Social Security: New rule for Withdrawal

[oliverdickens]

I was just listening to the Today show this am, and if I understand it correctly, there is a well hidden rule within SS benefits that one can ask for and get. They said admistration might fight it, but it is legal to do. I am hoping someone knows more on the forum.

Here is what they said:

There is such a thing as deferal of benefits by higher income wage earner which allows that person to defer his/her benefit until normal retirement age, such as 66, while his/her spouse can claim and get the 50% of that spouses benefit beginnng when that higher incomce spouse hits 62, or for full four years of that deferal time.

So our example might help:

My wife is three years older than me and will start getting her benefit starting at 62. She earned less over the years.

When I hit 62, would ask for deferal on my benefits until 66, but request that wife get 50% of mine starting when I hit 62. It would be much more than her own.

Than when I het 66, begin getting my benefits, which I assume would be 100% due since I deferred?

Would my wifes 50% than increase to 50% of my full 100% at this point?

Is there such a option out there or did I just hear wrong or was their explaination way off, as it has been in the past by the experts on the Today Show.

Sounds way to good to be true, but never hurts to ask.

Thanks

 

[REWahoo]

Oliver, the process is known as "file and suspend". You can google for more information.

Edit to add: Here is a thread that discusses the process - http://www.early-retirement.org/forums/f28/social-security-spousal-benefit-21908.html#post404663

 

[oliverdickens]

Thanks for the links. I did look at the link and still confused as everyone seems to have a different interpretation, even SS. My conclusions are:

I am three years younger than my wife and have higher wage earned.

When she is 62, she will take earlier retirement earnings based on HER earnings. They will be reduced, but would be wasted waiting for me to reach 62.

When I reach 62, she will be 65. At that point, I would take the file and suspend option, and she will get 50% of my benefit, AND it will not be reduced because she took her SS benefit based on HER earning. I will take nothing at this point.

She will have this 50% benefit for the next four years until I reach 66.

When I am 66, I will begin taking my benefits at 100%, and she continues at 50% level.

Appreciate knowing if these assumptions are right.

Thanks

 

[REWahoo]

Based on the information below, I question the assumption your spouse's benefits will not be permanently reduced when she begins benefits at 62:

Question:

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

Answer:

If you choose to receive a reduced benefit before full retirement age on your own record, you are not entitled to the full spouse's benefit rate upon reaching full retirement age, and a reduced benefit rate is payable for as long as you remain entitled to spouse's benefits.

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 you are due additional benefits, you will get a combination of benefits equaling the higher spouse's benefit. If you are not eligible for both because your spouse is not yet entitled, but you are due a higher amount when he or she starts receiving Social Security benefits, then the higher spouse's benefit is payable to you when your spouse applies for retirement benefits. Remember, you cannot receive spouse's benefits until your spouse files for retirement.

SS FAQs

 

[oliverdickens]

Thanks. Is over two years before we have to worry about it. Who's knows what will change. Hope it is still there.

Guess will have to balance how much difference there is in her talking her reduced benefit and not having any of her SS benefit for four years until she is 66 to gain 100% of the 50% spousal benefit.

 

[Martha]

Thanks for the links. I did look at the link and still confused as everyone seems to have a different interpretation, even SS. My conclusions are:

I am three years younger than my wife and have higher wage earned.

When she is 62, she will take earlier retirement earnings based on HER earnings. They will be reduced, but would be wasted waiting for me to reach 62.

When I reach 62, she will be 65. At that point, I would take the file and suspend option, and she will get 50% of my benefit, AND it will not be reduced because she took her SS benefit based on HER earning. I will take nothing at this point.

She will have this 50% benefit for the next four years until I reach 66.

When I am 66, I will begin taking my benefits at 100%, and she continues at 50% level.

Appreciate knowing if these assumptions are right.

Thanks

It is very confusing. I did end up agreeing with New Thinking in the thread that REWahoo linked to on how the reduction works in your case. His example using very rough numbers is in this post: http://www.early-retirement.org/forums/showpost.php?p=404930&postcount=40

There will be a permanent reduction, but the reduction comes out of her portion of the benefit, not the portion which is spousal benefit.

 

[Robert the Red]

The poster "SScritic" over at the Bogleheads forum knows a huge amount about Social Security rules, and he's the one to try to get a response from. When he's not away, he seems to reply pretty rapidly -- within a day or so, usually with very detailed and clear explanations.

 

[Bestwifeever]

This is another example of too many choices and thus decisions that drives me crazy--why does this have to be so complicated? [rant off]

 

[Robert the Red]

This is another example of too many choices and thus decisions that drives me crazy--why does this have to be so complicated? [rant off]

Because there are so many people in the US and there are so many different situations. It is confusing, but the plethora of choices does give each individual/couple the chance to adapt the SS payout to their needs:

* take SS early if you need it, or your life expectance is short
* payouts for non/low-working spouses
* disability and survivor benefits
* take SS late if you are working longer, or have money to tide you over (and you can change your mind at any point)
* take SS early, then your situation changes, so you can suspend benefits and get an increased payout later in return

Individually these (and more) all make a lot of sense, but in combination, the system seems designed to be confusing. The SS system has counselors to help people make the decisions, but not to help you plan far ahead -- e.g., is it worth it to save up to delay SS until age 70 in MY situation?

 

[rescueme]

This is another example of too many choices and thus decisions that drives me crazy--why does this have to be so complicated? [rant off]

You have options, since SS is designed to meet many needs (yes, it is flexible ).

Let me give you an example, in my case:

Our son is a disabled adult. He has worked many years, many jobs, but in each of them he did contribute to SS.

It took a long time, but he's finally on Social Security Disability (SSD) and receives enough (based upon his work history) to get by, and live. He also has Medicare, and since he's considered "low income", gets a few advantages on rent/drug rebates.

BTW, he still works (in a shletered workshop) and he still contributes to SS, so in a way he is still paying his own way.

As far as my wife/me? We will both be 62 within the next year. My wife will claim SS at age 62, me at age 70.

Why? Well, we don't suffer from any (known) major health problems; if we did, we would both claim at age 62.

We're fortunate to be able to be financially secure, that we don't need the $$$ for current income.

My wife will take it at age 62. She's the "spendthrift " and will make do with the extra income.

As for me? When my wife turns 66 (her FRA, and we're within a few months age of each other), I'll put a "spousal claim" against her SS. That will result in me getting 50% of her age 66 (not age 62!) benefit, while I delay my SS claim till age 70.

Why wait till age 70 (for myself)? Simple. I'm getting income ages 66-70 (from my wife), while my benefit increases 8% every year from age 66-70. Assuming I pass first (it's in the cards), my wife will then claim full survivor benefit against my SS - at a rate of more than 2.5x her age 62 benefit, and allow her to continue to live in our home which she wishes to do (e.g. "age in place").

This is just to show you how SS is flexible (depending on situation) and the reason the program has evolved with so many options.

Yes, it takes a bit of research to find out what is best for you, but that's nothing different than the rest of life, IMHO...

 

[homestead]

This is confusing.
Are there any SS calculators that take inputs from both spouses
applying all the rules giving real answers?