Social Security Scenerios

[Debinnov a]

I am so confused by spousal filing, even after reading up on the latest changes. One thing I'm unsure about is if I plan on taking my SS at age 66 1/2 PIA (current age is 60) what options does my DH (who is six years younger and lower earner) have?

My PIA is $2730
His PIA approx $1500

I think the option of him taking spousal, then switching to his own has been eliminated. (We were under the cut off age.) So really, he either takes his own at 62 or 67 or he could get a reduced spousal at age 62? I don't think it makes since for him to take later than 62, due to age difference, health and being the lower earner. So, instead of half of my $2730, his spousal if filing at age 62 would be discounted how much?

Am I looking at this correctly? Any suggestions. It would be helpful to know approximate numbers for planning purposes.


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[SecondCor521]

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

The book "Get What's Yours" by Kotlikoff et al. seems to be a good book to read. I'm reading it right now and it seems that it might be a good resource for you also. The latest edition has been revised to take into account the recent changes that were signed into law in, I believe 2015, and that I believe you are referencing.

The book is very clearly written and strikes me as accurate. It does seem moderately repetitive, but you can combat that by skipping the parts that don't apply.

You can get approximate numbers from the book also.

Good luck!

 

[savory]

This worked for me. SSAnalyze - Bedrock Capital Management. SSAnalyze - Bedrock Capital Management

It was consistent with the Kotlikoff suggestion for me.

 

[SecondCor521]

This worked for me. SSAnalyze - Bedrock Capital Management. SSAnalyze - Bedrock Capital Management

It was consistent with the Kotlikoff suggestion for me.

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.

 

[savory]

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.

I would refer to 69 or 70 for SS as being "consistent" especially with a 20 year window. As you point out, your life expectancy estimation is making the difference. Hopefully, the summary provided the direction you were looking for.

 

[SecondCor521]

I would refer to 69 or 70 for SS as being "consistent" especially with a 20 year window. As you point out, your life expectancy estimation is making the difference. Hopefully, the summary provided the direction you were looking for.

I'd already planned to take it at 70 so I ran the website calculator just out of curiosity. Note I'm not the OP, who has a more complicated situation than mine, trying to balance spousal benefits, two earnings records, and age and health differences.

 

[Independent]

I am so confused by spousal filing, even after reading up on the latest changes. One thing I'm unsure about is if I plan on taking my SS at age 66 1/2 PIA (current age is 60) what options does my DH (who is six years younger and lower earner) have?

My PIA is $2730
His PIA approx $1500

I think the option of him taking spousal, then switching to his own has been eliminated. (We were under the cut off age.) So really, he either takes his own at 62 or 67 or he could get a reduced spousal at age 62? I don't think it makes since for him to take later than 62, due to age difference, health and being the lower earner. So, instead of half of my $2730, his spousal if filing at age 62 would be discounted how much?

Am I looking at this correctly? Any suggestions. It would be helpful to know approximate numbers for planning purposes.

Doesn't this say it?

If your birthday is January 2, 1954 or later, the option to take only one benefit at full retirement age no longer exists. If you file for one benefit, you will be effectively filing for all retirement or spousal benefits.

He can start any time after age 62. When he applies, he will get his own benefit. If if the appropriate fraction of yours is higher, he will get an additional amount.

See table here: https://www.ssa.gov/oact/quickcalc/earlyretire.html

If he was born in 1954,
His own benefit at 62 is (1-.25) x $1,500 = $1,125
His spousal benefit at 62 is .50 x (1-.30) x $2,730 = $955.

So he only gets his own benefit.

My guess, since his PIA is more than 50% of your PIA, is that he will never get a spousal benefit.

 

[Chuckanut]

My understanding is that at his age he will be 'deemed' to be filing for all allowable benefits and SS will give him the largest one. Since he is such a young thing he won't be able to file and 'restrict' the application to only a spousal SS benefit while his increases for several more years.

 

[Ready]

I read the entire Kotlikoff book and still find it very confusing. But I'm thinking that if you wait until 70 to file it will be the best option for two reasons:

1) You are older than your spouse
2) You make more money

If you pass first, he will get your benefit for the rest of his life, so maximizing your benefit is important to him. Of course, women on average live longer than men, so that doesn't quite fit in with this logic. I guess you have to guess whether you think he might outlive you. If he does, the higher benefit from waiting until 70 could be very valuable to him.

