Yet another SS question

[ivinsfan]

Yes, but I think the question was what if the higher earner had filed adn suspended and not yet started collecting benefits, what the spousal survivor benefits will be.

We could have that issue as DW will be getting the spousal benefit from my FRA onward, but I plan to file and suspend and claim at 70. The question is if I die between my FRA and age 70, will DW's survivor benefit be my benefit on the date I die or can she wait until I woudl have been 70 and claim the higher benefit (the benefit grows at a simple 8% a year from FRA to age 70).

I don't know the answer and am curious myself.

Wouldn't one of the only reasons to file and suspend be to allow your spouse to collect a spousal benefit. I just took this to mean that the spouse was already collecting a spousal. Is there any good reason to file and suspend if the spousal or minor child option is not on the table? As I mentioned, we are at these ages right now and I am trying to understand all these situations.
Has anyone done and file and suspend for a reason other then spousal or minor child and would you mind sharing why?

 

[pb4uski]

Well, there is a bit more to it than that in that F&S at FRA allows the spouse to start collecting spousal benefits (DW is 8 months older than me) AND my benefit (and her survivor benefit) will continue to grow at 8% simple.

 

[ivinsfan]

My understanding is: No.

See here they have an example:
Secret Ways to Boost Your Social Security-Page 2-Kiplinger



My understanding is: Yes.

But I am guessing that it would be frozen at the value of point of death, ie the dead spouse does not keep earning increases to age 70. So it would be like they say at age 69 they ceased the F and S , if they died at age 69.

I read this link and I see comments about the spouses own benefit rising to FRA but I don't see anything about the spousal benefit.

 

[ivinsfan]

Well, there is a bit more to it than that in that F&S at FRA allows the spouse to start collecting spousal benefits (DW is 8 months older than me) AND my benefit (and her survivor benefit) will continue to grow at 8% simple.

Sorry if I wasn't clear, that's what I was asking, if this isn't your strategy to collect spousal and grow your own benefit at the same time,is there another good reason to file and suspend.

 

[pb4uski]

Actually for singles as I recall, you can file and suspend and if you get a terminal illness between FRA and when you start collecting benefits, you can apply for benefit retroactively from your FRA (at the FRA rate). Alternatively, if your health continues to be good, you can wait to claim the higher benefit at age 70. So using this strategy a single and avoid a situation where they have a quick terminal illness and get little or nothing out of the social security that they have paid in.

 

[Spanky]

Yes, but I think the question was what if the higher earner had filed adn suspended and not yet started collecting benefits, what the spousal survivor benefits will be.

We could have that issue as DW will be getting the spousal benefit from my FRA onward, but I plan to file and suspend and claim at 70. The question is if I die between my FRA and age 70, will DW's survivor benefit be my benefit on the date I die or can she wait until I woudl have been 70 and claim the higher benefit (the benefit grows at a simple 8% a year from FRA to age 70).

I don't know the answer and am curious myself.

just a guess - The maximum survivors benefit amount is limited to what you would receive if they were still alive. That is, the max amount is based on the date of death.

 

[pb4uski]

That would be my guess as well, but i was just looking to see if anyone knew the answer.

 

[ivinsfan]

Actually for singles as I recall, you can file and suspend and if you get a terminal illness between FRA and when you start collecting benefits, you can apply for benefit retroactively from your FRA (at the FRA rate). Alternatively, if your health continues to be good, you can wait to claim the higher benefit at age 70. So using this strategy a single and avoid a situation where they have a quick terminal illness and get little or nothing out of the social security that they have paid in.

Good point, and for a single person it could be a backstop to get some instant emergency cash flow...kind of like cashing in an annuity for emergency expenses. or do you actually have to be terminal to do this one

 

[pb4uski]

No, as I understand it you can do it at any time. I suppose it woudl be the same if you were married (like in if DW dies between my FRA and age 70 and I had filed and suspended and then after she passes I get a terminal illness or just decide I want the cash.

 

[ivinsfan]

No, as I understand it you can do it at any time. I suppose it woudl be the same if you were married (like in if DW dies between my FRA and age 70 and I had filed and suspended and then after she passes I get a terminal illness or just decide I want the cash.

That's an interesting twist, almost like reverse life insurance if you don't die suddenly. Has anybody out there done a file and suspend for this reason?

 

[Alan]

Another question.

I will be WEP'ed to the tune of ~$500/month. If I file and suspend at FRA then DW, at her FRA, files to receive 0.5 of my SS will she get 0.5 of my WEP reduced SS or will she get 0.5 of my FRA SS. (she will not be subject to WEP in her own right). My WEP reduced SS at FRA is not twice the size of her SS at FRA, so it changes the calculations somewhat as she will get her SS rather than 0.5 of mine.

 

[Sunset]

Another question.

I will be WEP'ed to the tune of ~$500/month. If I file and suspend at FRA then DW, at her FRA, files to receive 0.5 of my SS will she get 0.5 of my WEP reduced SS or will she get 0.5 of my FRA SS. (she will not be subject to WEP in her own right). My WEP reduced SS at FRA is not twice the size of her SS at FRA, so it changes the calculations somewhat as she will get her SS rather than 0.5 of mine.

