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Old 05-23-2013, 07:12 AM   #41
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Can someone confirm if the following is true?

You retire early at 62 based on your working record. Your spouse retires a number of years later at 66 (her FRA), and can then receive half of your FRA (age 66) benefit, even though you retired early at 62.

This rule (if true) was never clear to me.
Your FRA benefit is slightly less if you leave the workforce before FRA.

As I understand it, if you wait till FRA to file, and your spouse does the same, spouse will get her FRA benefit and the spousal to bring it up to 1/2 of your slightly reduced benefit.
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Old 05-23-2013, 07:28 AM   #42
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Your FRA benefit is slightly less if you leave the workforce before FRA.

As I understand it, if you wait till FRA to file, and your spouse does the same, spouse will get her FRA benefit and the spousal to bring it up to 1/2 of your slightly reduced benefit.
True. And as I understand it, if I retire at 62, spouse will still get half of my FRA benefit if she retires at her FRA.
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Old 05-23-2013, 07:49 AM   #43
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True. And as I understand it, if I retire at 62, spouse will still get half of my FRA benefit if she retires at her FRA.
Am I hearing that wife will defintely get one-half of your FRA if she waits until her FRA?

This is difficult to nail down, but your FRA benefit is reduced by some amount since you retire early at 62. Also, your spouse's FRA will be more in some cases, as she continues to work, and her FRA benefit will be increased as a result.

I think age difference between spouses has to be one factor that is included. For example, I am 3 years, 4 months older than wife.
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Old 05-23-2013, 08:36 AM   #44
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if I retire at 62, spouse will still get half of my FRA benefit if she retires at her FRA.
But her benefit will be reduced proportionally due to your taking it early... at least that is what I understand from an earlier discussion.
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Old 05-23-2013, 08:44 AM   #45
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True. And as I understand it, if I retire at 62, spouse will still get half of my FRA benefit if she retires at her FRA.
No. By taking it early you have reduced both her spousal benefit and her survivor benefit by a non-trivial amount.

This is why it is often recommended to have the higher paid spouse delay to 70 and the other spouse take theirs at 62. You really have to run the numbers and look at more than just the first decade. The odds are one of you will be widowed and live alone a lot longer. That is such an important consideration.
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Old 05-23-2013, 09:52 AM   #46
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It appears that I am receiving 1/2 of DW's FRA amount.
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Old 05-23-2013, 10:24 AM   #47
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When in doubt

Retirement Planner: Benefits For Your Spouse

From another SS page... The spousal benefit can be as much as half of the worker's "primary insurance amount," depending on the spouse's age at retirement. If the spouse begins receiving benefits before "normal (or full) retirement age," the spouse will receive a reduced benefit. However, if a spouse is caring for a qualifying child, the spousal benefit is not reduced.
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Old 05-23-2013, 12:15 PM   #48
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I think it comes down to what you want to save yourself for.

I'd rather live on SS in my early years and keep the nest egg (investments) intact until I have to use it. Others would rather draw down their nest egg early for a larger SS payout later.

Neither is right or wrong, as it depends on individual goals, priorities, and expectations.

You bring up the point of expectations.

Something I have not seen yet discussed in this thread is expectations about the future of the social security program and/or potential changes to who gets how much under the program in future years.

We all know (or should) that the social security program picture going forward is not pretty. And that picture is controlled by politicians. In my estimation, anyone assuming that all will be well, and that each of us will in fact get what our social security benefit statements say we will get is taking a big chance. (In fact, the benefit statements themselves carry a disclaimer to that effect.)

This defensive thinking led me to start collecting benefits sooner than later (which in my case was 65 because I didn't think this through earlier). In my view, once the money is in my pocket it's a lot less likely that Uncle Sam is going to mess with it. And, between 65 and 70, I am going to have collected over $100,000 -- all of which I can plow back into investments if I so choose.