 

[Debinnov a]

Thanks for the responses! Our goal is for me to file at 66.5 years of age at the earliest. Likely will wait until 70, as I understand that it is better for him to have the larger amount if I pass.





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[mathjak107]

I am so confused by spousal filing, even after reading up on the latest changes. One thing I'm unsure about is if I plan on taking my SS at age 66 1/2 PIA (current age is 60) what options does my DH (who is six years younger and lower earner) have?

My PIA is $2730
His PIA approx $1500

I think the option of him taking spousal, then switching to his own has been eliminated. (We were under the cut off age.) So really, he either takes his own at 62 or 67 or he could get a reduced spousal at age 62? I don't think it makes since for him to take later than 62, due to age difference, health and being the lower earner. So, instead of half of my $2730, his spousal if filing at age 62 would be discounted how much?

Am I looking at this correctly? Any suggestions. It would be helpful to know approximate numbers for planning purposes.


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he only gets his own reduced benefit . he has no option not to take his .

so he gets his early benefit at 62. when you file he gets the difference between 1/2 your pia (1365.00) less his primary benefit of 1k , even if he filed early , so 1365 less 1000 is 365 .00 .

so he would get 365 added to his early benefit . he is penalized for filing early so he never sees 1/2 yours . if he waited until his fra he would get the 365 added to his regular benefit , but if it is more than 1/2 yours it will get reduced down to 1/2 .
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only stipulation is in order not to get spousal cut he has to be at least fra or additional cuts apply

 

[Independent]

he only gets his own reduced benefit . he has no option not to take his .

so he gets his early benefit at 62. when you file he gets the difference between 1/2 your pia (1365.00) less his primary benefit of 1k , even if he filed early , so 1365 less 1000 is 365 .00 .

so he would get 365 added to his early benefit . he is penalized for filing early so he never sees 1/2 yours . if he waited until his fra he would get the 365 added to his regular benefit , but if it is more than 1/2 yours it will get reduced down to 1/2 .

I don't think that's consistent with these two pages from the SSA website:
https://www.ssa.gov/oact/quickcalc/spouse.html
https://www.ssa.gov/oact/quickcalc/earlyretire.html

If he retires early, he will not get 1/2 of her PIA.

 

[mathjak107]

the spousal benefit is only cut a 2nd time if the lower benefit receiver is less than fra when switching to spousal .

lets take my wife , she filed at 62 on her own record , she gets her early reduced benefit. at her fra when i file , she switches to spousal , she gets the difference of 1/2 my primary less her primary added to her early benefit . you never give up that early benefit it haunts you forever , the spousal adder goes on top .

she is fra so no other cuts take place

if she was less than fra when she switches from hers to spousal additional cuts take place . but if she takes her own early benefit until fra and then i file and she claims spousal when i file she gets her early benefit plus the full adder . it will always be less than half my full since it is on top of her early benefit . but again the no cuts on the spousal assume the switch over takes place at fra . she was already cut once for taking her own at 62 .

http://www.kiplinger.com/article/re...mize-the-social-security-spousal-benefit.html

 

[Independent]

the spousal benefit is only cut a 2nd time if the lower benefit receiver is less than fra when switching to spousal .

lets take my wife , she filed at 62 on her own record , she gets her early reduced benefit. at her fra when i file , she switches to spousal , she gets the difference of 1/2 my primary less her primary added to her early benefit . you never give up that early benefit it haunts you forever , the spousal adder goes on top .

she is fra so no other cuts take place

if she was less than fra when she switches from hers to spousal additional cuts take place . but if she takes her own early benefit until fra and then i file and she claims spousal when i file she gets her early benefit plus the full adder . it will always be less than half my full since it is on top of her early benefit . but again the no cuts on the spousal assume the switch over takes place at fra . she was already cut once for taking her own at 62 .

Maximize the Social Security Spousal Benefit

The Kiplinger article suggests that she can "switch to spousal benefit" whenever she likes.

