Social Security timing for couples

[VanWinkle]

Would the spouse then get whatever the primary got, if primary was to die first? Does it matter when the spouse took SS? TX!

The survivor benefit would be the higher benefit (the amount being paid to the primary beneficiary) So it does not make any difference when the surviving spouse claimed her/his benefit. This effect is felt if the primary(highest earner) claims early because then the survivor benefit is always reduced due to early filing by the primary.

 

[googily]

So, if someone dies before they started taking SS, how is their "full" benefit calculated? DH died at 55, with at least 35 years of SS earnings, so is the survivor benefit calculated like he retired early, or like he kept working to FRA?

I've run estimates both ways, and I'd definitely prefer the latter!

 

[MrLoco]

There are so many SS threads. They all make sense and most calculations and predictions are really good to know. For me, it's letting go of the actual dollars we've worked to get to FIRE. It's odd, I feel like the savings and investments are mine and I don't want to let go of them. I want to budget knowing exactly what I'm dealing with. But, SS isn't mine until I get the check. Yes, the check offsets the WD of "my money." I have this uncanny desire to get my SS as soon as possible so it does't go away. I know, markets go up and down, but are we really guaranteed SS?

I used to think as you. I want to take my SS as early as possible because it may not be there later on. But this is not the way to look at it.
The question that needs to be asked is : What is the worse scenario? Delay taking SS until later but dying early and leaving money on the table? OR taking SS early (age 62), but living too long ( and running out of money in your 70's or 80's). If you die early and leave money on the table....so what? You won't miss it! But if you take SS early and run out of money later in life....now you have a problem.



For those of us in our late 50's, early 60's, SS will be there. Benefits may be trimmed, but they will be there. At least I believe so. To drastically slash SS benefits would result in many of the elderly living on the streets and turning the US into a 3rd world country. Just will not happen.


And what if you take SS at 62 with the intention of "letting your investments grow" and we hit a bear market. Now you have taken SS at 62 and a 30% haircut versus taking benefits at FRA and your investments are down!


Granted.....delaying SS until FRA or even age 70 and living off investments could put one's investments in jeopardy if a bear market hits which is why many of us feel comfortable having 3 - 5 years in conservative investments (CAsh, CD's short term bonds) to weather the storm even if this approach creates a drag on portfolio earnings.


There is no right or wrong answer. We just do the best we can with the information we have.

 

[CRLLS]

I used to think as you. I want to take my SS as early as possible because it may not be there later on. But this is not the way to look at it.
The question that needs to be asked is : What is the worse scenario? Delay taking SS until later but dying early and leaving money on the table? OR taking SS early (age 62), but living too long ( and running out of money in your 70's or 80's). If you die early and leave money on the table....so what? You won't miss it! But if you take SS early and run out of money later in life....now you have a problem.



For those of us in our late 50's, early 60's, SS will be there. Benefits may be trimmed, but they will be there. At least I believe so. To drastically slash SS benefits would result in many of the elderly living on the streets and turning the US into a 3rd world country. Just will not happen.


And what if you take SS at 62 with the intention of "letting your investments grow" and we hit a bear market. Now you have taken SS at 62 and a 30% haircut versus taking benefits at FRA and your investments are down!


Granted.....delaying SS until FRA or even age 70 and living off investments could put one's investments in jeopardy if a bear market hits which is why many of us feel comfortable having 3 - 5 years in conservative investments (CAsh, CD's short term bonds) to weather the storm even if this approach creates a drag on portfolio earnings.


There is no right or wrong answer. We just do the best we can with the information we have.

Consider that while delaying SS and living off your investments, you are reducing the retirement account balance. If you have both Roth and tIRA's, reducing the tIRA (401k) can help control future RMD's. Depending on your situation, taxes and goals, this can be a good way to go.

Any decision is a crap shoot. Go into it with an open mind. We will never know if it was right until after the fact.

 

[gwraigty]

So, if someone dies before they started taking SS, how is their "full" benefit calculated? DH died at 55, with at least 35 years of SS earnings, so is the survivor benefit calculated like he retired early, or like he kept working to FRA?