No idea.

But I too will be subject to WEP, by my simple calculations, it seems optimal for me to:
Claim the outside pension early (at reduced rate).
Delay until FRA/70 to claim SS.
Reason being I get 6 years of the outside pension, and when SS does the WEP thing, they will be reducing my SS by 1/2 of a smaller amount.
Delaying the outside pension, is not as positive as normal, since SS will simply be reduced by 50% of any gain.

I did also put some weight to the hedging of early claiming on the outside pension means I get years of cash in case I don't make it to 70 for SS

Have done any calculations as to which way to claim them considering the interaction ?

 

[ChrisC]

Another question.

I will be WEP'ed to the tune of ~$500/month. If I file and suspend at FRA then DW, at her FRA, files to receive 0.5 of my SS will she get 0.5 of my WEP reduced SS or will she get 0.5 of my FRA SS. (she will not be subject to WEP in her own right). My WEP reduced SS at FRA is not twice the size of her SS at FRA, so it changes the calculations somewhat as she will get her SS rather than 0.5 of mine.

There's a lot of confusing and misleading information in this thread. I encourage folks to read more in other places like the Bogelheads forum where more accurate information is provided. But to answer your question, which knowledgeable folks once answered for me, WEP results in adjustments to your PIA, Primary Insurance Amount, the basis for calculating your benefits. Those adjustments affect all benefits derived from your PIA, including spousal benefits, so yes, your spouse takes a reduction in spousal benefits caused by WEP adjustments to the PIA.

 

[Alan]

Thanks ChrisC and Sunset for your responses. My searching around also indicated the spousal benefit will be calculated on half of the WEP reduced benefit.

I am already taking 1 private pension and will start a 2nd one early at 62.

I have also realized another factor that I had forgotten about. By the time DW is eligible for SS in 2.5 years we will have relocated to the UK for tax purposes and the dual taxation agreement between the USA and UK says that SS is only taxed in the UK. Since the UK only taxes on an individual basis then DW's income from SS will be in the 0% tax bracket so it will be totally free of tax. If we were in the US then 85% of it would be taxed at our marginal tax rate of 25%.

Taxes are complicated...

 

[ChrisC]

Thanks ChrisC and Sunset for your responses. My searching around also indicated the spousal benefit will be calculated on half of the WEP reduced benefit.

I am already taking 1 private pension and will start a 2nd one early at 62.

I have also realized another factor that I had forgotten about. By the time DW is eligible for SS in 2.5 years we will have relocated to the UK for tax purposes and the dual taxation agreement between the USA and UK says that SS is only taxed in the UK. Since the UK only taxes on an individual basis then DW's income from SS will be in the 0% tax bracket so it will be totally free of tax. If we were in the US then 85% of it would be taxed at our marginal tax rate of 25%.

Taxes are complicated...

Yes, taxes are complicated and challenging to manage. On the SS issue you mentioned, I'm not sure how this strategy might work for you, but it's something I plan on doing. I'm subject to WEP and GPO, but my wife isn't. I have a very good pension I'm currently taking and wife has a very modest pension she's also taking.

I plan to take SS at 62 at the beginning of next year (I turn 62 in December), with the WEP reduction. My wife, is 2.5 years older than me and has the higher PIA in our family, will take spousal benefits from my PIA at her FRA at 66 (by filing a Restricted Application for spousal benefits) until 70, when she'll file for her SS retirement benefits earning higher benefits on her own record.

Before we get to 70.5, we have started conversions of funds in our tIRAs and 401Ks into Roth IRAs, to minimize the full brunt of the tax torpedo we'll face with having pensions, Social Security benefits, and RMDs for two comma tIRAs and 401Ks. The tax issues, nonetheless, are great problems to have.

 

[Dreamer]

Individual situations are so different and leaving out some info can completely change how the benefits are figured. The best way to find out the information is to contact social security. If you want to try to figure out things yourself, then you can try to look at social security's manuals. Good luck. https://secure.ssa.gov/apps10/poms.nsf/lnx/0300615000

 

[Alan]

Thanks for the link Dreamer, it was the SS site I had been reading before posing the question, and I do appreciate all the feedback.

To ChrisC, like you we have been doing tIRA to ROTH conversions for a few years now since retiring and will continue to do so up to age 70. My US SS at age 70 will push me to the top of the UK 20% bracket so RMD's will then push me into the 40% bracket, so I have a big incentive. (Fortunately the ROTH conversions will only be taxed in the US even after we become UK resident so we do have plenty of time, unless the rules change of course)

 

[ivinsfan]

There's a lot of confusing and misleading information in this thread. I encourage folks to read more in other places like the Bogelheads forum where more accurate information is provided. But to answer your question, which knowledgeable folks once answered for me, WEP results in adjustments to your PIA, Primary Insurance Amount, the basis for calculating your benefits. Those adjustments affect all benefits derived from your PIA, including spousal benefits, so yes, your spouse takes a reduction in spousal benefits caused by WEP adjustments to the PIA.

