Help understanding Social Security Spousal Benefit

[mountainsoft]

I have a basic idea of how SS spousal benefits work, but some of the details are confusing me. Full retirement age is 67 for both my wife and I, but for a variety of reasons we both plan to start withdrawals at 62. I know the advantages of waiting till FRA, but that's another discussion.

For simplicity, let's say my monthly benefit is $500 when I turn 62.

My wife will turn 62 five years later, and her benefit will be $1500.

What will happen to my benefit when her benefits start? Will mine stay at $500, or will I receive $750 (half of hers) as a spousal benefit?

If the latter is true, will I need to apply for spousal benefits, or will that be automatic as part of her application?

 

[Drake3287]

From what SS told me, nothing will happen to either parties benefit. The other issue is if you or her have a pension in addition to SS. If that's the case, the person with the pension will generally get a "reduced" benefit from SS.

I just had this conversation with SS the other day. In my case I have a government pension but I'm shy 20 quarters for SS because I never had to pay into SS with my government employer. I asked what would happen if I went out and got a part time job to reach my 40 quarter mark, she replied that because of my current pension amount I wouldn't receive anything from SS. I basically make to much and I would need to work many more years in order to get even a small check from them.

She specially said my situation wouldn't affect my wife's SS check.

 

[mountainsoft]

I found this calculator on the social security web site:

https://www.ssa.gov/OACT/quickcalc/spouse.html#calculator

Based on my age, if I start taking social security at age 62, it looks like my spousal benefit would be 32.71% of my wife's benefit. If my wife receives $1500, the spousal benefit would only be $490. That's less than my own $500 benefit so it looks like I won't receive any spousal benefit and will just rely on my own. That's what I was already planning for, so no change to our plans.

 

[mountainsoft]

The other issue is if you or her have a pension in addition to SS. If that's the case, the person with the pension will generally get a "reduced" benefit from SS.

I believe that only applies to government pensions that did not pay social security taxes.

https://www.fool.com/investing/gene...-pension-cut-my-social-security-payments.aspx

 

[Running_Man]

I found this calculator on the social security web site:

https://www.ssa.gov/OACT/quickcalc/spouse.html#calculator

Based on my age, if I start taking social security at age 62, it looks like my spousal benefit would be 32.71% of my wife's benefit. If my wife receives $1500, the spousal benefit would only be $490. That's less than my own $500 benefit so it looks like I won't receive any spousal benefit and will just rely on my own. That's what I was already planning for, so no change to our plans.

You are looking at this wrong the 32.71% is the percentage of the PRIMARY INSURANCE AMOUNT OF YOUR WIFE, which would be what she was entitled to at age 67 not what she originally claims. Assuming your wife’s primary insurance will be $2210 at age 67 you would get .3271 of that when she claims or $723 per month

 

[mountainsoft]

You are looking at this wrong the 32.71% is the percentage of the PRIMARY INSURANCE AMOUNT OF YOUR WIFE, which would be what she was entitled to at age 67 not what she originally claims.

Yes, I did miss that detail. Thanks for the clarification.

Her benefit at FRA is roughly $2000, which would put my spousal benefit at $654 at age 62. That's only $100 more than my own benefit, but I suppose every little bit helps.

I'm still not clear whether the spousal benefit is automatic when she applies for SS, or if I would have to apply for the spousal benefit in addition to applying for my own benefit?

 

[braumeister]

I'm still not clear whether the spousal benefit is automatic when she applies for SS, or if I would have to apply for the spousal benefit in addition to applying for my own benefit?

You will have to apply yourself, but you can both visit your local SS office and do both applications at the same time. They're quite used to it, and that's what I would recommend. You could even do it together over the phone.

 

[Running_Man]

Yes, I did miss that detail. Thanks for the clarification.

Her benefit at FRA is roughly $2000, which would put my spousal benefit at $654 at age 62. That's only $100 more than my own benefit, but I suppose every little bit helps.

I'm still not clear whether the spousal benefit is automatic when she applies for SS, or if I would have to apply for the spousal benefit in addition to applying for my own benefit?

I am pretty sure you have to apply for that as nothing is automatic much in Social Security, but I think you can apply for it online

 

[mathjak107]

I have a basic idea of how SS spousal benefits work, but some of the details are confusing me. Full retirement age is 67 for both my wife and I, but for a variety of reasons we both plan to start withdrawals at 62. I know the advantages of waiting till FRA, but that's another discussion.

