Facts on SS spousal benefits

[MissMolly]

Here is another wrinkle that will apply to DW and me. She is 63 1/2 I am 65.
My FRA benefits are $ 2,358 and hers are $ 1,000.
DW is going to take her benefits earlier - age 64 1/2 when I am FRA at 66.
Her reduced benefits will be appx $ 855.
I will file for spousal benefits which will be 50% of $ 1,000. Since I am FRA I get the full 50% of spousal benefits, I am not penalized for her taking benefits early.
At a later date, hopefully at age 70 I will file for my own benefits. appx $ 3,100.
DW will then apply for spousal benefits which should be 50% of my $ 3,100 x's .85 which represents the "penalty" for her taking her benefits early.
Upon my demise, DW will get survivor benefits of $ 3,100.

If anyone sees an issue with the calculations, let me know, as I am very sure these options are available under the current SS program.

jpjr, I hate to burst your bubble, but I don't think what you are planning can be done. First of all, if a spouse files for their own benefits before they are full retirement age, they cannot come back later and file for spousal. You are only allowed to do that if when you first file for any benefits that you have reached full retirement age. It is only at that point that you have the choice. Also, a spouse can only claim 50% of your amount you would receive at your full retirement age - they do not get 50% of the amount you receive if you wait until you are 70. You are correct that if you wait until you are 66 you can file for your full 50% of your souse's PIA benefits and then file under your own at 70. You can read about it here Benefits for Spouses

 

[Never2L8]

jpjr, my understanding is that delayed retirement credits do not add to the spousal benefit. So, at your age 70 when you file for your benefits, your wife's spousal benefit will be calculated using 50% of your FRA benefit (your PIA). Since she is taking her benefit early, they calculate the extra she gets by subtracting what her FRA would have been from 50% of yours. So, using your previous numbers, 50% of $2358 is $1179 less $1000 equals a bump of $179 per month. (All would be adjusted by COLA each year as well.)

I have seen discussions that advocate for the lower earner to take SS as early as possible, with the higher earner taking spousal benefits first and delaying their own until 70. You are already waiting until 70 for the delayed credits, so you may want to evaluate if it makes any sense for your wife to file now and collect her SS for an extra year. Either way, the bump up for her at your age 70 would be calculated the same.


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[pb4uski]

jpjr, my understanding is that delayed retirement credits do not add to the spousal benefit. So, at your age 70 when you file for your benefits, your wife's spousal benefit will be calculated using 50% of your FRA benefit (your PIA). Since she is taking her benefit early, they calculate the extra she gets by subtracting what her FRA would have been from 50% of yours. So, using your previous numbers, 50% of $2358 is $1179 less $1000 equals a bump of $179 per month. (All would be adjusted by COLA each year as well.)...

I agree with the $179. But wouldn't the $179 spousal benefit as calculated above also be reduced because she is starting her benefits at 64 1/2 rather than at her FRA? So if her FRA benefit is $1,000 and her age 64 1/2 benefit is $855, if they both file at the same time as proposed, I think she will get $1,008 ($855 based on her own work record and $153 spousal benefit ($179 spousal benefit at her FRA but discounted because she is collecting benefits early... $153 = $179*$855/$1,000).

 

[NW-Bound]

Your plan is addressed here (i think it is telling you it won't work as planned): Social Security Q&A: Can My Spouse File and Suspend at 63 to Enable Spousal Benefits? - Forbes

If jpjr's plan does not work, it is not for the same reason. Jpjr does not talk about "file and suspend" at all. It is not the same case as discussed in that Forbes article.

The one thing questionable where jpjr's plan may not work as he, and the Black Rock article, thought was whether his wife will get 50% of his higher delayed-till-70 own benefit, or a derated amount because she started collecting before her FRA. This was pointed out by MissMolly and Never2L8 in their posts. However, that could still be higher than his DW's own early benefit.

Darn it! I said I hated SS benefit formulations.


