This coming year, there will be some changes to Social Security that could affect seniors who get divorce or spousal compensation. It is important to know about any changes to benefits and how they can affect you in the coming year.
If the worker applies for retirement benefits, the worker’s spouse may be able to get them too, depending on how much the worker makes. The spouse must also be at least 62 years old or have a qualifying child in their care. A child who qualifies must be younger than 16 or a person who is getting disability benefits from Social Security.
If the spouse retires before the employee, the spousal benefit could reach half of the employee’s primary insurance amount (PIA). If one spouse starts getting benefits before they reach “normal or full retirement age,” they will get less.
However, if a spouse has to care for a qualifying child, their Social Security benefits will not be cut. We give the spouse the retirement benefit if they are eligible for one based on their earnings and if the retirement benefit is more than the spousal benefit. We give the spouse benefit if not.
What effects will the 2025 reforms to Social Security have on married and divorced individuals?
COLA increase and its impact on American beneficiaries
The cost-of-living adjustment for next year will be 2.5%, which is the lowest level in four years. This percentage might not seem like much if you get divorce or spousal benefits, which are usually much less.
As of last month, the average monthly Social Security benefit for the spouse of a retired worker was $909. The price will go up by just under $23 a month because of the increase.
New earnings test limit for Social Security beneficiaries
If you are still working and were just recently approved to start getting monthly checks before your full retirement age, you may have to take the retirement earnings test. This test sets a maximum amount of money that people who get a salary can make.
The amount depends on how likely it is that the person will reach full retirement age the following year. This means that benefits will go down by one dollar for every three dollars over the annual maximum of $62,160. The next year, if you do not reach that age, your beneficiaries will lose $1 for every $2 over the $23,400 annual limit.
In this case, spousal or divorced benefits are usually less than what the average retiree earns, so the earnings test limits have a bigger effect on their absolute numbers. Some or all of your Social Security benefits may be taken away if your earnings are much higher than the earnings test limit.
Medicare premiums
If you are getting spousal or divorce benefits, you may see a bigger drop in your Social Security income. Rates for Medicare Part B will go up next year. This could mean that people who get smaller checks will have a higher percentage of their monthly benefits taken out.
Like, Medicare Part B payments will go up to $185 a month next year. The COLA means that the average spousal benefit will only go up by $23 per month over the next year. This increase will only be about $12.70 after taking into account the $10.30 increase in Medicare costs.
Could early retirement affect spousal benefits?
A spouse may choose to retire at age 62, but the most they could get is 32.5% of their primary insurance amount. For up to 36 months before the normal retirement age, benefits for a spouse are cut by 25% of one percent.
The benefit is cut even more by 5/12 of 1% per month if the number of months is more than 36. If a spouse can not get benefits because of their own work history, the base spousal benefit is cut. This benefit is equal to half of the worker’s primary insurance amount.
For example, if an employee’s spouse wants to start getting benefits 36 months before the employee’s normal retirement age and the worker’s primary insurance amount is $1,600, the SSA will first take 50% of that amount to get a base spousal benefit of $800.
Then, the federal agency will take 25% off, which will give the spouse a benefit of $600. This means that when added to the $800 total, the spousal benefit will be 37.5% of the primary insurance amount.
