Social Security Spousal Benefit

[New Thinking]

Pfpelican - Just reading your last post..That information is incorrrect..When your wife started her SS benefit at 62, she did indeed lock in a permanent reduction on HER SS. If she is entitled to a spousal benefit based on your record, she did not lock in a permanent reduction at age 62 since she will not begin receiving that until after her Full Retirement Age.

The most important issue to you though is to look at what I wrote about "filing and suspending" benefits..You should do this since you are leaving money on the table as your spouse's benefits do not grow with Delayed Retirement Credits..Therefore, her benefit is not increasing since she is past Full Retirement Age (and so are you)...You should not be waiting...This is an often misunderstood piece of SS strategizing that you will read more about in the press shortly.

[pfpelican]

Actually, I'm not at FRA, and won't be till 7/07.

[WilliamG]

Martha, thanks for the reply. *It still seems to me that the spousal benefit would be ROUGHLY one-half of what the spouse's is at time of retirement. *Reasoning: *both retire at 62, husband is decreased from normal amount but has annual cost of living increases, wife retires at 62 which has same reduction computation but is based on what husband's normal would be with cost of living increases since he retired. *
Simpler situation, couple are exactly same age and both retire at 62. *Spousal benefit will be 1/2 of husband's benefit because they have the same early retirement calculation, right?

[Martha]

Originally Posted by Elderdude

I believe our situation is different from the SSA quotes sited by Martha and Wahoo and the information shared by Pelican.
This is not a question about a spouse who earned less. Nor is it a question about whether the spousal benefit amount, (if any,) must be reduced because the partner took early benefits. (I know this is true.)

I am collecting a reduced benefit, my entitlement will remain reduced, at 70% until death.* My wife will begin taking her full benefit at age 66.* Neither of us expected to get any spousal benefit.* Our salaries and work histories were too similar to make a signigificant diffence.*

However, our planning software which gives us a year by year projection of income and expenses, assumed she would collect a spousal benefit between the age of 62 and 66.* It labeled the amount "Social Security spousal benefit."* This was approximately 50% of my reduced benefit. At age 66, the software label changes to Social Security Benefits not spousal) and the amount changes to what we originally planned on her receiving (and* had entered into the software.)*

The spousal benefits from 62 to 66 were totally software generated. * This is a Microsoft product and may contain bugs, or it works as designed but is based on faulty understanding on the part of Microsoft of Social Security regulations, or I tweaked something inadvertantly, or no one on this board has thus far grasped the situation.

I'd like to eliminate some of these possibilities. I have sent a question to SSA, I am looking for an appropriate channel to talk with Microsoft, but I was hoping someone could help on this board.* *

Well the software shouldn't have generated a benefit that your wife does not want to collect. If she did start collecting any SS at 62, she permanently reduces her benefit. Once she applies for SS, they calculate her benefit first based on her own record, and only if spousal benefits are a greater amount does she collect any spousal benefits.

[Martha]

Originally Posted by WilliamG

Martha, thanks for the reply. *It still seems to me that the spousal benefit would be ROUGHLY one-half of what the spouse's is at time of retirement. *Reasoning: *both retire at 62, husband is decreased from normal amount but has annual cost of living increases, wife retires at 62 [which has same reduction computation but is based on what husband's normal would be with cost of living increases since he retired. *
Simpler situation, couple are exactly same age and both retire at 62. *Spousal benefit will be 1/2 of husband's benefit because they have the same early retirement calculation, right?

Havent done the math, but from the link I posted above:

If full retirement age is 65, a spouse can get 37.5 percent of the worker’s unreduced benefit at age 62;
If full retirement age is 66, a spouse can get 35 percent of the worker’s unreduced benefit at age 62;
If full retirement age is 67, a spouse can get 32.5 percent of the worker’s unreduced benefit at age 62.

I don't know if this number works out to about half of the husband's early SS benefits.

