No FICA, No Problem - How to Maximize Social Security Spousal Benefits

Almost everyone pays the Federal Insurance Contributions Act Tax or FICA. These taxes are taken out of each and every paycheck and go towards paying for your future social security benefits and Medicare health insurance. Currently, the social security FICA tax is 6.2% and Medicare is 1.45%.

There are some notable exceptions for employees who do not pay FICA tax and are, generally, not entitled to receive social security benefits and Medicare. One important example are California teachers who are covered by the California State Teachers’ Retirement System or CalSTRS.

CalSTRS provides retirement, disability, and survivability benefits for nearly 1-million prekindergarten through community college educators and their families. CalSTRS is the largest teachers’ retirement fund in the United States and the eleventh largest public pension fund in the world.¹ 

CalSTRS is important to for myriad reasons, but especially to me because my Mom is a member as she spent her career as the Chair of the Sociology Department at Irvine Valley College.

When my Mom reached social security eligibility age, 62, she phoned the Social Security Administration (SSA) and inquired if she was eligible. She was told that because she was eligible to receive a pension through CalSTRS she was not eligible to receive social security benefits.

My Mom told me this story over coffee in her wonderful home town of Laguna Beach several years after the phone call. I told my Mom that while the information she was given by the SSA would eventually be correct, it was currently wrong. That my Mom was missing out on thousands of dollars a month. She was entitled to receive social security thanks to her previous marriage to my Dad, who did pay FICA taxes throughout his private sector career. She didn’t quite believe me, after all the SSA told her something else! Because I’m her son, she made the call anyway.

She informed the SSA staffer she spoke to that day the following: “I am still working, therefore I do not yet receive my pension through CalSTRS yet. While I didn’t pay FICA, my ex-husband did. So, I can collect social security until I retire.” The SSA employee she was speaking to that day confirmed she was correct!

When my Mom started collecting thousands of dollars a month because of that phone call she was very happy.

The moral of this story is not to denigrate the initial SSA worker my Mom spoke too. They would eventually be correct when my Mom retired. Once she starts receiving her pension, she will no longer be eligible to receive social security benefits. But, until then she is eligible. Why did the SSA employee not mention this? Well, they are paid by the SSA, they work for the government, not you. They are not paid by you to make sure you collect your dues. So please, if you think you are not entitled to social security benefits, talk to your financial advisor first. Or, if you are a do-it-yourself type person, we highly recommend you check out the wonderful book by Laurence Kotlikoff: Get What's Yours: The Secrets to Maxing Out Your Social Security. 

Your advisor or a few hours of reading this book and a phone call could make you or a loved one tens of thousands of dollars. 

What Are the Rules when Applying for Social Security Spousal Benefits?

When applying for Social Security spousal benefits, you can expect: 

• To receive upwards of 50% of your spouse’s Social Security benefit. 
• The ability to apply for benefits if you have been married for at least 9 months. 
• The ability to apply for benefits if you have been divorced for at least two years and the marriage lasted for 10 or more years. 
• To start benefits early, which may lead to a reduction in payments.

In order to take full advantage of your spousal Social Security benefits, be aware of the amount you might be eligible for, as well as the timing around your claim. These details can potentially impact how much you receive. 

Eligibility for Social Security Spousal Benefits

Before applying for benefits, you should be married for at least a full year. In addition, your spouse must have already started to collect benefits and you’ll need to be at least 62 years old.³

If you’ve experienced multiple marriages and/or divorces, it’s up to you to choose whichever spousal benefit is more impactful, given the other requirements have been met. Additionally, if you have employment experience you may be eligible for a personal benefit. In this case, you may receive your own benefit if it is greater than the spousal benefit in question. 

How Much to Expect

By visiting the Social Security Administration website you can learn more about the spousal Social Security payment amount you should expect to receive. You can expect your spousal benefit to be roughly 50% of your spouse’s benefit at their full retirement age.⁴ When you are eligible to receive your full benefit is considered the full retirement age. 

When it comes to delaying your payments, spousal and personal benefits often differ. Say you were to consider delaying your personal benefits until after your retirement age occurs, the benefit would then increase over time. Keep in mind, spousal benefits will max out at the full retirement age and there is no benefit to delaying past that time. 

1. https://www.thinkingaheadinstitute.org/research-papers/the-worlds-largest-pension-funds-2020/
2. https://www.thebalance.com/clearing-spousal-benefits-confusion-2388948
3. https://socialsecurityintelligence.com/social-security-spousal-benefits/
4. https://blog.ssa.gov/understanding-spouses-benefits/

This content is developed from sources believed to be providing accurate information. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.