PS. To be fair, the Black Rock article says that jpjr's wife "may be entitled to adjusted spousal benefits" when he claims his own at 70. They did not say that she would get 50% of his. See the word "adjusted". And jpjr talked about the "0.85x penalty" for his wife taking hers early.

 

[Never2L8]

Pb4uski - based on the timeline that jpjr is using, he will file for spousal benefits only at his FRA when his wife is 64.5. When he files for his own retirement benefit at age 70, his wife will be over her full retirement age, so no reduction in the excess spousal benefit of $179. As long as she is full retirement age, no reduction.


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[MissMolly]

Pb4uski - based on the timeline that jpjr is using, he will file for spousal benefits only at his FRA when his wife is 64.5. When he files for his own retirement benefit at age 70, his wife will be over her full retirement age, so no reduction in the excess spousal benefit of $179. As long as she is full retirement age, no reduction.


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Yes, but if you file for benefits before FRA, SSA will determine which is higher, your own but reduced for filing early or 50% spousal reduced for claiming early. And then that's it. You don't get an opportunity to switch until the death of one of the spouses. The remaining spouse is then bumped up to the higher amount assuming the deceased spouse was collecting a higher amount.

 

[tmm99]

You guys are giving me a headache! I can see how *regular* people (like myself) would be so confused.

 

[Never2L8]

MissMolly, it is true that when filing before FRA, the SSA considers or "deems" that you are filing for all benefits available. However, you are not eligible for spousal benefits unless your spouse has filed for his (or her) own retirement benefits first. So, to be safe, jpjr's wife could file one month earlier for her benefits. Not sure if that is necessary though, since he is going to restrict his filing to spousal benefits only. She is not eligible for spousal until he files for his retirement benefits at his age 70.


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[NW-Bound]

You guys are giving me a headache! I can see how *regular* people (like myself) would be so confused.

I am still confused like hell. But when I talk to my relatives, they don't know what I am talking about. Ignorance is bliss. Just do what the people in SS office tell you to do. It's simpler that way.

 

[MissMolly]

MissMolly, it is true that when filing before FRA, the SSA considers or "deems" that you are filing for all benefits available. However, you are not eligible for spousal benefits unless your spouse has filed for his (or her) own retirement benefits first. So, to be safe, jpjr's wife could file one month earlier for her benefits. Not sure if that is necessary though, since he is going to restrict his filing to spousal benefits only. She is not eligible for spousal until he files for his retirement benefits at his age 70.


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You are correct and I thought about that after I posted but in trying to make my point about not getting a "do over" if you file early I forgot to mention it. I'm glad you clarified that. Thanks!

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[NW-Bound]

Yes, but if you file for benefits before FRA, SSA will determine which is higher, your own but reduced for filing early or 50% spousal reduced for claiming early. And then that's it. You don't get an opportunity to switch until the death of one of the spouses. The remaining spouse is then bumped up to the higher amount assuming the deceased spouse was collecting a higher amount.

But is it true that you always get the higher of your own or the spousal benefit (if applicable), or survivor's benefit?

I know how your own benefit will get reduced or increased depending on when you file.

What I am not certain about is how the spousal or survivor benefit gets modified depending on when you or your spouse claim. Beware of the "special RIB-LIM formula" mentioned earlier.

 

[MissMolly]

But is it true that you always get the higher of your own or the spousal benefit (if applicable), or survivor's benefit?

I know how your own benefit will get reduced or increased depending on when you file.

What I am not certain about is how the spousal or survivor benefit gets modified depending on when you or your spouse claim. Beware of the "special RIB-LIM formula" mentioned earlier.

Yes, you will always get the highest amount you qualify for at the time you file when filling before FRA and of course, survivor amounts don't enter into the calculations until your spouse is deceased. Survivor amount is not decreased. Whatever the highest amount was at the time of death, that is the amount the survivor will receive.