But, the OP situation was that she would file at 66 1/2 and her husband is six years younger. He is eligible for spousal benefits when he first files at age 62.

I read this to say that he will be deemed to have filed for the spousal benefit as soon as he starts benefits. https://www.ssa.gov/planners/retire/claiming.html

Maybe you meant that the real decision here is when she should start benefits. If she starts before her age 68, he will start spousal benefits at 62. If she defers till 70, he can do two years on just his record, then will have to start his spousal as soon as she files.

That could be a better strategy for certain benefit combinations, but I don't see it for this situation where his PIA is $1,500 and hers is $2,730.

Maybe you can do some numbers to show how it works?

 

[mathjak107]

if the higher benefit spouse files first at 66-1/2 then there is a little problem .

when her husband files at 62 he automatically gets spousal since it is higher than his own . but that spousal now gets reduced for each month he is under fra . it is reduced more than his own would be although on a higher amount . not sure how it works out balance wise .

The percentage reduction is 25/36 of 1% per month for the first 36 months and 5/12 of 1% for each additional month on spousal . it is only a reduction of 5/9 of 1% per month for the first 36 months and 5/12 of 1% for each additional month on his own for taking it early .. .

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 .

 

[user5027]

he should file first at 62 for his benefit only .

Is that a restricted application? At his age he would not be eligible due to the 2015 budget deal.

Scuttled a lot of plans.

 

[mathjak107]

no , not restricted . he files for his own benefit on his own record . with restricted he wouldn't be filing for his benefit .he would be filing for hers leaving his to grow . but they missed the boat on that option and it is better done in the reverse with the higher benefit left to0 grow and that person filing restricted for 1/2 the lower benefit .

but in any case that is gone for them .

he has to file for his own before she files . once she files first he gets a spousal benefit by default since it is higher than his own , but it is reduced since he is under fra .

in order to have a choice of his own or spousal he has to file first . then he can collect his until fra and then file for the spousal adder to be added to his early benefit he already gets down the road . that way it is not reduced , although it will be less than 1/2 since it goes on an early reduced benefit , but at least the spousal portion is not reduced down ..

 

[Independent]

if the higher benefit spouse files first at 66-1/2 then there is a little problem .

when her husband files at 62 he automatically gets spousal since it is higher than his own.

I think his own benefit in that situation is (1-.30) x $1,500 = $1,050. We ought to be able to agree on that.

What do you think his spousal benefit would be?

but that spousal now gets reduced for each month he is under fra . it is reduced more than his own would be although on a higher amount . not sure how it works out balance wise .

The percentage reduction is 25/36 of 1% per month for the first 36 months and 5/12 of 1% for each additional month on spousal . it is only a reduction of 5/9 of 1% per month for the first 36 months and 5/12 of 1% for each additional month on his own for taking it early .. .

I think that if he files at 62, and his wife is already receiving benefits, then his benefit is level (adjust for CPI) until she dies. I don't know of any situation where SS benefits go down after they start.

You're quoting the factors for the initial benefit.

 

[Independent]

in order to have a choice of his own or spousal he has to file first . then he can collect his until fra and then file for the spousal adder to be added to his early benefit he already gets down the road . that way it is not reduced , although it will be less than 1/2 since it goes on an early reduced benefit , but at least the spousal portion is not reduced down ..

She can't defer her start date past age 70. When she starts at 70, he will be 64.

The way I read the SSA explanation I linked, at that point, he is eligible for a spousal benefit and he has to start. He can't wait till 67.

 

[MissMolly]

She can't defer her start date past age 70. When she starts at 70, he will be 64.

The way I read the SSA explanation I linked, at that point, he is eligible for a spousal benefit and he has to start. He can't wait till 67.

He does not have to start at 67. SSA never requires anybody to start. You are not even "required" to start at 70, but it's pointless to wait past 70 since benefits no longer grow. He can wait until 68, 69 or 70. His choice.

 

[mathjak107]

She can't defer her start date past age 70. When she starts at 70, he will be 64.

The way I read the SSA explanation I linked, at that point, he is eligible for a spousal benefit and he has to start. He can't wait till 67.

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.

 

[Debinnov a]

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.

