a month. Option two: She could claim the survivor benefit now, at age 62. The full survivor benefit would be one hundred percent of her husband's PIA. That's twenty-five hundred dollars, but only if she waited until her own FRA. By claiming at 62, five years early, her benefit is reduced by twenty-eight point five percent. This means she receives seventy-one point five percent of the full amount. So you take his twenty-five hundred dollar PIA and multiply it by point seven one five. That comes out to seventeen hundred eighty-seven dollars and fifty cents per month. That's much better than her own benefit. But there’s a third, and optimal, strategy. She can claim the survivor benefit now. She gets that seventeen hundred eighty-seven dollars a month for immediate income. At the same time, she doesn't touch her own retirement benefit. She lets it grow. It will earn delayed retirement credits of eight percent per year from her FRA of 67 up to age 70. So at age 70, her own benefit will have grown by twenty-four percent. You take her eighteen hundred dollar PIA and multiply it by one point two four. That gives her a future benefit of two thousand, two hundred thirty-two dollars per month. The best strategy is clear. She takes the survivor benefit now for cash flow. Then, at age 70, she switches over to her own, now much larger, retirement benefit. A common trap people fall into, especially with ex-spouses, is thinking they are somehow exempt from deemed filing. They aren't. If your divorced client was born after January 1st, 1954, deemed filing applies to them just like it does to a married person. Don't mix those two rules up. If you need a way to remember the special power of survivor benefits, think of this phrase: "Survive Now, Thrive Later." A widow or widower can use the survivor benefit to "Survive Now"—it provides immediate income. Meanwhile, they're letting their own benefit grow, so they can switch to it and "Thrive Later." It helps you remember that these are two separate pots of money that can be timed independently. To wrap this up, let's hit the key takeaways. First, for anyone born after January 1st, 1954, deemed filing is the law for spousal and ex-spousal benefits. You file for one, you've filed for both, and you get the higher of the two. Second, survivor benefits are the big exception. They are totally separate from deemed filing, which creates that powerful "Survive Now, Thrive Later" strategy. And finally, eligibility is everything. Know the ten-year rule for ex-spouses and the age-60 remarriage rule for survivors. They are classic exam fodder. You've got this. VoraPrep is a full exam-prep app — lessons, practice questions, and an AI tutor in one place. Get started at Vora Prep dot com.