Social Security Spousal Benefit

[pfpelican]

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/managed/IB-InnovativeStrategies.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]

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]

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]

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]

Clarification

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]

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 68), 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.


http://tinyurl.com/levmp

 

[New Thinking]

Martha - Again, it is how what you are reading is interpretted. I am confident in my answer and we have built unique software to illustrate this..This is what my business now does...

Let me respond to your comment..I don't disagree that the spouse has permanently reduced her TOTAL BENEFITS, but she has not reduced her spousal benefit..only her OWN SS benefit....Per your last quote, I agree that she is not entitled to the FULL 50% benefit at age 66 (FRA) ..I am not saying that she is..She is entitled to the FULL UNREDUCED BALANCE of her spousal benefit which is usually UP TO a total of 50% of the husband's.... Let me give you an example...Let's say the husband has a SS benefit of $1,000 at Full Retirement Age (FRA)..So the potential spousal benefit is $500 at spouse's FRA. Taken at age 62, the amount would be reduced 30% (ignoring COLAs) to $350.

Now let's assume that the spouse has her own SS worker benefit of $200 at FRA..Her potential spousal benefit just got reduced to $300 at FRA. At her FRA, she would get $200 benefit on her own record and $300 as a spousal benefit....Now, this is where the example kicks in to the question...If the spouse starts her own SS worker benefit at age 62, her benefit is reduced from $200 to $150. (This is a 75% reduction from age 66 FRA to age 62 for one's own worker benefit). ALSO, assume that the spousal benefit did not start at 62, but is started at age 66 (because the husband never filed for benefits)...The $300 spousal benefit is not reduced just because the spouse started her own benefit at age 62...Ignoring COLAs, the spouse would be recieving $450 at age 66 made up of her (reduced) worker benefit of $150 and her (unreduced) spousal benefit of $300...I agree that she doesn't JUMP UP to the full 50% spousal benefit of $500 - because she started her own SS benefit early...The age 66 benefit is $450, not $500..That is what the SSA's quote says that you posted..She doesn't jump up to the full spousal 50% benefit..What it doesn't lay out, is what I explained above. They probably could have made it clearer, but I am certain of my answer.

 

[Martha]

I see what you are saying and it makes sense; the permanent reduction is there but it comes out of your own benefit. Do you have a citation for me? If not, I can pick through the regs.

 

[New Thinking]

Martha - If you have the appetite, the easiest way is to download the SS Handbook at http://www.ssa.gov/OP_Home/handbook/download.html

I don't recall exactly where it is laid out, but it should be in the handbook..It's just become second nature to me..It has amazed me how confusing the regs are and the misinformation that exists when we talk about such a critical component of seniors' financial security..

Until later.

 

[New Thinking]

PfPelican - Regarding:

RE: the "file and suspend"...as I understand it, when she hits FRA, at 66 (I'll be 68), 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?

No - You don't have to recieve any SS, you tell them that you want to file and immediately suspend your benefits..If they are unfamiliar with this, tell them it is laid out in Program Operations Manual System (POMS), Section GN 02409.100. Became available in 2000.

You will leave a nice survivor benefit for your wife if you predecease her since you will wait until age 70 to start.

 

[Martha]

Good idea New Thinking.  The handbook is much easier to use than the regs.  EDIT: Well, not much easier, though the handbook tracks the numbering system of the regs, it still does not give enough hypothetical situations showing what happens when you are eligible for multiple benefits.

Even though we have been a bit repetious on this thread, it is understandable given how muddy the SSA can make the waters.  

 

[Elderdude]

I received the following answer from the SSA. (Sorry, I didn't copy my question.):

Thank you for your inquiry.

The following information explains two provisions when an individual is entitled to his or her own retirement benefit and is entitled to additional benefits as a spouse.

1. An individual is filing for both his or her own retirement benefit and benefits on a spouse’s record at the same time.

One of the provisions of the Social Security Act provides that whenever an individual files for reduced retirement or spouse’s benefits, that individual is “deemed” to have filed for the other benefit as well.  Essentially, this means that if an individual is eligible for both retirement and spouse’s benefits in the initial month of entitlement, then he or she must legally be entitled to both benefits.  An individual cannot restrict an application in order to avoid the deemed filing provisions of the law.

