Stay-at-home wife, husband with 25 years of employment — Complete analysis of spousal pension (based on LA)

The Kim couple living in LA's Koreatown. The husband worked for 25 years, increasing his salary to $70,000 before retiring, while the wife has been a stay-at-home mom her entire life.

The wife has almost no social credits in her name.

"I haven't worked my whole life, so I probably won't have any pension," is a common misconception among many Korean wives.

To put it simply, even if the wife has never earned a dime in the U.S., she can receive social security benefits thanks to her husband.

The key is the 'Spousal Benefit' program.

This law allows a stay-at-home wife to receive up to 50% of the amount her high-earning spouse will receive at Full Retirement Age (FRA).

For those born after 1960, the FRA is 67 years old.

In Mr. Kim's case, since he worked for 25 years, the Social Security Administration's (SSA) pension calculation, which is based on the 'highest earning 35 years,' will fill the remaining 10 years with '0' income, slightly lowering the average. If the calculated monthly benefit (PIA) at his FRA (67 years) is, for example, $2,200, then the maximum spousal benefit the wife can receive would be $1,100 per month.

Here are two key points where Koreans often make mistakes.

The first is the 'eligibility requirements.' For the wife to apply for spousal benefits, her high-earning husband must be 'actually receiving his social security benefits.' If the husband delays receiving his benefits until age 70 to increase the amount, the wife cannot start receiving any spousal benefits until he applies. In other words, the timing of the husband's benefits is the key to the wife's application timing.

The second is 'timing and limits.' To receive the maximum spousal benefit (50%), the wife must also wait until her own Full Retirement Age (67) to apply. If she rushes and applies at age 62, the benefit could drop to 32.5% of the maximum amount (about $715 in this case). Conversely, if the wife delays her application beyond 67 to 70, what happens? Unlike her own social security benefits, the spousal benefit does not increase after the Full Retirement Age. This means the wife's share of $1,100 at 67 is the absolute ceiling (maximum).

However, the real important twist lies in the 'Survivor Benefit.'

If the husband passes away first, the wife will inherit up to 100% of the amount her husband was receiving instead of the spousal benefit (50%).

This is why, in single-income households, if the husband is healthy, it is advantageous to delay applying for benefits until age 70.

If the husband delays receiving benefits until age 70, the pension amount increases by 8% each year, meaning the original $2,200 pension could grow to about $2,728. While the husband is alive, the wife receives the spousal benefit of $1,100 at her Full Retirement Age (67), allowing the couple to enjoy a combined amount of about $3,800. Even after the husband passes away, the wife can switch to the survivor benefit of around $2,700 that her husband built up, providing her with stable retirement income.

Additionally, California residents have a bonus benefit. Apart from federal income tax, California does not impose any state income tax on social security benefits. This means the pension amount received after careful calculation goes directly into the couple's wallet.

In conclusion, the most ideal scenario for this couple is as follows.

The wife should wait until her Full Retirement Age (67) to receive the full 50% spousal benefit, and if the husband's health and financial situation allow, he should delay receiving his benefits until age 70 to maximize both his pension and the survivor benefit the wife will receive in the future.

However, the correct approach may change depending on the family's health status or current cash flow, so it is advisable to visit the Social Security Administration's website (ssa.gov) to obtain each spouse's actual expected benefit report and strategize accordingly.