Social Security Scenerios

[Independent]

he can take spousal any age he wants . he just gets reduced switching to spousal pre his fra but any time after is fine if the reduction is an issue .

there is no time limit on spousal . but waiting past your fra to take spousal does not make much sense.

I'm looking at this:

For example, if you begin receiving your retirement benefit and only later become eligible for a spousal benefit (or vice versa), you will be “deemed” to have applied for the second benefit as soon as you are eligible for it.

I read that this way:

Suppose he starts his own benefit at 62 and she waits to age 70. With the six year age difference, he will be 64 when she starts.

He becomes eligible for a spousal benefit as soon as she starts her benefits.
He is "deemed" to have applied for the spousal benefit. He was born too late to have a choice.

How do you read it?

https://www.ssa.gov/planners/retire/claiming.html

 

[Independent]

I'm trying to follow this, but I'm a bit lost. So, is it agreed that he should file first at 62, and I would then have to wait until he filed before I file. (This would make me 68.5)

I'm not understanding I don't think. His reduced benefit for filing early would be approximately $1050. Then after I have filed, he can file for spousal (does he have to wait until his full retirement age of 67?) Half of my PIA would be approximately $1370. So he would then get MORE than his original $1050 but LESS than half of my benefit? So, our plan for him to file at age 62 and me to file at age 66.5 won't work because of our 6.5 yr age difference - I would be filing before him, and that will lower his spousal somehow? Sheesh.... sorry for the questions.

You can see that people disagree. That's frustrating.

My opinion is that in your case, there won't be any spousal benefit regardless of when you file.

The largest possible spousal benefit is ( half your PIA ) - ( his PIA ). That's what he gets if he starts at his full retirement age (apparently 67).
When I do the math, I get ( .5 x $2,730) - ( $1,500 ). That's less than zero. He doesn't get a spousal benefit if he starts at 67.

If he starts sooner, he will get less than he could have had at 67. But, the age 67 benefit is already zero.

 

[Bogie]

I've got a question about the medicare "hold-harmless" provision which I think means that medicare can't go up more than the cola you get for social security. If you delay social security until say 70 is the medicare increase limited by cola increases or do you actually have to be taking social security to limit the medicare yearly increases? If it doesn't then the break-even analysis for delayed social security is flawed.

 

[mathjak107]

you must collect a check to be covered

 

[mathjak107]

I'm looking at this:


I read that this way:

Suppose he starts his own benefit at 62 and she waits to age 70. With the six year age difference, he will be 64 when she starts.

He becomes eligible for a spousal benefit as soon as she starts her benefits.
He is "deemed" to have applied for the spousal benefit. He was born too late to have a choice.

How do you read it?

https://www.ssa.gov/planners/retire/claiming.html

he is only deemed to have taken spousal if he files after her . in this case he takes his benefit only at 62 . he can then take spousal anytime after she files at any point in time .

but if she files first he automatically gets the larger benefit . if it is spousal he gets spousal . if he is under fra it gets reduced .

so like my wife , she took her benefit at 62 . she is fra now and has been collecting hers all these years . if i file at 65 this year in october then she can get a spousal adder to her early benefit .

she gets half my full less her full added to her early benefit . since she is fra she gets no further reduction on the adder portion . it will be less than 1/2 my full since it is added on to her already reduced lower benefit .

 

[youbet]

I think it is hard to figure out how to maximize Social Security.

Now there's the understatement of the day! And I agree.

You can't project SS outcomes without making assumptions about how long you'll (and spouse if applicable) live and the time value of money, both crap shoots.

Given some wild-ass guess about longevity and future investment returns, you can calculate pro-forma numbers very accurately. Unfortunately, your assumptions are likely to be far from accurate.

So, you pays your money, you take your chances.......

 

[mathjak107]

you either take on more market , interest rate and inflation risk or more longevity risk .

which one is your choice ? that is what it comes down to .

i already have lots of market risk so diversifying a bit in to longevity risk , especially with a spouse and having two horses in the race with one bet i am delaying a bit .

 

[Independent]

he is only deemed to have taken spousal if he files after her in this case he takes his benefit only at 62 . he can then take spousal anytime after she files at any point in time .