For simplicity, let's say my monthly benefit is $500 when I turn 62.

My wife will turn 62 five years later, and her benefit will be $1500.

What will happen to my benefit when her benefits start? Will mine stay at $500, or will I receive $750 (half of hers) as a spousal benefit?

If the latter is true, will I need to apply for spousal benefits, or will that be automatic as part of her application?

you only get your own benefits first off . the spouse with the lower benefit may see a boost to their early benefit .

you take 1/2 the higher full benefit and subtract the full lower benefit . the difference is added to the smaller early benefit you are getting ..

the math is always based on the full benefit amounts . where you get penalized is that the difference gets added to the early benefit amount so it works out to less than 1/2 the higher amount if you don't wait until your fra .

so as an example take your wifes full fra amount and cut it in half , that is 1k based on the 2k . now take your full amount at fra and subtract it .

so lets say your full is 750 . (i am just pulling a number out of the air ) .

the difference of 250 gets added on to your 500 bucks so you get 750.00 . at your fra you would have gotten 1k instead . .

 

[pb4uski]

OP, have you run your situation through SSAnalyze? You can also see your plan in it too.

 

[mountainsoft]

OP, have you run your situation through SSAnalyze? You can also see your plan in it too.

Yep. Obviously, the ideal is for me to wait till FRA and my wife to wait till 70. But, ideal doesn't pay the bills till we're that old.

I ran our 62/62 plan through SSAnalyze. I gave it my FRA of 807, but for some reason is says I would receive 682 at age 62. Social Security says I'll only get 555 at 62.

It also says I'll receive 37.63% for a spousal benefit, but the Social Security calculator says I would only get 32.71%.

So, there's a bit of inaccuracy in the SSAnalyze calculations I think.

We're still six years out from retirement, so much of this is still guesswork at this point. I'm only estimating a 5% return for my IRA investment, so if that works out better when we reach retirement we might be able to push back the SS applications a little farther.

 

[mountainsoft]

OK, I think I may be misunderstanding the spousal benefit again.

I was under the impression if I applied for my SS at 62, that would also be the age they would use to calculate my spousal benefit. However, this article makes me think I'm looking at this wrong:

Maximize the Social Security Spousal Benefit

I plan to apply for my own social security at age 62. So that's the date I initially plugged into the SS spousal benefit calculator (and got the 32.71% result).

However, I can't apply for the spousal benefit until my wife applies for her own SS at age 62. At that point I will be 67. If I apply for spousal benefit at that age, I would receive 49.66% of her FRA amount.

If I am understanding that correctly, 49.66% of her FRA (1991) would be 988, a big jump from my own 555 benefit.

Can anyone confirm if this is how this works?

 

[H2ODude]

I'd just say that I've heard visits to SS office can be less than fun. We did our applications on the web easy peasy. DW is one month older and has a lesser benefit so she applied for hers at FRA (66). I was one month behind and applied for what is my spousal of hers, one half. When I turn 70 I'll go for mine and she will drop hers and apply for half of mine. At least that's how I understand it will work.

Over our many years of working and contemplating what retirement finances would be like, always discounted SS for a large part. Turns out Uncle Sam is dropping about $1,300 a month in the bank account after deducting for Medicare. Sweet. Don't want to rush to 70 (especially not 70-1/2) but that should about double then. I guess we can use it to pay taxes on springing those dollars from the tIRA. Life is good.

 

[Running_Man]

OK, I think I may be misunderstanding the spousal benefit again.

I was under the impression if I applied for my SS at 62, that would also be the age they would use to calculate my spousal benefit. However, this article makes me think I'm looking at this wrong:

Maximize the Social Security Spousal Benefit

I plan to apply for my own social security at age 62. So that's the date I initially plugged into the SS spousal benefit calculator (and got the 32.71% result).

However, I can't apply for the spousal benefit until my wife applies for her own SS at age 62. At that point I will be 67. If I apply for spousal benefit at that age, I would receive 49.66% of her FRA amount.

If I am understanding that correctly, 49.66% of her FRA (1991) would be 988, a big jump from my own 555 benefit.

Can anyone confirm if this is how this works?

