{{ The wealthiest fifth of households receives 38 percent of taxpayer dollars spent on Social Security and retirement tax preferences, more than the bottom 60 percent. But Congress can solve the problem by capping federal retirement benefits at middle-class levels. }}
The only way for max-FICA wage earners to optimize their SS benefit is to quit working before they hit the 2nd bend point in the AIME calculation. That would be around age 45 or so for someone earning a max-FICA paycheck from their mid to late 20’s.
Family income. The spouse of the higher earner can claim 50% of the primary earner’s social security benefits (even if they never worked enough to qualify for their own social security benefits). So maximum FAMILY social security check is about $62,000 + $31,000, or $93,000.
In fact, it is nearly just the opposite in practice. If the spouse does pay “additional” premium, then they often get zero benefit from it. Let’s say the spouse works for 5 years before kids, and for 10-12 years after kids. So the spouse pays in (“additional premium”) for 15-17 years. Later on when both spouses hit SS age, the lower earning spouse has to decide (The SSA decides automatically for you) which benefit to take, either their own benefit of 15-17 years, or the 50% of spouses benefit. Almost always, the 50% is the better option. So all their contributions over 15-17 years amounted to zero additional benefit.
This is an error I see often with small business owners that employ their spouse. I have told many that they are MUCH better off paying themselves more and paying their spouse nothing due to how spousal SS is calculated as well as the earnings cap on the SS tax.
In nearly every case, the business owner has had a tax advisor for years that never once brought up that issue.
There is a danger to the spouse in all this, typically the woman, that if she leaves the marriage she has a very low income history with the SSA. I do not call this good advice.
If she remarries she can collect from her current spouse. If she’s in a bad situation for a short time it shouldn’t affect her own SS too much. This won’t solve every situation but can help a lot of spouses getting out of “bad situations”.
Yes, I agree. She shouldn’t depend on marrying in the first place or staying married.
But, if you make a bad decision to marry poorly at least spousal SS gives you a chance to recover from that mistake. It won’t save everyone but will help some.
Why build a strawman? If she is married less than 10 years and received no income while married, she very likely gets an even better result with alimony than she does with a few years of low income coverage with SS - that she will never get back without having 10 full years of coverage anyway.