SS benefits are one of the most confusing programs around, right behind the tax code...I assume no one takes what they read on a public forum as the gospel truth.Fine to recommend Bogelheads...but before taking any action a person should go right to the source, mainly the SS website...I don't feel anybody is trying to mislead people here. There just isn't a one size fits all for SS.

 

[ChrisC]

SS benefits are one of the most confusing programs around, right behind the tax code...I assume no one takes what they read on a public forum as the gospel truth.Fine to recommend Bogelheads...but before taking any action a person should go right to the source, mainly the SS website...I don't feel anybody is trying to mislead people here. There just isn't a one size fits all for SS.

I apologize if what I posted was interpreted as suggesting that folks here might be intentionally misleading others about SS benefits. I didn't mean to suggest that. It is true that SS benefits are complicated to figure out just like the tax code or government sponsored health or insurance benefits.

I'm not sure going to the source, the SS website or even SS staff, will always lead to the correct answer. I've known several people who, after studying SS website information, went to the local SS office and still got the wrong information from SS staff, the quality of which may vary from office to office, from region to region. I've had the same thing happen to me when helping my Mom apply for Medicaid several years ago -- took me an appeal/reconsideration request and a hired attorney specialist (and my wife and I are two lawyers who worked in Government benefit programs early in our careers at HEW) -- to get that straightened out.

As a retired Federal civil servant, I have the utmost respect for our Government workforce. But we are prone like others to make occasional mistakes in providing information to the public or in carrying out our duties and responsibilities. The point of this is that you really, really need to do your own homework for Government sponsored health or benefit programs, and not take what's posted in public forums or even on a Government website as the Gospel truth.

BTW, in threads on SS in Bogelheads there are two well known posters there, SScritic and Oblivious Investor (Mike Piper), who have a great deal of depth in SS. One of them has even written a book on it: http://www.amazon.com/Social-Security-Made-Simple-Retirement/dp/0981454283/ref=asap_bc?ie=UTF8, which I found out about from this Early Retirement forum when it was offered for free on Kindle.

 

[Clone]

I think that SS, like many other topics, is either simple or complicated depending on your situation. Folks that have to deal with WEP are in a different place than people with straight SS. Folks with one significant earner are different than folks with 2 significant earners. Folks roughly the same age are different than folks with significant difference in age.

When we are amongst folks similar to ourselves, the discussion is more straight-forward. But what works for me, and is obvious to me, may be very different for somebody in a different situation.

This group tends to have folks that are out there on the tail of the curve. I have no idea what happens when you have a WEP SS person with multiple pensions, and spouse with significant age difference, retiring in a different country, where they also have a retirement plan.

My situation- DW and I are approximately the same age. My earnings are significantly larger than hers. We do not need the income asap. We are probably within one standard deviation of the normal SS situation. Easy for many folks to contribute meaningful insight and reference websites.

 

[ivinsfan]

I apologize if what I posted was interpreted as suggesting that folks here might be intentionally misleading others about SS benefits. I didn't mean to suggest that. It is true that SS benefits are complicated to figure out just like the tax code or government sponsored health or insurance benefits.

I'm not sure going to the source, the SS website or even SS staff, will always lead to the correct answer. I've known several people who, after studying SS website information, went to the local SS office and still got the wrong information from SS staff, the quality of which may vary from office to office, from region to region. I've had the same thing happen to me when helping my Mom apply for Medicaid several years ago -- took me an appeal/reconsideration request and a hired attorney specialist (and my wife and I are two lawyers who worked in Government benefit programs early in our careers at HEW) -- to get that straightened out.

As a retired Federal civil servant, I have the utmost respect for our Government workforce. But we are prone like others to make occasional mistakes in providing information to the public or in carrying out our duties and responsibilities. The point of this is that you really, really need to do your own homework for Government sponsored health or benefit programs, and not take what's posted in public forums or even on a Government website as the Gospel truth.

BTW, in threads on SS in Bogelheads there are two well known posters there, SScritic and Oblivious Investor (Mike Piper), who have a great deal of depth in SS. One of them has even written a book on it: http://www.amazon.com/Social-Security-Made-Simple-Retirement/dp/0981454283/ref=asap_bc?ie=UTF8, which I found out about from this Early Retirement forum when it was offered for free on Kindle.

I have that book myself and agree it is very useful,I never thought you meant it was anything intentional with any incorrect info that might end up in this forum. Someone might post incorrect info believing it to be true and can themselves benefit by a polite correction. When someone posts something, I always assume they do it good faith, it's my job to accept or research it as I see fit.
However, your comment about not always believing what SS itself tells you, just proves what a minefield it all is.It's too bad it's all so complicated that we need to have special books written about it! Every thread that starts up about SS and when and how to file just proves my point. I for one am glad to have people around to bounce info and ideas off for another point of view.