NO because you claimed at 62 that is the date they will use as effective date for spousal benefit as well

 

[Running_Man]

you only get your own benefits first off . the spouse with the lower benefit may see a boost to their early benefit .

you take 1/2 the higher full benefit and subtract the full lower benefit . the difference is added to the smaller early benefit you are getting ..

the math is always based on the full benefit amounts . where you get penalized is that the difference gets added to the early benefit amount so it works out to less than 1/2 the higher amount if you don't wait until your fra .

so as an example take your wifes full fra amount and cut it in half , that is 1k based on the 2k . now take your full amount at fra and subtract it .

so lets say your full is 750 . (i am just pulling a number out of the air ) .

the difference of 250 gets added on to your 500 bucks so you get 750.00 . at your fra you would have gotten 1k instead . .

This is not how it is calculated, as a spouse, you can claim a Social Security benefit based on your own earnings record, or you can collect a spousal benefit that will provides 50% of the amount of your spouse’s Social Security benefit as calculated at their full retirement age (FRA), which depends on the year of birth

If you file before you reach your own FRA, your spousal benefit will be calculated as 50% of what your spouse would get at their FRA, but then it will also be further reduced because of filing early.

You are automatically entitled to receive the benefit that provides you the higher monthly amount and Social Security makes this determination for you based on mathematical reductions in payments based on the year of your birth and the year of your filing for Social Security. When the spouse claims has no effect on the calculation of the spousal benefit, only the ability to collect a spousal benefit.

From the Social Security website, "If you qualify and apply for your own retirement benefits and for benefits as a spouse, we always pay your own benefits first. If your benefits as a spouse are higher than your own retirement benefits, you will get a combination of benefits equaling the higher spouse benefit.”

At full retirement age for a spouse they will always be eligible for 1/2 of the the full retirement age of the spouse, there is never a reduction in that minimum amount, the only reduction is from the Social Security based on the reduced benefit percentage table, which is applied to the spousal benefit as well as your own benefit at an equal percentage. You are only elegible for the higher of the calculation of the reduced spousal benefit or your own benefit, if your own is lower there is a distinction Social Security makes saying you are paid your own benefit first then an addition to equal the spousal benefit, but in reality you get the higher of reduced spousal or your own reduced determined by the age when you take Social Security and the year you were born.

 

[mathjak107]

what i said is 100 % correct as far as figuring the spousal benefit pre fra which is what the op said they are doing . . there is no question that is how it is calculated

it is 1/.2 the higher full benefit less the lower full benefit and the difference is added to the early lower benefit that is the spouses own . that is how the reduction is arrived at for filing early . it comes from the fact the spousal adder is on the early benefit amount ..


pre fra the lower earning spouse gets their own early benefit .

so if the higher benefit at fra is 2k than 1/2 is 1000 . if the lower benefit at fra was 750 and they are getting 500 as an early benefit than the 1000- -750 leaves 250 dollars that gets added to the early benefit of 500 . there benefit would be only 750 , not the 1000 it would have been if they waited until fra

http://www.investmentnews.com/artic...about-social-security-benefits-for-spouses-of

 

[pb4uski]

Yep. Obviously, the ideal is for me to wait till FRA and my wife to wait till 70. But, ideal doesn't pay the bills till we're that old.

I ran our 62/62 plan through SSAnalyze. I gave it my FRA of 807, but for some reason is says I would receive 682 at age 62. Social Security says I'll only get 555 at 62.

It also says I'll receive 37.63% for a spousal benefit, but the Social Security calculator says I would only get 32.71%.

So, there's a bit of inaccuracy in the SSAnalyze calculations I think.

We're still six years out from retirement, so much of this is still guesswork at this point. I'm only estimating a 5% return for my IRA investment, so if that works out better when we reach retirement we might be able to push back the SS applications a little farther.

The calculations are pretty straight forward and I have not experienced any inaccuracies with SSAnalyze... it is likely input or that the SSAnalyze numbers that you are looking at are after projected COLA and the SS numbers are not.

You can test that hypothesis by running SSAnalyze with a assumed COLA of 0%.

 

[ivinsfan]

No offence OP but I think a little more reading at the SS site might clear up some of your confusion. It can be confusing reading but take your time.

Several people on this thread have tried to explain reductions for age when claiming benefits, this clock starts ticking on the day you apply for either SS or spousal benefits and cannot be reset.

 

[Running_Man]

so if the higher benefit at fra is 2k than 1/2 is 1000 . if the lower benefit at fra was 750 and they are getting 500 as an early benefit than the 1000- -750 leaves 250 dollars that gets added to the early benefit of 500 . there benefit would be only 750 , not the 1000 it would have been if they waited until fra

http://www.investmentnews.com/artic...about-social-security-benefits-for-spouses-of

No there is no question in my mind you are wrong on this and the blog you linked even states you use a lower spousal SS amount if you retire before FRA.

