Yet another SS question

[ivinsfan]

Quote:

Originally Posted by PawPrint53 If someone plans to take SS at age 70 and dies at 68, for example, could the surviving spouse wait until the deceased would have turned 70 to get the full spousal benefit?

Confusing to understand, but I thought the spousal benefit is capped at 50% of the primary spouse's number at their FRA..in other the words, the spousal benny does not rise after that date...the only number that would change the payout is the age the spouse starts to collect the spousal benefit.

Now, the survivor benefit when one spouse remains and both of them are drawing off the same earnings records, would be the highest of the 2 monthly payments. Is this correct? My DH is now FRA and I will be eligible to draw a spousal later this year if I want to.

[Sunset]

Quote:

Originally Posted by FireBug DW and I are 18 mths apart in age. Both of us have w*rked 30 years and both of our earnings records are about the same. I know SS can have a lot of ins and outs, with file and suspend, various options for married couples and I've done some preliminary research but backed off when I felt "Well, that probably wouldn't help in our situation". Most of these 'creative' solutions seem to apply well to couples with wide differences in age and earning records. While still two years from deciding on a SS strategy, its been my early assumption that... If both partners are aprox the same age, with the same earning records, there really isn't to much to be done 'creatively' speaking. It's more in the vein of when do each of you want to start taking it. So perhaps you good folks can comment with one of the following responses (given both partners are about same age with same SS record). A. There's plenty you can do.... do more research to maximize your value. B. Just decide when you want to take the $ (now, FRA, or 70). I ask because DW will sometimes say... "I've heard about file and suspend, should we look in to it?" I just kind of say... "Don't think it will help in our case". If I'm wrong, I'll delve into more.

You should listen to DW.
Comparing both taking it at FRA, you can do better by file and suspend given your equal age and earnings.
example: you at FRA file and suspend.
DW get 1/2 your FRA, and hers increases 8% per yr
You take yours at 70 (get the max for you).
DW takes hers at 70 (get the max for her).

This is my understanding, you can check it with SS to be sure.

[pb4uski]

Quote:

Originally Posted by ivinsfan Confusing to understand, but I thought the spousal benefit is capped at 50% of the primary spouse's number at their FRA..in other the words, the spousal benny does not rise after that date...the only number that would change the payout is the age the spouse starts to collect the spousal benefit. Now, the survivor benefit when one spouse remains and both of them are drawing off the same earnings records, would be the highest of the 2 monthly payments. Is this correct? My DH is now FRA and I will be eligible to draw a spousal later this year if I want to.

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.

[ivinsfan]

Quote:

Originally Posted by pb4uski 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.

I'd like to know the answer to that one too, as my DH has a business he loves and will keep working...so to put it a little more simply, what happens when you have a file and suspend and a death occurs to the F and S spouse while a spousal benefit is being paid out. That doesn't sound very simple either!

[Sunset]

Quote:

Originally Posted by ivinsfan Confusing to understand, but I thought the spousal benefit is capped at 50% of the primary spouse's number at their FRA..in other the words, the spousal benny does not rise after that date...the only number that would change the payout is the age the spouse starts to collect the spousal benefit.

My understanding is: No.

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

Quote:

Originally Posted by ivinsfan Now, the survivor benefit when one spouse remains and both of them are drawing off the same earnings records, would be the highest of the 2 monthly payments. Is this correct? My DH is now FRA and I will be eligible to draw a spousal later this year if I want to.

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.

[ivinsfan]

Quote:

Originally Posted by pb4uski 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]

Quote:

Originally Posted by Sunset 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]

Quote:

Originally Posted by 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.

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]

Quote:

Originally Posted by pb4uski 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]

Quote:

Originally Posted by 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.

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]

Quote:

Originally Posted by 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.

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]

Quote:

Originally Posted by 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.

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]

Quote:

Originally Posted by 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.

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]

Quote:

Originally Posted by 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...

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.