Social Security Spousal Benefit

[Elderdude]

I was playing with my Microsoft Money Lifetime Planner and noticed that the program had my wife receiving a spousal benefit in the year she turns 62.  I did not plug this figure in.  She intends to apply for her full benefit at age 66 (which I did plug in and which does show up as the amount we estimated as income in the year she turns 66.)  I am 64 and took my Social Security at 62.  She is 55 and still working and will retire at age 57.  We are both government employees (or I should say I was until retirement.) We will have good pensions and a little extra in 401K accounts.

This spousal benefit sounds too good to be true.  Can she really collect a % of the amount I am collecting as a spouse at age 62 and then switch over to her full benefit at age 66?

 

[REWahoo]

Can she really collect a % of the amount I am collecting as a spouse at age 62 and then switch over to her full benefit at age 66?

Here's what the SS website has to say:

Question: Can I receive reduced retirement benefits at age 62 under my record then at full retirement age receive full spouse's benefits?

Answer: When you apply for reduced retirement benefits, we will check to see if you are eligible for both your own retirement benefits and for benefits as a spouse. If you are eligible for both, we always pay your own benefits first. If your benefits as a spouse are higher than your retirement benefits, you will get a combination of benefits equaling the higher spouse benefit. If you choose to receive a reduced benefit before full retirement age, you are not entitled to the full spouse's benefit rate upon reaching full retirement age. A reduced benefit rate is payable for as long as you remain entitled to spouse's benefits.

 

[Elderdude]

Why is this topic locked?

 

[d]

Why is this topic locked?

 

[Elderdude]

Ok, now that the mysterious lock thingy has miraculously been removed from the folder thingy, I will attempt to clarify my question.

Is my wife entitled to a spousal benefit at age 62 if she chooses to wait until she qualifies for her own benefit at age 66? Dual entitlement I believe it is called? I find all references quite confusing. One assumption made is that the spouse has not been a full time earner in his/her own right.
Another assumption is that the spouse's full time benefits would be less than his/her partners. In our case, neither is valid.

 

[dory36]

REW asked me to let you know he's having computer problems and ...

Somehow I accidently locked a thread when responding to ElderDude's SS question.  I mangaged to get it unlocked but have been unable to post anything to explain the "mystery lock/unlock".

If you have a chance, please post an explanation/apology for me.

 

[Elderdude]

Thanks Dory and Wahoo,
I thought I'd offended the retirement gods or something.

 

[Elderdude]

Can she collect a % of the amount I am getting as my spouse at age 62 and then switch over to her full benefit at age 66?

 

[pfpelican]

My wife at 62 gets her benefit Then at 68, when I'm 70 and start receiving my benefits, she will get 50% of my benefit. So, when I start, we'll get 150% of my benefit, even tho she's been receiving a reduced benefit on her own account since age 62. I checked personally with a SS rep twice to make sure, as like you, I thought it too good to be true.

 

[Martha]

From the social security administration web site:



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

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.  See also www.ssa.gov/pubs/10035.html which tells you to what extent spousal benefits are reduced. 

My wife at 62 gets her benefit Then at 68, when I'm 70 and start receiving my benefits, she will get 50% of my benefit. So, when I start, we'll get 150% of my benefit, even tho she's been receiving a reduced benefit on her own account since age 62. I checked personally with a SS rep twice to make sure, as like you, I thought it too good to be true.

Well either the rep is wrong or the ssa websites are wrong.

 

[d]

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.

ditto

 

[pfpelican]

I agree that that's what it says. That's why I called, first before she started. The person I talked to did the computation for when I started receiving benefits, even if my wife was already receiving her own. The rep agreed that my wife should start at 62 and get her 50% later calling it "free money". Later I read what you quoted on the ssa website, and called again. I was assured that my wife got a do-over when I started receiving my benefits, that her having started her own benefits earlier ( at a reduced rate ) would not influence her percentage when I started. I told her that the website appeared to say something different, but she assured me that my understanding of it was correct, contrary to what I thought the website said.

 

[pfpelican]

Ok. Or not OK. I just checked with ssa again. Talked to another rep. Apparently the website is correct. By starting at 62, my wife permanently reduced her %, so she will not get the stepup to 50% when I start benefits. She will get the 35% of my full ssa amount -- because she started receiving at 62 and permanently reduced her percentage. Sorry for the false report.

 

[WilliamG]

Not to highjack the thread, but I have a spousal SS question too. If higher earner takes SS at 62 and spouse at 62 roughly 4 years later, does that mean you can roughly expect spouse's benefit to be 1/2 of what higher earner is getting when she begins benefits? Assuming both have same regular retirement age.

 

[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. She decides to retire early, at 62. Her spousal benefit is based on what her husband would get at full retirement age, no matter when he retires. But he has to retire before she gets a spousal benefit. Her benefit is reduced via a formula for retiring early. Some examples are given at www.ssa.gov/pubs/10035.html.

After pfpelican posted the erroneous information from an SSA representative, I checked the regulations on benefit reductions. The regualtions are at 20 CFR part 404. The reduction formulas are too complex for me. But yes, by retiring early your benefits are permanently reduced.

 

[jdw_fire]

But yes, by retiring early your benefits are permanently reduced.

Unless you pay it back as was discusses here http://early-retirement.org/forums/index.php?topic=7344.0

 

[Martha]

Right.

 

[REWahoo]

Unless you pay it back as was discusses here http://early-retirement.org/forums/index.php?topic=7344.0

Anyone on the forum actually done this, or know anyone who has?

Edit: Other than the example mathjak gave of his dad's situation.

 

[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.   

 

[New Thinking]

Let me try to clarify some of the questions....Let me speak in generalities first and assume that the spouse is female (so I don't have to write "her/his" every time)..Your spouse gets either her own SS benefit based on her own work record OR half of the other spouse's benefit at Full Retirement Age... If she is entitiled to a spousal benefit yet still has a smaller SS benefit on her own, the spousal benefit would be the difference between her own SS benefit and the 50% spousal benefit. Both are subject to actuarial reductions if taken early - prior to her Full Retirement Age.

These benefits are actually separate and can be started at different times. But once you start one benefit, it is actuarially locked into a permanent reduction..It ties back to the Primary Insurance Amount and Full Retirement Age of both spouses if anyone wants to know).

The spousal benefit can only start when the other spouse (with the higher benefit) has filed for benefits...This higher earning spouse can actually file for benefits and suspend them so that the other spouse can start spousal benefits.

I have written about this in the white paper that someone posted last month.

The software probably "solves" for a spousal benefit by default but you have to override with the correct amounts for your spouse's SS amounts - whether based on her own record or a spousal record - or both...You should also plan for increases due to COLAs since most info is usually in "Today's Dollars" but your retirement income is in future dollars.

 

[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]

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]

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.