At that point, she could step up to a larger spousal benefit if it was higher than her own, but her total retirement benefit would be worth less than half of the husband's PIA.

Remember, spousal benefits are based on 50% of the higher earner's full retirement age benefit if collected at full retirement age — less if collected earlier.

It is only if you take SS after full retirement age that the method you describe would be used but that is not the scenario the OP outlined.

If the wife’s full retirement age social security is $1,500 then he will get 32.71% of that amount as his social security or $490.65. Now the OP has actually stated his wife’s FRA benefit is around $2,000 which means his total SS he will get when he claims spousal SS will be $2,000 * .3271 = $654.52, not 1000 (1/2Spouse SS) - 750 (OP full retirement benefit)+500 OP early benefit = $750.

 

[mountainsoft]

You can test that hypothesis by running SSAnalyze with a assumed COLA of 0%.

Yep, that must have been it. With a 0% COLA it shows 564 which is only a few dollars from the 555 SS states. Close enough for me.

I'm still not sure why SSAnalyze says I would get 37.6% for spousal benefits, but I'm not expecting exact numbers this far out.

 

[mathjak107]

you are not reading what i wrote .

it is a very simple calculation . the reduction is already on the early benefit .

they are starting out with 500,.00 ..

you then take 1/2 the full of the higher benefit , subtract out what the full would have been for the lower benefit if they delayed .

that difference is added TO THE EARLY BENEFIT OF 500.00 . that brings the lower benefit to 750.00 using the numbers above . it would have been 1k if they waited to fra and got half but because they didn't , they get less than half ..

i just guessed at the full amount but if you took his actual full and subtracted it you would find the reduction is correct .

 

[mountainsoft]

No offences OP but I think a little more reading at the SS site might clear up some of your confusion. It can be confusing reading but take your time.
Several people on this thread have tried to explain reductions for age when claiming benefits, this clock starts ticking on the day you apply for either SS or spousal benefits and cannot be reset.

Thanks! Unfortunately, I haven't found anything on the SS site that makes this as clear as you have.

Filing early for my own benefits also reduces my spousal benefits later. Got it!

 

[pb4uski]

mathjak, are you also considering that the spousal add-on also gets discounted if the beneficiary starts receiving benefits before their FRA... so the 50% can become as little as 35.21%.

Enter your date of birth (month/day/year format): 12/31/1950

Enter the effective month and year for which you would like to begin receiving benefits: 12/2016

(You must be at least age 62 to begin receiving benefits.)

Compute

You will reach normal retirement age in
December 2016.

Effect of the retirement choice on your benefit:

You choose to receive benefits when normal retirement age. Your benefit will be 50 percent of the worker's primary insurance amount.

Enter your date of birth (month/day/year format): 12/31/1950

Enter the effective month and year for which you would like to begin receiving benefits: 1/2013

(You must be at least age 62 to begin receiving benefits.)

Compute

You will reach normal retirement age in
December 2016.

Effect of the retirement choice on your benefit:

You choose to receive benefits 47 months before normal retirement age. Your benefit will be 35.21 percent of the worker's primary insurance amount.

https://www.ssa.gov/OACT/quickcalc/spouse.html#calculator

 

[mathjak107]

the spousal add on has no bearing on when the higher earner takes ss . it is a fixed amount based on the formula i gave which only uses the primary insurnace rate (fra) regardless . .

there is no double reduction on spousal . the only reduction is the early filer gets the add on put on to their lower benefit.

the higher benefit filing early only effects survivor benefits . spousal is unaffected as far as the formula goes . the reduction already took place on the lower benefit , it does not happen to both .

 

[pb4uski]

If someone takes SS early, both the benefit based on their own work record and the spousal benefit are reduced... and they are reduced by different factors.

See https://www.ssa.gov/OACT/quickcalc/earlyretire.html

Assume that someone born in 1943-1954 retires at age 62... is due $750 PIA at their FRA based on their own work record and their spouse has a $2,000 PIA at their FRA.

The person would get $562.50 based on their own work record [$750 * (1-25%)] and $165 spousal add-on ([($2,000 * 50%)-$750] * (1-30%)) for a total of $727.50.

From what you wrote, you seem to be suggesting they would receive $812.50 ($562.50 + $250) ... there would be no reduction on spousal.