And that last observation leads to some interesting thinking. Had I waited to age 70, my social security benefit would then have been 40% greater than what I collect now. But that extra 40% works out to $8000 a year more. I'll bet that if I ran the compounded 5-year growth calculations of investing the lower present soc sec payouts in stocks, I would find that by age 70 I would be in a position to pay myself that extra $8000 a year (or at least a big hunk of it) from those investments.

Alex in Virginia
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Old 05-23-2013, 01:16 PM   #49
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Spousal benefit is quite confusing. I called SSA to discuss and they said
YOUR spousal benefit is only reduced if YOU take benefits early. As long
as your mate takes their benefits after FRA they can get the full 50%
spouse benefits but the other person must also be collecting benefits.
You can see this is true using this calculator for your specific situation.
Social Security calculator: when to collect for you and spouse.
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Old 05-23-2013, 03:08 PM   #50
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You bring up the point of expectations.

Something I have not seen yet discussed in this thread is expectations about the future of the social security program and/or potential changes to who gets how much under the program in future years.

We all know (or should) that the social security program picture going forward is not pretty. And that picture is controlled by politicians. In my estimation, anyone assuming that all will be well, and that each of us will in fact get what our social security benefit statements say we will get is taking a big chance. (In fact, the benefit statements themselves carry a disclaimer to that effect.)

This defensive thinking led me to start collecting benefits sooner than later (which in my case was 65 because I didn't think this through earlier). In my view, once the money is in my pocket it's a lot less likely that Uncle Sam is going to mess with it. And, between 65 and 70, I am going to have collected over $100,000 -- all of which I can plow back into investments if I so choose.

And that last observation leads to some interesting thinking. Had I waited to age 70, my social security benefit would then have been 40% greater than what I collect now. But that extra 40% works out to $8000 a year more. I'll bet that if I ran the compounded 5-year growth calculations of investing the lower present soc sec payouts in stocks, I would find that by age 70 I would be in a position to pay myself that extra $8000 a year (or at least a big hunk of it) from those investments.

Alex in Virginia
I quite agree with what you say here, Alex.
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Old 05-23-2013, 03:32 PM   #51
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Thanks all for input to my query.

Just called SS and they confirmed this is true. If I take SS early at 62 based on my work record, my spouse is entitled to half of my FRA (66) benefit if she starts her spousal benefit at her FRA (66). There is no penalty to her benefit because of my early start.
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Old 05-23-2013, 03:34 PM   #52
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I quite agree with what you say here, Alex.
The one thing that a politician can be trusted to do is try to protect their 'jobs'. SS may be controlled by politicians, but with the strong surge of baby boomers about to retire and take SS - I foresee very little happening to SS (other than a shift in retirement age) for the BBers.

btw - I plan to take SS at 62, but not because I am afraid of insolvency, but more likely the chance I will die before the break-even point - which IMO is a much greater chance than SS severly changing.

Now if more people were to smoke more and eat less healthy - perhaps SS can stay solvent longer...
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Old 05-23-2013, 03:46 PM   #53
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Thanks all for input to my query.

Just called SS and they confirmed this is true. If I take SS early at 62 based on my work record, my spouse is entitled to half of my FRA (66) benefit if she starts her spousal benefit at her FRA (66). There is no penalty to her benefit because of my early start.
This makes sense as she can't control when you start collecting. Recall that some "spouses" are divorced, but still collecting based off ex-spouse's SS benefits.
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Old 05-23-2013, 06:00 PM   #54
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I have very recent experience with the spousal benefit. I started early SS at 64.5 years of age in January as 2013 is my first full year of retirement. My benefit is modest as I have only 16 years under SS and I also have it reduced further as most of my career was as a fed. In April, when my wife turned 66, she applied for her spousal benefit under my work record and, since she has a much higher SS benefit than I do, will wait until 70 to claim hers. In the meantime, she gets a bit more than half of mine for 48 months while hers grows at 8% a year. A great deal as long as you don't need the money to live.