2. An individual is filing for his or her own retirement benefit but is not eligible to file for spouse’s benefits on the husband’s or wife’s record until the husband or wife becomes entitled.

An individual can elect to receive his or her own retirement benefit as early as age 62, but the benefit will be permanently reduced for each month before the full retirement age.

If the individual is due additional benefits as a spouse, as soon as the husband or wife on whose record they are eligible starts receiving Social Security benefits, then the spouse’s benefits are payable.  A spouse receives one-half of the retired worker’s full benefit rate unless the spouse begins collecting benefits before full retirement age.  If payment of spouse benefits occurs before full retirement age, the benefit is reduced each month between the entitlement date to spouse’s benefits and full retirement age.

For example, based on the full retirement age of 66 (i.e., the full retirement age for people born in 1943 through 1954), a spouse may receive a percentage of the basic benefit of the worker.  The amounts payable follow:

Age            Percent Payable

62                  35%
63                  37.5%
64                  41.7%
65                  45.8%
FRA                 50%

However, if a spouse is taking care of a child who is under age 16, or who is disabled and is receiving Social Security benefits, a spouse receives full benefits, regardless of age.

Information about full retirement age may be found on our Web site at the following Internet address:

http://www.socialsecurity.gov/retire2/retirechart.htm

If you are eligible for both your own retirement benefit and for benefits as a spouse, we always pay your own benefit first.  If your benefit as a spouse is higher than your retirement benefit, you’ll receive a combination of benefits equaling the higher spouse’s benefit.

For more information, you may call our toll-free number, 1-800-772-1213, and ask for our publications called “Retirement Benefits,” publication number 05-10035 and “What Every Woman Should Know,” publication number 05-10127.  Our representatives will be glad to help you.  If you prefer, you can access these publications from the following Internet address:

http://www.socialsecurity.gov/pubs/englist.html

You can file for retirement and/or spouse’s benefits online at our Web page below:

http://www.socialsecurity.gov/applyforbenefits

 

[Martha]

I received the following answer from the SSA. (Sorry, I didn't copy my question.):

Thank you for your inquiry.

The following information explains two provisions when an individual is entitled to his or her own retirement benefit and is entitled to additional benefits as a spouse.

1. An individual is filing for both his or her own retirement benefit and benefits on a spouse’s record at the same time.

One of the provisions of the Social Security Act provides that whenever an individual files for reduced retirement or spouse’s benefits, that individual is “deemed” to have filed for the other benefit as well.  Essentially, this means that if an individual is eligible for both retirement and spouse’s benefits in the initial month of entitlement, then he or she must legally be entitled to both benefits.  An individual cannot restrict an application in order to avoid the deemed filing provisions of the law.

2. An individual is filing for his or her own retirement benefit but is not eligible to file for spouse’s benefits on the husband’s or wife’s record until the husband or wife becomes entitled.

An individual can elect to receive his or her own retirement benefit as early as age 62, but the benefit will be permanently reduced for each month before the full retirement age.

If the individual is due additional benefits as a spouse, as soon as the husband or wife on whose record they are eligible starts receiving Social Security benefits, then the spouse’s benefits are payable.  A spouse receives one-half of the retired worker’s full benefit rate unless the spouse begins collecting benefits before full retirement age.  If payment of spouse benefits occurs before full retirement age, the benefit is reduced each month between the entitlement date to spouse’s benefits and full retirement age.

For example, based on the full retirement age of 66 (i.e., the full retirement age for people born in 1943 through 1954), a spouse may receive a percentage of the basic benefit of the worker.  The amounts payable follow:

Age            Percent Payable

62                  35%
63                  37.5%
64                  41.7%
65                  45.8%
FRA                 50%

However, if a spouse is taking care of a child who is under age 16, or who is disabled and is receiving Social Security benefits, a spouse receives full benefits, regardless of age.

Information about full retirement age may be found on our Web site at the following Internet address:

http://www.socialsecurity.gov/retire2/retirechart.htm

If you are eligible for both your own retirement benefit and for benefits as a spouse, we always pay your own benefit first.  If your benefit as a spouse is higher than your retirement benefit, you’ll receive a combination of benefits equaling the higher spouse’s benefit.