 

[NW-Bound]

... survivor amounts don't enter into the calculations until your spouse is deceased. Survivor amount is not decreased. Whatever the highest amount was at the time of death, that is the amount the survivor will receive.

True, if both were claiming SS at the time of death. The survivor gets the higher amount.

The complication that I just learned is that if the survivor has not started SS at the time of the spouse's death, then when the survivor starts collecting is important. The survivor can start her own benefit first, then switch to survivor benefit later.

The best time to make the switch to survivor benefit depends on when the deceased spouse took SS, if he did. That's the secret "RIB-LIM" formula that I just heard of today.

 

[MissMolly]

True, if both were claiming SS at the time of death. The survivor gets the higher amount.

The complication that I just learned is that if the survivor has not started SS at the time of the spouse's death, then when the survivor starts collecting is important. The survivor can start her own benefit first, then switch to survivor benefit later.

The best time to make the switch to survivor benefit depends on when the deceased spouse took SS, if he did. That's the secret "RIB-LIM" formula that I just heard of today.

Oh, OK, I see now what you are saying. That makes perfect sense. Thanks!

 

[NW-Bound]

I found out what "RIB-LIM" is, right from the horse mouth.

Here's an excerpt paragraph:

Start with the RIB MBA to which the NH was entitled for the month before the month of death with the ARF and any recomputations that would have been due had the NH remained alive. Convert this forward to the WIB MOET.
​

Read https://secure.ssa.gov/apps10/poms.nsf/lnx/0300615320, and weep.

 

[MissMolly]

I found out what "RIB-LIM" is, right from the horse mouth.

Here's an excerpt paragraph:

Start with the RIB MBA to which the NH was entitled for the month before the month of death with the ARF and any recomputations that would have been due had the NH remained alive. Convert this forward to the WIB MOET.
​

Read https://secure.ssa.gov/apps10/poms.nsf/lnx/0300615320, and weep.

UGH! Too many acronyms and too late at night for me. I'm going to bed

 

[NW-Bound]

Please explain it to us once you figure that out.

I think I will try to hold off death so that my wife will not have to deal with this special case. It's worth hanging on so that you do not have to deal with this special "RIB-LIM" thing. No, please, not the "RIB-LIM" thing. ARGHHH!

 

[Chuckanut]

No, you cannot get spousal benefit until you are 62. And then, as you file early before FRA, your own benefit will be permanently reduced.



From a Web site:

If you file for a spousal benefit before your FRA, you will end up with a smaller amount. You can file as early as age 62 but if you do, you will be hit with benefit reductions. Retirement benefits will rise each month they are deferred between FRA and age 70. Spousal benefits peak at FRA, so there is no reason to defer claiming them past that point.



An early filing will also trigger a Social Security provision called deeming—this means the agency considers you to be filing both for your individual retirement benefit and you spousal benefit. You will be paid an amount roughly equal to the greater of the two benefits. But you lose the opportunity to get increases for delayed claiming on your individual benefits. This is a bad deal.​

See: Social Security: 3 Secrets to Maxing out Spousal Benefits

Bingo!!!!

That part about permanently reduced benefits if a person files for spousal benefits before FRA is often overlooked.

Also overlooked is what happens if the spouse has worked for years in a job where no SS was paid. Presumably one has invested the dollars not paid into SS. If not, they may be in for a world of hurt.

 

[Bestwifeever]

If jpjr's plan does not work, it is not for the same reason. Jpjr does not talk about "file and suspend" at all. It is not the same case as discussed in that Forbes article.

The one thing questionable where jpjr's plan may not work as he, and the Black Rock article, thought was whether his wife will get 50% of his higher delayed-till-70 own benefit, or a derated amount because she started collecting before her FRA. This was pointed out by MissMolly and Never2L8 in their posts. However, that could still be higher than his DW's own early benefit.

Darn it! I said I hated SS benefit formulations.

