The importance of understanding spousal benefits

Jul 13, 2011

Spousal benefits can play important role in financail planning

As people enter retirement age and become more dependent on Social Security benefits, understanding exactly how spousal benefits are dispersed can be key in financial planning. If people did not invest in annuities or life insurance plans that guarantee a financial safety net, this could be the only source of income.

Poverty has become a growing problem among elderly widows in America, so making sound financial decisions can be helpful, CBS reports. A spousal Social Security income is either based on a person’s covered earnings or half of their spouse’s benefit.

Experts believe it is important that people estimate their Social Security benefits and then divide that number in half to determine the amount of their spouse’s benefit. If an individual decides on early retirement their benefits will be reduced.

People are encouraged to consider what would happen if their spouse dies, because the additional Social Security income will stop. When a person is widowed they will receive the greater payment of the Social Security benefit based on their earnings, or the Social Security income the deceased was receiving, according to the media outlet.

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