SS actually called her to make sure she really wanted to do this as her PIA at 66 is about double my current benefit. They encouraged her to take it now and not wait until 70. In our case, the tax issue is not a factor - we will always pay tax on 85% of whatever SS benefit we receive. What is disconcerting is that Medicare premiums shoot up the more taxable income you have in retirement, to include SS. And the income levels for the additional premiums are not indexed for inflation.

This is complex and conversations with different SS employees resulted in different advice and answers.
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Old 05-26-2013, 02:11 PM   #55
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One question is whether you are married, and if so it might be beneficial to your spouse for you to delay and take your SS benefits at 66 or 70. That way if you go first than your spouse is entitlement to that higher benefit. For a married couple there are two strategies: File & Suspend and Restricted Application aka Claim Twice. The 1st is when your spouse worked very little or there is a big gap between your Soc Sec benefits and your spouse. The 2nd strategy is when your Soc Sec benefits are close to one another as is your age at retirement.

If not married than forget these strategies. If not in good health than you should take at 62. If in good health you could consider taking from your 401k or Traditional IRA in the earlier retirement yrs. and spend down, then take Soc Soc at a later date. At 62 you get 75% of your FRA (at 66), and at 70 you get 32% more than at FRA.

You are correct when your income is over $34,000 (single) and $44,000 (married) you are going to get your Soc Sec payments taxed at 85%. I face the same situation as you, so I feel your pain.
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Old 05-26-2013, 03:40 PM   #56
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You are correct when your income is over $34,000 (single) and $44,000 (married) you are going to get your Soc Sec payments taxed at 85%..
Actually, 85% of your SS payments will be taxed at whatever your marginal rate might be. Not the same thing as taxing them at 85%!
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Old 05-26-2013, 04:24 PM   #57
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It just feels like 85%
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Old 05-27-2013, 09:24 PM   #58
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You are correct when your income is over $34,000 (single) and $44,000 (married) you are going to get your Soc Sec payments taxed at 85%. I face the same situation as you, so I feel your pain.
The way I read the worksheet, there's an interaction between SS and ordinary income. It's true that if we had hardly any SS, and had $44,000 of ordinary income, 85% of our SS would be taxable.

But, if our SS is higher, we can absorb more ordinary income before we hit the 85%. For example, if our total income were $44,000, composed of $22,000 of SS and $22,000 of ordinary income, only $500 our our SS income would be taxable.

Here are some combinations that just cross the line to 85%:

SS + Ordinary Income = Total Income

$12k + $43k = $55k
$20k + $47k = $67k
$28k + $51k = $79k
$36k + $55k = $91k
$44k + $59k = $103k
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Old 05-27-2013, 10:39 PM   #59
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No Richard8655 said he has a spouse in post #12. This is an important factor that needs to be considered.

You have to consider joint life expectancy which makes waiting til 70 often a much better option.

My pet peeve is married people who disregard the effects of delaying SS on the survivors benefit. They will probably be leaving widows who are suddenly taxed at the much higher single tax rate. I feel people need to consider the whole of retirement for both spouses and not just focus on the beginning of retirement when both spouses are alive and paying tax at the married rate.
+2.
In my case, if I die first, my DW takes a big hit in income, and that just isn't fair of me to know that and let it happen. My DW will need that higher amount of SS at 70. If you have the numbers to show that your spouse will be OK, then nevermind. Lots of stuff on the internet about the 'survivor income gap'. Here are a couple of links Retirement Planning, Spouse Protection - Financially Speaking - AARP Bulletin and The Economic Consequences of a Husband's Death: Evidence from the HRS and AHEAD
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Old 05-28-2013, 12:42 AM   #60
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My spouse and I are in complete agreement that early SS for the primary worker (yours truly) works out the best for both of us. We did decide, however, that she'll wait until her FRA in order to receive half of my FRA benefit (even though I'll retire at 62).

From running the numbers, this works out the best for both of us in terms of lowest taxes, cumulative payout over time, break-even age, and our own plans and expectations.
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