 

[SecondCor521]

This worked for me. SSAnalyze - Bedrock Capital Management. SSAnalyze - Bedrock Capital Management

It was consistent with the Kotlikoff suggestion for me.

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.

Have you tried plugging your situation into the tool that davef mentioned? If so, what did it say?

Things I'm fairly certain of:

Neither of you are grandfathered under the 2015 law, since you're both born after 1954.

As a married couple, as long as you both are alive, you can potentially qualify for four benefits:

1. You can qualify on your own earnings record,
2. Your husband can qualify on his earnings record,
3. You can qualify for spousal benefits on your husbands record,
4. Your husband can qualify for spousal benefits on your record

At any time that you are collecting benefits, if you try to collect two benefits (for example, you trying to collect benefits 1 and 3), you will get the larger of the two and Social Security will describe this as getting the smaller benefit plus an amount of money for the second benefit that will result in a total equal to the second benefit. For example, if you your retirement benefit is $1000 and your spousal benefit would be $1200, they'll give you $1200 and describe it as $1000 retirement benefit plus $200 excess spousal benefit.

I'm pretty sure that spousal benefits don't increase after FRA (the FRA of the person claiming benefits on the spouse's record, not the FRA of the spouse).

From the Kotlikoff book I referenced, I also find the following information:

You have to be 62 or over to collect spousal benefits and your spouse has to have filed for his/her retirement benefit. (page 69)

The full spousal benefit equals one half your spouse's full retirement benefit...the spousal benefit is equal to half of your spouses retirement benefit at FRA. So whether your spouse takes theire retirement benefit early or late doesn't directly impact the size of your spousal benefit...If you were not grandfathered, you'll be forced to take your retirement benefit at the same time as you take your spousal benefit. This is a key feature of a provision called deeming. We call it the deeming deamon, since Social Security won't pay you both benefits. They'll pay you, roughly speaking, the greater of the two. This means you lose one of the two benefits. (58, 59)

Furthermore, deeming works in two directions. If you file for your retirement benefit and you are subject to deeming, you'll be deemed to be filing for your spousal benefit as well if you're eligible. (60)

If you take retirement or spousal benefits before FRA, they will be subject to an early retirement reduction for each month early. Taking your own retirement benefit at 62 vs FRA is a 25% reduction. Taking spousal benefits at 62 entails a 30% reduction. (51)

If you qualify for spousal benefits, your benefits will be no larger if you wait beyond FRA to take them. (92)

---

I'd still recommend trying out the tool that is linked at the very top of this post. Since you mention that he is in poor health, I would pay particular attention to the life expectancy that the tool provides for your DH is one that you find reasonable. It's simply too hard to figure out otherwise.

That being said, because you're both subject to deeming and you are the higher earner, you'll end up collecting your retirement benefits and he'll end up collecting spousal benefits on your record. If he had longevity, it will probably recommend that he start collecting spousal benefits on your record at his FRA and that you start your retirement benefits at your age 70. The shorter his longevity, the more it might make sense for him to collect spousal benefits closer to 62.

One other note: You can start collecting benefits at any age and they'll be calculated to the nearest month. So, for example, you could start collecting retirement benefits at 68 years and 7 months of age, and they'd calculate benefits based on that full age, and not round it to 68 or 69. This applies to reductions for benefits before FRA and the increase in benefits after FRA.

Hope that helps.

Good luck!

 

[Sunset]

My plan when we become eligible is to run the various free calculators and to pay for the services of 2 that I read about in various magazines.

This is one of them Get more Social Security benefits with Social Security Solutions.

I have not used them, so folks should look up reviews etc to be sure, but the risk is a pretty low $20 or $50 expense (I'm going to do the $50 one to compare senerios).

The risk of getting it wrong, or being told by some worker at SSA the wrong answer is literally thousands of dollars per year.

 

[Independent]

He does not have to start at 67. SSA never requires anybody to start. You are not even "required" to start at 70, but it's pointless to wait past 70 since benefits no longer grow. He can wait until 68, 69 or 70. His choice.

The context is someone who has already decided to take his own benefit at age 62, and whose higher-earning spouse is six years older.

Given those two facts, he can't defer the spousal benefit to 67.