This is the SS website:

For example, if you begin receiving your retirement benefit and only later become eligible for a spousal benefit (or vice versa), you will be “deemed” to have applied for the second benefit as soon as you are eligible for it.

https://www.ssa.gov/planners/retire/claiming.html

but if she files first he automatically gets the larger benefit . if it is spousal he gets spousal . if he is under fra it gets reduced .

so like my wife , she took her benefit at 62 . she is fra now and has been collecting hers all these years . if i file at 65 this year in october then she can get a spousal adder to her early benefit .

she gets half my full less her full added to her early benefit . since she is fra she gets no further reduction on the adder portion . it will be less than 1/2 my full since it is added on to her already reduced lower benefit .

Note that the law has changed.

The Bipartisan Budget Act of 2015 (Public Law 114-74; November 2, 2015), made some changes to Social Security’s laws about claiming retirement and spousal benefits

And the changes only apply to people who turn 62 on or after January 2, 2016.

I expect that your wife is on the prior side of that line. I'm sure the husband in the OP is on the after side.

 

[mathjak107]

This is the SS website:https://www.ssa.gov/planners/retire/claiming.html




Note that the law has changed. And the changes only apply to people who turn 62 on or after January 2, 2016.

I expect that your wife is on the prior side of that line. I'm sure the husband in the OP is on the after side.

again don't get confused .

we are not using restricted application . birth date has nothing to do with the way spousal works in our case . those rules i stated apply to everyone.

if instead i waited until my fra and filed restricted application for 1/2 my wife's while letting my own grow to 70 that is filing restricted application . that is what you have to be grand fathered for . we are not doing that .


as far as deeming under the new law and the quotes you posted ..

what they are saying is under the old law at fra you used to be able to take spousal instead of your own benefit . you had a choice through either file and suspend or restricted application to just take spousal and let your own benefit grow . .

now under the new changes ,whether you apply pre fra or after fra you cannot choose either your own or just spousal anymore , unless you were grand fathered with restricted application . , you always are deemed taking your own now and if a spousal benefit is available because your spouse filed first you are deemed to have taken both your own and spousal . but if the higher spouse has not filed yet you are not eligible for spousal until they file .

it is just as i said my wife and i are doing it .

she filed at 62 ,,, i will file at 65 when she is 67 since she is older . once i file at 65 she becomes eligible for spousal so she gets the spousal adder on top of her early benefit . .. that is how it is done for everyone regardless of birth date .

what you are referring to is restricted application or file and suspend . file and suspend is gone for us but restricted is an option .. that is this :

had we went the restricted application route since we were grand fathered , we could have done this if i wanted to wait until 70 and we could have gotten the biggest amount .

she started collecting at 62 . at her fra she stops her benefit which she can do . anyone can do a start stop once they reach fra . her benefit starts growing again at 8% a year while stopped.


when she hits 70 she takes her benefit again , at that time i would be 68-10 months .


i file restricted application for 1/2 hers leaving my own to grow to 70 . at 70 i take my benefit at which point she is eligible for the spousal adder now that i filed .

see the difference ? in scenario 2 a benefit is not taken and allowed to grow while only spousal is taken . that is what you can't do anymore . scenario 1 is open to anyone to do .

 

[Cut-Throat]

It's slightly different for me (divorced and not grandfathered in under the 2015 rules). Bedrock Capital's web site recommends I file for my benefit at age 69 because it thinks I will die at 83. Kotlikoff's book recommends that I wait to age 70. Although the difference in NPV between 69 and 70 is only a few thousand bucks. Maybe I'll see how sick I feel in the summer of 2038 and then decide.

Seriously ? ....... Imagine yourself lying on your deathbed and being happy because you took SS early or Sad because you waited.

Delaying SS to age 70 is old age insurance. If you die early, you don't collect, but you're dead, so you won't care.

Think of it like Fire Insurance. If you don't have a Fire, do you feel 'ripped off' because you didn't get to collect on it?

 

[mathjak107]

delaying social security is a decision you will never live to regret . lol

 

[SecondCor521]

Seriously ? ....... Imagine yourself lying on your deathbed and being happy because you took SS early or Sad because you waited.

