Social Security Spousal Benefits

[ocdude]

Anybody out there have a handle on social security spousal benefits? I recently read an article on the subject - FOXNews.com - Spousal Benefit Another Key To Social Security Decision - Finance | Personal | Business | Personal Finances - and need a reality check on whether I am interpreting it correctly.

My wife and I are both retired and approaching 62. Although our full benefit age is 66, we will very likely choose to begin drawing early social security benefits at 62, with my wife arriving there about 4 months ahead of me.

If I understand this article correctly - At 62, my wife's reduced benefits will be based on her own earnings, as usual. When I reach 62 and begin drawing benefits, she becomes eligible to draw 35% of my FULL retirement age benefit, even though I am alive and drawing a reduced benefit at 62.

That seems strange to me, but I reach the same conclusion every time I read this article. Am I missing something here? Thanks for any and all feedback.

 

[ziggy29]

Retirement Benefits

My understanding is that when she retires, she is only eligible for benefits based on her earnings. As long as you are not yet collecting SS, spousal benefits don't enter the picture. I believe that once you also start collecting, she would get the greater of her own earned benefit or 35% of your full amount, whichever is greater.

 

[tryan]

hmmm, so if one SS payment is significantly larger it might make sense to collect the smaller payment ASAP and delay the larger payment as long as possible.

Really no "penalty" for collecting the smaller payment earlier.

 

[REWahoo]

You understand the information correctly. From the FAQ section of SS.gov:

Question:
Can my spouse collect benefits at age 62 from her work and earnings and then receive a combined total up to 50 per cent from my account when I start receiving benefits at age 65?

Answer:
Your wife can start receiving reduced retirement benefits on her own record at age 62. If the amount she receives on her own record is less than what she would be entitled to as a spouse, she would receive a higher spouse's benefit when you start receiving benefits. However, because she began receiving Social Security before reaching full retirement age, she will receive a reduced benefit rate that is less than the full 50 percent amount for as long as she remains entitled to spouse's benefits.

When your spouse applies for reduced retirement benefits, we will check to see if she is eligible for both her own retirement benefits and for benefits as a spouse. If she is eligible for both, we will pay her own benefits first. If she is due additional benefits, she will get a combination of benefits equaling the higher spouse's benefit. If she is not eligible for both because you are not yet entitled, but is due a higher amount when you start receiving Social Security benefits, then the higher spouse's benefit is payable to her when you apply for retirement benefits. Remember, she cannot receive spouse's benefits until you file for retirement.

 

[REWahoo]

hmmm, so if one SS payment is significantly larger it might make sense to collect the smaller payment ASAP and delay the larger payment as long as possible.

Really no "penalty" for collecting the smaller payment earlier.

Correct. The longer the spouse with the larger benefit delays, the larger the monthly benefit for both. Of course the question is - will the spouse with the larger benefit live long enough to recoup what he/she gave up by delaying.

 

[SteveR]

... Of course the question is - will the spouse with the larger benefit live long enough to recoup what he/she gave up by delaying.

Ah, the question that launched a thousand posts....

 

[UncleHoney]

Ok SS gurus, lets turn the tables.

DW is full retirement age and collecting her full SS benefit. As I understand the SS info I (62) could file under her benefit and collect 35% of her benefit and then at my full retirement age (66) I could switch and draw on my record.

Am I understanding this correctly?

Sounds like a no brainer for a little extra beer money each month.

 

[UncleHoney]

Ok SS gurus, lets turn the tables.

DW is full retirement age and collecting her full SS benefit. As I understand the SS info I (62) could file under her benefit and collect 35% of her benefit and then at my full retirement age (66) I could switch and draw on my record.

Am I understanding this correctly?

Sounds like a no brainer for a little extra beer money each month.

Here's the kicker.

When your spouse applies for reduced retirement benefits, we will check to see if she is eligible for both her own retirement benefits and for benefits as a spouse. If she is eligible for both, we will pay her own benefits first.

 

[REWahoo]

Here's the kicker.

Talking to yourself is a sign of some sort of minor abnormality. But answering your own questions on a discussion board, now that's really serious!

 

[Martha]

Here is the skinny, inside out and backwards. But you have to go through the entire thread. http://www.early-retirement.org/forums/f28/social-security-spousal-benefit-21908.html

 

[ocdude]

The longer the spouse with the larger benefit delays, the larger the monthly benefit for both...

