Exploring Spousal Benefits

A reader from Colorado asks how spousal benefits are calculated when one spouse took Social Security early, and the other has a Colorado Public Employees' Retirement Association (PERA) pension.  

"I'm 63. I took Social Security last year, and I get a payment of $2100 a month. If I had waited until age 67, I think it would have been in the $3700 range. My wife is 62. She gets a monthly PERA payout for her time in the schools, and she does some monthly work, netting less than $20,000 a year. Monthly income is significant to us, and we have been considering her taking half of my Social Security payout. If she did, would she get half of what I would have received at my Full Retirement Age (FRA) -- that is, $3700? Or would she get half of what I currently receive, $2100? Lastly, would she be penalized for taking the benefit early, say on her 63rd birthday?"  

Let me clarify one thing up front. I was surprised when you mentioned that your Full Retirement Age (FRA) benefit at 67 was $3700. That looked like a big difference from your age 62 benefit, so I did a little math. The $3700 you mentioned would only be available if you waited until age 70 to claim.  

Here's how I figured it out: if you claimed last year when you were 62, you would receive 30% less than your FRA benefit. That's the penalty. If you claim your own retirement benefit early, the reduction is as follows: it's a 20% reduction over the first three years you claim early, then 5% per year beyond that. So, your FRA is 67. Five years earlier is 62, which means a 30% reduction: 20% for the first three years, 5% for Year 4 and 5% for Year 5. Add it up, and you get 30%. That's the reduction. 

So, your $2100 is 70% of your FRA benefit, which means your FRA benefit at age 67 would be $3,000. Then, if you were to wait until age 70 to claim, the amount would have been 8% larger per year. Three years at 8%, or 24%, gets you to $3720. So, you're misremembering the options you had before you claimed. I mention this only because it is important for calculating your wife's spousal benefit.

On your statement, the $3700 would have been your benefit at 70, but your spouse would not be eligible to receive half of that as a spousal benefit. The reason? The spousal benefit is limited to half of the FRA benefit. That means the maximum your wife could receive as a spousal benefit would be half of the $3000, so $1500. 

Now, that's the maximum. Your wife could receive that maximum if she claims it at her FRA or later. You notice I didn't say 'your' FRA. Your claiming date has nothing to do with the size of her spousal benefit. Just as you waiting to 70 wouldn't have increased her benefit, claiming before doesn't decrease it.

However, she can reduce her spousal benefit by her choice of a claiming date. The reduction is more aggressive for the spousal benefit. The reduction over the first three years of early claiming is 25% (not 20% like on one's own benefit), and then 5% per year beyond that. So, if she were to claim at 63 in your example, that's four years earlier than her FRA, which would also be a 30% reduction. Why the same reduction? Because of the more aggressive reduction factor applied to the spousal benefit. It is reduced by 30% when claimed four years earlier, whereas your own benefit gets a 30% reduction if claimed five years earlier.  

So, if your wife is going to get 70% of $1500, she would collect $1050 if she were to claim at age 63, reduced not because you claimed early, but instead reduced because she claimed early. If she chooses to wait, her spousal benefit could become as large as $1500, but she'd have to wait until 67 to claim that. I don't know what makes the most sense for you both. I'm just describing the mechanics of the numbers.  

Anyone not paying much attention to Social Security rules for the past few months might say, "Whoa, wait a minute. She has PERA (Colorado's government alternative to Social Security), so GPO would wipe out her spousal benefit." The Government Pension Offset, or GPO, was rescinded by the Social Security Fairness Act that Congress passed in late 2024 and became law in early 2025. As a result, your wife will have full access to a spousal benefit on your work record unless GPO returns.  

I believe some version of GPO will return because, right now, someone in your wife's situation can effectively double-collect. She can collect her PERA (which is meant as a Social Security substitute) and a spousal benefit. If she had Social Security instead of PERA, she wouldn't be able to collect a spousal benefit if her Social Security benefit was larger than the spousal benefit. Under Social Security, you get one or the other, not both. However, with the abolishment of GPO, she can effectively receive her full PERA benefit and her spousal benefit from Social Security.  

The belief that GPO – or some form of GPO – will return will probably incentivize someone to claim the spousal benefit sooner rather than later to collect as much as possible before it comes back to eliminate (or at least significantly reduce) the spousal benefit. 

If you are playing by today's rules and looking for longevity income – that is, the most you can get in the long run – it might be worth considering the option of your wife waiting to claim her spousal benefit until it reaches $1500.  

I won't speak to 'the right way to go' in your case because I don't have all the details. I mention GPO as food for thought – as my opinion about the future of a GPO equivalent returning and changing the math on some of this. But … right now, it's gone. You don't have to worry about it. Your wife would have access to spousal benefits precisely as I just described.