Delaying SS to age 70 is old age insurance. If you die early, you don't collect, but you're dead, so you won't care.

Think of it like Fire Insurance. If you don't have a Fire, do you feel 'ripped off' because you didn't get to collect on it?

I think one of us is misunderstanding the other.

Yes, I'm serious about deciding at 69 whether to take it then or wait another year.

I don't see a whole lot of difference between taking SS at 69 vs. 70. As noted, the NPV difference is about $3K, and that's over the remainder of my life, so essentially it's a coin toss.

I certainly understand about how SS insures against longevity risk. In my particular case it's insurance I probably won't even need.

I doubt I'll be thinking about SS one way or the other on my deathbed. I'll probably be thinking about my kids.

 

[Cut-Throat]

I think one of us is misunderstanding the other.

Yes, I'm serious about deciding at 69 whether to take it then or wait another year.

I don't see a whole lot of difference between taking SS at 69 vs. 70. As noted, the NPV difference is about $3K, and that's over the remainder of my life, so essentially it's a coin toss.

I certainly understand about how SS insures against longevity risk. In my particular case it's insurance I probably won't even need.

I doubt I'll be thinking about SS one way or the other on my deathbed. I'll probably be thinking about my kids.

I was only commenting on YOUR Statement of "Maybe I'll see how sick I feel in the summer of 2038 and then decide."

I just don't see how this factors into this decision?

 

[Independent]

now under the new changes ,whether you apply pre fra or after fra you cannot choose either your own or just spousal anymore , ... . , you always are deemed taking your own now and if a spousal benefit is available because your spouse filed first you are deemed to have taken both your own and spousal . but if the higher spouse has not filed yet you are not eligible for spousal until they file .

I went through your post and deleted everything except the part that applies to the couple in the OP. They are not grandfathered into anything, they are operating with the new law.

So, they are just left with this paragraph. Maybe I missed something that is relevant to them. If so, please add it.

This is an earlier post that bothered me:

he should file first at 62 for his benefit only . after he files then she files when she likes as long as it is after him . .

he then can then put in a spousal claim at his fra and get the full spousal adder on top of his early benefit . it will never be equal to 1/2 the higher benefit because it goes on his early benefit and that was reduced but he gets no further spousal cuts for being under fra .

In the OP case, the husband is six years younger than the wife, and has an fra of 67.

I don't see how he can wait till age 67 to start a spousal benefit. She will have to start when she is 70 and he is 64. At that time, he will be "deemed" to be applying for both benefits. If any spousal is available, he will have to start then.

Maybe you can explain otherwise.

-------

I think we should also look at the numbers for this case. It seems to me that his PIA is more than half her PIA. So, in their case, spousal is off the table regardless of ages. Do you agree with that?

All this discussion of spousal benefits assumes that his PIA is lower than the OP states - you used $1,000 in post #11. I've been going with to try to sort this out in general.

 

[SecondCor521]

I was only commenting on YOUR Statement of "Maybe I'll see how sick I feel in the summer of 2038 and then decide."

I just don't see how this factors into this decision?

Ah. Sorry, sometimes I write obscure stuff.

Whether to take SS at 69 or 70 depends on my life expectancy. I was born in 1969 and will turn 69 in the summer of 2038, at which point I may know if I'm healthy enough to make it worth waiting until I turn 70 in the summer of 2039, or if I should take it early because my life expectancy is on the shorter side of things.

HTH.

 

[Sunset]

I've got a question about the medicare "hold-harmless" provision which I think means that medicare can't go up more than the cola you get for social security. If you delay social security until say 70 is the medicare increase limited by cola increases or do you actually have to be taking social security to limit the medicare yearly increases? If it doesn't then the break-even analysis for delayed social security is flawed.

A very good point, perhaps in the "old" days Medicare was not rising as fast as now compared to the normal inflation.
And this extra cost of Medicare would be forever charged, so it's equivalent to a permanent reduction in delayed SS.

 

[SecondCor521]

A very good point, perhaps in the "old" days Medicare was not rising as fast as now compared to the normal inflation.
And this extra cost of Medicare would be forever charged, so it's equivalent to a permanent reduction in delayed SS.