OK, I'm confused again. Assume I have the larger benefit. I agree that the longer I delay, the larger MY monthly benefit. However, if my spouse is eligible for the spousal benefit, I read it to say her payment is based on a percentage of my FULL, unreduced benefit. If she draws early, the percentage, and thus the monthly amount is reduced. If that's true, whether or not I delay receiving benefits should not have any impact on her monthly payment, only whether or not she delays. Is that wrong?

 

[UncleHoney]

Talking to yourself is a sign of some sort of minor abnormality. But answering your own questions on a discussion board, now that's really serious!

That's me.

I wouldn't even qualify as a Wall Street banker.

Guess I'll have to settle for Kool Aid and forget the beer budget.

 

[REWahoo]

OK, I'm confused again. Assume I have the larger benefit. I agree that the longer I delay, the larger MY monthly benefit. However, if my spouse is eligible for the spousal benefit, I read it to say her payment is based on a percentage of my FULL, unreduced benefit. If she draws early, the percentage, and thus the monthly amount is reduced. If that's true, whether or not I delay receiving benefits should not have any impact on her monthly payment, only whether or not she delays. Is that wrong?

As usual, the devil is in the details. You delaying will have a definite impact on the amount your spouse can initially draw assuming you delay and your spouse begins drawing first.

From the SS FAQ I quoted above: "Remember, she cannot receive spouse's benefits until you file for retirement."

 

[ocdude]

As usual, the devil is in the details...

Ahhh, the light bulb flickers... Thanks, that makes sense.

Thanks to everyone for the excellent info. At least, that's one small step closer to understanding the intricacies of federal gov't. That don't happen every day....

 

[statsman]

I have a somewhat related question to the topic at hand. When computing the SS benefit for a future retirement, is the estimate based on today's dollars or will it be based on a dollar amount in the year of retirement? I ask this because my wife and I have a six year age difference, and I was wondering if the COLAs affect the amount of the spousal benefit.

 

[REWahoo]

When computing the SS benefit for a future retirement, is the estimate based on today's dollars or will it be based on a dollar amount in the year of retirement? I ask this because my wife and I have a six year age difference, and I was wondering if the COLAs affect the amount of the spousal benefit.

As I understand it, the amount of benefit is always in today's dollars. The benefit amount will then be COLA adjusted each year once your spouse starts drawing.

Note: If your question is in reference to estimating benefits using the SS online calculator you have the option to select either today's dollars or estimated future dollars.

 

[shoe]

I have a question that I could not find an answer to on the SS web site. I am hoping someone here has encountered this and will share what they know. My husband is a retired career teacher who earned SS in second jobs he has had over the years and is currently employed full time an paying into SS. I do not have enough credits to receive SS on my own and his will be reduced due to WEP. Will I receive half of his benefits before the WEP reduction or half of the amount AFTER the WEP reduction? TIA

 

[REWahoo]

Shoe, I think you may need to call the SS folks for an answer to that one.

EDIT: I did find this Answer

Question:
If my retirement or disability benefits are computed under the WEP, will the benefits of my dependents and survivors be affected?

Answer:
The Windfall Elimination Provision (WEP) affects the benefits of retired or disabled workers who are also receiving a pension based on work not covered by Social Security. Since dependents' benefits are derived from the worker's benefit, WEP affects dependents' benefits as well.
WEP does not affect benefits paid to survivors of workers who received pensions based on noncovered employment.

EXAMPLE:
A worker and spouse both claim their benefits at full retirement age. Because the worker receives a pension based on work not covered by Social Security, the benefit amount under the WEP benefit formula is $700. Based on the WEP benefit amount, the spouse's benefit is $350 (one-half of the worker's WEP benefit amount).

When the worker dies, the WEP reduction is removed. The surviving spouse's benefit is refigured using the regular benefit formula.

 

[kaneohe]

As usual, the devil is in the details. You delaying will have a definite impact on the amount your spouse can initially draw assuming you delay and your spouse begins drawing first.

From the SS FAQ I quoted above: "Remember, she cannot receive spouse's benefits until you file for retirement."

Would this "file and suspend" work? Don't know myself.....just asking.


Recordnet.com: Social Security: Check out little known 'file and suspend' option

 

[REWahoo]

Would this "file and suspend" work? Don't know myself.....just asking.

Recordnet.com: Social Security: Check out little known 'file and suspend' option

Ah yes, I had forgotten about the 'file and suspend' option. It looks like that strategy will work - assuming the option is still in place by the time the OP needs it.

BTW, James Mahaney, one of the authors of the paper quoted by Humberto Cruz in your link, posts here occasionally under the name New Thinking.