For more information, you may call our toll-free number, 1-800-772-1213, and ask for our publications called “Retirement Benefits,” publication number 05-10035 and “What Every Woman Should Know,” publication number 05-10127.  Our representatives will be glad to help you.  If you prefer, you can access these publications from the following Internet address:

http://www.socialsecurity.gov/pubs/englist.html

You can file for retirement and/or spouse’s benefits online at our Web page below:

http://www.socialsecurity.gov/applyforbenefits

Geez Louise.  The SSA just spits out canned info.  On another thread I posted this information from the SSA:

This is from www.socialsecurity.gov:

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?
 
The answer depends on the situation. The following information explains two provisions when an individual is entitled to his or her own retirement benefit and is entitled to additional benefits as a spouse.

   1. An individual is filing for both his or her own retirement benefit and benefits on his or her spouse's record at the same time.

      One of the provisions of the Social Security Act provides that whenever an individual files for reduced retirement or spouse's benefits, that individual is "deemed" to have filed for the other benefit as well. Essentially, this means that if an individual is eligible for both retirement and spouse's benefits in the initial month of entitlement, then he/she must be awarded both benefits. An individual cannot restrict the application to only one benefit when the deemed filing provision of the law applies.

   2. An individual is filing for his or her own retirement benefit but is not eligible to file for spouse's benefits on his or her husband/wife's record until the husband/wife becomes entitled.

      An individual can elect to receive his or her own retirement benefit as early as age 62, but his or her benefit will be permanently reduced for each month before full retirement age. If the individual is due additional benefits as a spouse, as soon as the husband/wife on whose record he or she is eligible starts receiving Social Security benefits, then the spouse's benefit is payable. If payment of spouse benefits occurs before full retirement age, the benefit is reduced each month between the entitlement date to spouse's benefits and full retirement age.

http://early-retirement.org/forums/index.php?topic=4943.msg82994#msg82994

 

[haha]

When this thread reaches a complete, I hope it can be put in the Best of the Boards.

This stuff is incredibly complicated and you guys are doing a careful job of trying to explain it.

Ha

 

[Elderdude]

As promised, here is the reply I received from Microsoft regarding the problem I encountered with the Money software generating a "spousal benefit" where it appears there should not be one. I will not comment on the quality of the response except to say that it looks like Microsoft and the SSA have similar communication skills :

Dear Elderdude  ,

This is Judy  from MSN Money Online Support, and I'll be assisting you with your case today.

To give the most accurate support possible, I would like to give a brief summary of the problem as I understand it.

You have an amount entered in the planner for spousal benifits and your spouse is not collecting these benifits
.

If I have misunderstood the issue, don't hesitate to let me know.

I am sorry to hear about the problem you are experiencing today.I can help you with this issue.

Elderdude this is a know issue withthe software. To resolve this issue as a work around enter a negative amount for the amount it is showin gyour wife is receiving until she retires

Please email me at your earliest convenience and let me know the resuplts of the steps I sent  . If anything is unclear, please feel free to let me know. I look forward to your reply.
Our hours of operation are  5 am - 9 pm  PST Mon to Fri
                                              6 am -3 pm PST Sat and Sun
My hours of work are Mon to Wed 5am - 2 pm PST
                                    Sat and Sun 6am- 3 pm PST
Best Regards,

Judy
Microsoft Finance Product Support Services

Delighting our customers is our top priority. Our managers welcome your comments and suggestions about how we can improve the support we provide to you. Please email us at
mailto:managers@microsoft.com?subject=Consumer_Finance_Online

If you have your case number, please provide it within your email.

NOTE: This Email address is not intended for interaction with the Support Professional working on your specific technical issue. For further help with your issue, please reply using the instructions listed above.

To provide additional feedback or to explore more support options, please visit the Microsoft Help and Support Website at:
<http://support.microsoft.com/money>

 

[cute fuzzy bunny]

Hmm, so its a known problem that could cost someone tens of thousands of dollars if they made the mistake the software suggests, but it hasnt been fixed yet.

Nice job.

 

[d]

Delighting our customers is our top priority

CFB missed this!?