It's even worse. Because the SSA is required to fund Medicare to certain percentage levels and the hold-harmless protects those who are taking SS, the shortfall is disproportionately made up by those not taking SS. So there can be something akin to a "Medicare squeeze" on some people.

 

[mathjak107]

I went through your post and deleted everything except the part that applies to the couple in the OP. They are not grandfathered into anything, they are operating with the new law.

So, they are just left with this paragraph. Maybe I missed something that is relevant to them. If so, please add it.

This is an earlier post that bothered me:



In the OP case, the husband is six years younger than the wife, and has an fra of 67.

I don't see how he can wait till age 67 to start a spousal benefit. She will have to start when she is 70 and he is 64. At that time, he will be "deemed" to be applying for both benefits. If any spousal is available, he will have to start then.

Maybe you can explain otherwise.

-------

I think we should also look at the numbers for this case. It seems to me that his PIA is more than half her PIA. So, in their case, spousal is off the table regardless of ages. Do you agree with that?

All this discussion of spousal benefits assumes that his PIA is lower than the OP states - you used $1,000 in post #11. I've been going with to try to sort this out in general.

to funny , i did use 1k in my example and now working on my desktop i see it was 1500 . on my nook it looked like 1000 to my eyes at first glance and i didn't realize it .

so in this case the base adder would be 1365 minus 1500 , in which case there will never be spousal so you were correct about that part .

but just for the education lets assume it was the 1k i thought it was .

so the scenario would shake out that assuming his was 1k and not 1500 , the spousal base amount would be 1365-minus 1000 which leaves a spousal benefit of 365 left . but that 365 will be reduced if he takes it earlier than fra .

the earliest he could file would be 62 which makes her 68 . at 62 if he filed first he would get only his benefit at first . there is no 2nd componenant until she files .

so actually she could wait 2 years until he is 64 to file and the 365 will not be reduced as much as at 62 .

so the closest he could get to fra is 64 and her 70 .

so he would become eligible for spousal at 64 but it is not an automatic process . he has to fill out an application to start getting spousal or he does not get a thing additional . .

the ss office told us that once i file my wife has to complete the process by filing a spousal application or no change will happen to her amount even though she is eligible . . it would be silly though not to grab it as soon as you are eligible .

so in this hypothetical example the wife would get her 70 benefit . he would get his early 64 benefit as one component , the adder of 365 is reduced 25/36 of one percent for each month before 67, up to 36 months. If the number of months exceeds 36, then the benefit is further reduced 5/12 of one percent per month.

if it was a more typical closer age situation and he was able to hit fra before taking spousal the calculation is much more simple .

it is just 1/2 the primary amount less the primary amount of the lower spouse . any difference is added to his own benefit .

what makes deciding when to co-ordinate the filing is there are two moving targets .

while me filing gets my wife her spousal adder faster , the fact i get reduced more taking it sooner can offset the spousal gain .

so we will balance it out with me taking ss at 65 . i am concerned about medicare increasing a lot more for me if i don't file .

we could get the biggest bang for the buck with me filing restricted application and waiting until 70 but since we are pretty good financially i see no point running until 70 before taking mine and her getting spousal .

i intentionally picked 65 because i still like doing consulting work 1 day a week and occasionally helping out on some big projects . the year before you are fra special rules apply and you can earn like 2x what you can in earlier years if collecting before having to give back money

 

[MBSC]

And this extra cost of Medicare would be forever charged, so it's equivalent to a permanent reduction in delayed SS.

Not forever but until inflation is high enough to reset everyone at the standard Part B premium, excluding IRMAA.

In 2010 and 2011, with no Social Security COLA, the hold‐harmless provision prevented the majority of Medicare beneficiaries from paying any increase in Part B premiums. Thus, in both 2010 and 2011, the majority of Medicare beneficiaries paid monthly premiums of $96.40, which was the standard Part B premium amount in 2009.

Roughly one‐quarter of all Part B enrollees were not held harmless in 2010 and 2011, including new Medicare enrollees (3 percent); higher‐income beneficiaries (5 percent); and Medicare beneficiaries who do not have their Part B premium deducted from their Social Security benefit payment (19 percent) – this group consists mainly of beneficiaries dually eligible for Medicare and Medicaid, for whom Medicaid pays the monthly Part B premium (17 percent). These beneficiaries were subject to a higher Part B premium than those who were protected by the hold‐harmless provision to ensure that Part B enrollee premium contributions continued to cover 25 percent of program costs. The standard monthly premium for these beneficiaries was $110.50 in 2010 and $115.40 in 2011.