[pfpelican]

Originally Posted by New Thinking

The most important issue to you though is to look at what I wrote about "filing and suspending" benefits..You should do this since you are leaving money on the table as your spouse's benefits do not grow with Delayed Retirement Credits..Therefore, her benefit is not increasing since she is past Full Retirement Age (and so are you)...You should not be waiting...This is an often misunderstood piece of SS strategizing that you will read more about in the press shortly.

New Thinking...
I understand what you are saying about my wife's benefits not growing with my delayed retirement...and that we would be leaving money on the table if she delays spousal benefits past my FRA. * How does that "filing and suspending" benefits deal work?

[Elderdude]

New Think,
I think you said "Yeah, she can take a spousal benefit at 62 but it would screw her out of getting full benefits on her own at 66." *Once reduced for either, reduced for both. Correct?

[Martha]

I am sure New Thinking will answer too, but yes.* Once reduced for either, reduced for* both.* What New Thinking was adding to the mix was the possibilty of the higher earner taking, and then suspending,* his benefits so his wife could get a spousal benefit right away. I haven't looked at that possibility.* New Thinking paper on this is at http://www.prudential.com/media/mana...Strategies.pdf

[pfpelican]

Thanks Martha.* I will look at the paper.* That and the note from New Thinking about a SPOUSE's benefit at 50% NOT being reduced to the 35% she established for her OWN ss benefit, is good news.

[Elderdude]

Thanks to all of you for your input. I will post again if I find out why my software thinks my wife will get a spousal benefit at 62 and her full benefit at 66. It sounds like a bug.

I will also let you know when and if I get a response from the SSA to my question.

For the time being, we will assume that spousal benefits are off the table and we must bridge the gap between when my wife retires from work and when she decides to apply for Social Security at or after age 62.

[WilliamG]

Ok Martha, thanks for being patient! *I used your link to get to here
http://www.ssa.gov/retire2/agereduction.htm
and see where you get the 35% of normal when normal age is 66 and taking at 62. *This looks like about 46.7% rather than 1/2 of spouse's benefit.
One last non-clear to me point. *If wife retires at 62, I assume there is a further reduction to the spousal benefit?

[Martha]

Originally Posted by WilliamG

Ok Martha, thanks for being patient! *I used your link to get to here
http://www.ssa.gov/retire2/agereduction.htm
and see where you get the 35% of normal when normal age is 66 and taking at 62. *This looks like about 46.7% rather than 1/2 of spouse's benefit.
One last non-clear to me point. *If wife retires at 62, I assume there is a further reduction to the spousal benefit?

William, if you retire at 62 and your wife retires at 62 as well, both of you will see reduced benefits.* Let's say that your wife never worked* so she will collect spousal benefits.* * However, her spousal benefit is calculated off of your full benefit, not your reduced benefit.* But because she retired early, instead of getting about 50% of your full benefit, she will get about a third, depending her age of eligility for full retirement benefits:* From above:

If full retirement age is 65, a spouse can get 37.5 percent of the worker’s unreduced benefit at age 62;
If full retirement age is 66, a spouse can get 35 percent of the worker’s unreduced benefit at age 62;
If full retirement age is 67, a spouse can get 32.5 percent of the worker’s unreduced benefit at age 62.

EDIT: I am not sure I quite understood your question. My point is that there isn't a double reduction.

[haha]

Originally Posted by Martha

Not really William.* For ease of speaking, let's say that the wife had low income and would do better by taking a spousal benefit. .....

Damn, Matha, have I told you lately that I like your style?

Mikey

[Martha]

Originally Posted by HaHa

Damn, Matha, have I told you lately that I like your style?*

Mikey

You're sweet Ha.* Wasn't I PC?*

This SS stuff really does get complicated.* For people who want to be sure that they have the exact correct answer, go the the regulations.* Here is a link to the index of the benefit regulations:* http://www.ssa.gov/OP_Home/cfr20/404/404-0000.htm

Of course, the regs are not exactly transparent and can be tough to read and there is way too much cross referencing.

[New Thinking]

Martha seems to have answered much of this ..If you would like to verify this option with your local Social Security office, refer them to Program Operations Manual System (POMS), Section GN 02409.100. The information is also available on the Internet at http://policy.ssa.gov/poms.nsf/lnx/0202409100!opendocument

Good luck.