No, my point was that the flexibility of file and suspend (and to choose which record to file against and when) will never be available to her if she files pre-FRA, and if she waits til FRA and chooses to use file and suspend to accomplish their plan, then he cannot use it, and the Forbes article seemed to address their pre and post FRA situation. But, never mind.

 

[Rothman]

Thanks NW-Bound the strategy is called hybrid, my wife file at 62 for reduced benefits, I file and suspend at FRA, she gets increased to reduced spousal benefit, I file for increased benefit at 70. This is a good scenario.
Also thanks homebound for the calculator link, it's a very professional looking website, and generates 9 scenarios. But looking at result as I describe above it calculates my wife benefit as the spousal benefit at age 62 even though I won't file and suspend for 5 more years. This difference is $1,000 per month which is significant for someone trying to plan ER with a SWR.


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[jpjr]

To all: My scenario's major flaw was the assumption that DW would get 50% of my delayed benefit if I filed at age 70 and she concurrently filed for spousal benefits (50% plus a reduction % for her early filing). I feel really "stupid" as I have more damn articles in my SS claiming manifesto that clearly state that she is only eligible for 50% of my FRA benefit (reduced again by her early filing %).

After recalculating the numbers; if she were collecting SS now, and I filed for spousal benefits at 66, followed by my filing for benefits at 70 and she refiling for spousal benefits at same time, it would take 8.7 years to capture the income "lost" by delaying her filing until I was 66. Oh, my head hurts.

One other thing to clarify. Upon my demise (well after 70 I hope) she would get survivor benefits based upon the delayed amount I would receive at age 70, not the figure associated with my FRA.

Thanks to all for your input. This is sort of fun if it weren't so important!

 

[Rothman]

Thanks NW-Bound the strategy is called hybrid, my wife file at 62 for reduced benefits, I file and suspend at FRA, she gets increased to reduced spousal benefit, I file for increased benefit at 70. This is a good scenario.
Also thanks homebound for the calculator link, it's a very professional looking website, and generates 9 scenarios. But looking at result as I describe above it calculates my wife benefit as the spousal benefit at age 62 even though I won't file and suspend for 5 more years. This difference is $1,000 per month which is significant for someone trying to plan ER with a SWR.


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[NW-Bound]

To all: My scenario's major flaw was the assumption that DW would get 50% of my delayed benefit if I filed at age 70 and she concurrently filed for spousal benefits (50% plus a reduction % for her early filing). I feel really "stupid" as I have more damn articles in my SS claiming manifesto that clearly state that she is only eligible for 50% of my FRA benefit (reduced again by her early filing %)...

Same as you, I had the same misconception, despite reading about it. It takes a while before you can keep all these rules straight in your mind.

I still have a few years to think about this. Hopefully, they will not change the rules on us, making us learn new tricks. My financial situation will change between now and then too, depending on how the market moves. That may also drive how we claim SS. Time will tell.

 

[NW-Bound]

As of now, my basic plan is the same as jpjr's. That is, having a higher SS benefit, I will delay mine till 70. My wife will claim hers earlier. But as her early SS is still higher than 50% of mine, I will not have to do file-and-suspend. At my full FRA, I will claim spousal benefit on hers. When I claim mine at 70, my wife still stays on her own SS and will not switch to spousal because the latter is lower.

So, in our situation my wife will be continuously on her own benefits until I croak, then she will get mine. The only variable now is how soon before FRA she should take hers. That depends on how long I (and she) plan to live. One can run spreadsheets all day long, but the unknowns are still those ends of life.

 

[Rothman]

NW-Bound you may want to reconsider file and suspend. In doing my research I came across references that even for single filers it has the advantage for potential lump sum payment if you change your mind. As I understand you file and suspend but can elect to collect retroactive to that date or any date between that date and the present. This gives you access to the money if your health situation or other need makes that choice desired. Of course you'll likely not exercise the option but the strategy gives you the choice.


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