With a 3.6 percent increase in the Social Security COLA scheduled for 2012, fewer beneficiaries will be affected by the hold-harmless provision, and the beneficiary portion of annual Part B expenditures will be spread across a greater share of Part B enrollees than in 2010 and 2011. This results in a monthly Part B premium of $99.90 in 2012 – an increase for the majority of beneficiaries who have been protected by the hold‐harmless provision in 2010 and 2011 who were paying $96.40, and a decrease for all others who were paying the standard amount in both years.

The monthly Medicare Part B premium for those who have been paying the 2011 standard Part B premium (i.e., not protected by the hold‐harmless provision this year) will decrease by $15.50 per month, from $115.40 to $99.90 (a 13.4 percent decrease). For those who have been paying the 2010 standard Part B premium (e.g., beneficiaries who enrolled in Medicare in 2010), the monthly Part B premium will decrease by $10.60 per month, from $110.50 to $99.90 (a 9.6 percent decrease).

Reference: https://kaiserfamilyfoundation.file...ups-and-downs-of-medicare-part-b-premiums.pdf

 

[Independent]

so in this case the base adder would be 1365 minus 1500 , in which case there will never be spousal .

Thanks.

I wanted to highlight this part of your post because there's a (very slim) chance that the original poster has had the patience to read all the way to this point.

If so, the correct answer to the original question is:

"Your husband will not qualify for a spousal benefit because his PIA is more than 50% of your PIA. So, don't waste time trying to understand spousal benefit rules."

I think we agree on that.

 

[mathjak107]

yep , now that i got their numbers correct we agree

 

[Independent]

but just for the education lets assume it was the 1k i thought it was .

so the scenario would shake out that assuming his was 1k and not 1500 , the spousal base amount would be 1365-minus 1000 which leaves a spousal benefit of 365 left . but that 365 will be reduced if he takes it earlier than fra .

the earliest he could file would be 62 which makes her 68 . at 62 if he filed first he would get only his benefit at first . there is no 2nd componenant until she files .

so actually she could wait 2 years until he is 64 to file and the 365 will not be reduced as much as at 62 .

so the closest he could get to fra is 64 and her 70 .

And, I agree with this. He cannot postpone to fra because of the six year age difference.

In general, it seems that with the new rules, the choices for spousal benefit are very restricted.

I'll use "he" to represent the lower earning spouse and "she" to represent the higher earning spouse.

Either:
- she starts first, and he has to start spousal benefits as soon as he starts his own benefits, or
- he starts first, and he has to start spousal benefits as soon as she starts her benefits.

Those statements are true regardless of the relative ages, though the relative ages will determine how much choice the couple has on start-benefit dates.

Is that the way you see it?

 

[mathjak107]

i think that if you are eligible for spousal once your spouse files that it would be in your best interest to take it asap as it will be higher than your own early benefit .

don't forget you always get your early benefit anyway if pre fra so any reduction on the spousal adder is on additional money you are not getting yet .

 

[Independent]

i think that if you are eligible for spousal once your spouse files that it would be in your best interest to take it asap as it will be higher than your own early benefit .

don't forget you always get your early benefit anyway if pre fra so any reduction on the spousal adder is on additional money you are not getting yet .

I won't try to sort out the trade offs between getting a spousal benefit earlier at a lower monthly rate or later at a higher monthly rate.

I just think that with the new deeming rules, people don't have the choice.

 

[mathjak107]

me neither but i don't see how taking spousal early would be lower unless it was a very very small amount .. the biggest difference would be that your spouse has to file so if they file early so you can get spousal earlier they are taking a 6-8% hit per year in their own benefit .

remember you already are keeping your early benefit with or without spousal and the further reduction is on the spousal portion for the most part .

but i have no desire to start doing the math since most are taking spousal based on when the higher earner decides to file anyway since they don't have a choice at that point . .