[pfpelican]

New Thinking...

I am bothered by what seems to me to be a contradiction between what Martha quoted and what you later said:

------------ Martha said ---------------
Quoting the SSA site: "However, If she chooses to receive a reduced benefit before full retirement age, she is not entitled to the full 50 per cent spouse's benefit rate when you begin receiving retirement benefits.* A reduced benefit rate is payable for as long as she remains entitled to spouse's benefits."

Everything I have read tells me that if a spouse takes SS early, benefits are permanently reduced, including spousal benefits that the person may be entitled to at a later date.

----------- but you said ----------------

When your wife started her SS benefit at 62, she did indeed lock in a permanent reduction on HER SS. If she is entitled to a spousal benefit based on your record, she did not lock in a permanent reduction at age 62 since she will not begin receiving that until after her Full Retirement Age.

---------

To me, these appear to be contradictory statements.* Can you enlighten?

Thanks...pp

[New Thinking]

It can be confusing and the communication might break down because an assumption is being made..

The spousal benefit and the spouse's SS benefit are two different benefits that COULD possibly start at different times. Both started early lock in a permanent reduction (at different reduction rates)..If the spouse starts her own SS benefit at age 62, she locks in a permanent reduction (25% reduction for most)..If the spousal benefit starts at 62, it is indeed locked into a permanent reduction (30% reduction for most)..Since these are separate benefits and the spouse cannot start a spousal benefit until the husband has filed for benefits, it is very possible that the spouse will start her own SS benefit at, say 62 while the spouse doesn't start her spousal benefit until, say age 66. This would mean that the spousal benefit does not have a permanent reduction although the spouse's own SS (started at age 62) would have a permanent reduction..I think the assumption in Martha's comments was that the SS office would have assumed that BOTH SS benefits started for the spouse at age 62...I am saying that that is not always what happens and that the spousal benefit often will not start until later (when the husband files for or "files and suspends") his own benefits.

Does that make sense?

[pfpelican]

Originally Posted by New Thinking

I think the assumption in Martha's comments was that the SS office would have assumed that BOTH SS benefits started for the spouse at age 62...I am saying that that is not always what happens and that the spousal benefit often will not start until later (when the husband files for or "files and suspends") his own benefits.

Does that make sense?

Yep, and the latter is my case.* My wife started HER (reduced) benefit at 62 and will have a permanent reduction for HER benefit.

However, she has NOT started her SPOUSAL benefit, and won't till I'm 68 and she's 66 (FRA for her).* At that time, she gets the 50% of my benefit as her SPOUSAL benefit, not related to the reduction in HER benefit. Assuming I start receiving my primary benefit at that time.

This is the "do-over" the first two SSA reps referred to.

Thanks New Thinking.

RE: the "file and suspend"...as I understand it, when she hits FRA, at 66 (I'll be 6, I start my benefits, she starts the SPOUSAL benefit, then I suspend mine.* Do I have to receive any?* Does she just start the spousal benefit?* i.e.* I suspend, or ask SS not to pay any so I can get delayed credits...but how long after I file do I suspend?

Thanks again...pp

[Martha]

New Thinking, I disagree.* If the spouse retires early and collects her own benefits, and her spouse retires later at full retirement age, she will have permanently reduced benefits.

From the SS website:
Question
* Can my spouse collect benefits at age 62 from her work and earnings and then receive a combined total up to 50 per cent from my account when I start receiving benefits at age 65?

* Answer
* Your wife can begin receiving reduced retirement benefits at age 62 on her own earnings record.* If she is entitled to a spouse's benefit higher than her retirement benefits, she would normally get a combination of benefits equaling the higher spouse benefit. This is usually 50 per cent of the amount that you would receive at age 65.

However, If she chooses to receive a reduced benefit before full retirement age, she is not entitled to the full 50 per cent spouse's benefit rate when you begin receiving retirement benefits.* A reduced benefit rate is payable for as long as she remains entitled to spouse's benefits.


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