I've run estimates both ways, and I'd definitely prefer the latter!

This site seems to explain it well: https://socialsecurityintelligence.com/social-security-survivor-benefits-and-death/

"If the deceased spouse never filed for benefits, but died on or before their full retirement age, the calculation is relatively easy. The survivor receives the deceased’s full retirement age benefit, adjusted for the survivor’s filing age (see chart below)."

For example, I'm about 4 months and 2 days older than my DH. We both turn 55 this year. Our FRA is 67. His 2018 SS statement says that if he died this year, I would receive survivor benefits of $2586/mo. starting at my FRA. His FRA age benefit is listed as $2755/mo. I'd have to wait until his FRA to collect the full FRA amount.

 

[VanWinkle]

The deem rule relates to claiming your own benefit or spousal benefits.

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

As I see it explained, you can claim your own benefit at 62, and as long as your spouse does not claim until your FRA, you will get the full 50% spousal benefit but it will be reduced by the same amount as your primary benefit was by claiming early at 62. There is an explanation in the link from the Ss.gov.

 

[VanWinkle]

This site seems to explain it well: https://socialsecurityintelligence.com/social-security-survivor-benefits-and-death/

"If the deceased spouse never filed for benefits, but died on or before their full retirement age, the calculation is relatively easy. The survivor receives the deceased’s full retirement age benefit, adjusted for the survivor’s filing age (see chart below)."

For example, I'm about 4 months and 2 days older than my DH. We both turn 55 this year. Our FRA is 67. His 2018 SS statement says that if he died this year, I would receive survivor benefits of $2586/mo. starting at my FRA. His FRA age benefit is listed as $2755/mo. I'd have to wait until his FRA to collect the full FRA amount.

Good explanation and correct as I read it too!!

VW

 

[gwraigty]

Good explanation and correct as I read it too!!

VW

Thanks! I'm glad I didn't mess that one up.

 

[googily]

This site seems to explain it well: https://socialsecurityintelligence.com/social-security-survivor-benefits-and-death/

"If the deceased spouse never filed for benefits, but died on or before their full retirement age, the calculation is relatively easy. The survivor receives the deceased’s full retirement age benefit, adjusted for the survivor’s filing age (see chart below)."

For example, I'm about 4 months and 2 days older than my DH. We both turn 55 this year. Our FRA is 67. His 2018 SS statement says that if he died this year, I would receive survivor benefits of $2586/mo. starting at my FRA. His FRA age benefit is listed as $2755/mo. I'd have to wait until his FRA to collect the full FRA amount.

That's a great link, thanks. That is how I have recently understood it, but not always.

I will have some interesting decisions to make if/when the time comes. His FRA benefit is higher than mine, but lower than my benefit if I wait until 70. And of course I can start receiving a reduced version of his at 60.

 

[bizlady]

I may be mistaken, but I think the rules changed recently on spousal benefits. Unless you turned 62 by Jan 2016, the new rules apply. Essentially, if you turn 62 after this date, once a spouse applies for SS, s/he will get the larger of the spousal benefit or their own benefit. They will have been deemed as applying and no longer can get a spousal benefit while waiting for their own benefit to further accrue.

 

[VanWinkle]

I may be mistaken, but I think the rules changed recently on spousal benefits. Unless you turned 62 by Jan 2016, the new rules apply. Essentially, if you turn 62 after this date, once a spouse applies for SS, s/he will get the larger of the spousal benefit or their own benefit. They will have been deemed as applying and no longer can get a spousal benefit while waiting for their own benefit to further accrue.

You are correct. The spousal benefit is based on when the primary high earner applies for benefits as spousal can't be paid until the application for benefits by the primary. Can't claim spousal and let your own benefit accrue per the dates you listed.

 

[skipro33]

I'm still confused;
If my wife applies for her benefit at 62 and I've not yet applied for mine, then there is no spousal benefit to 'deem' and she will get her own earned benefit minus the early discounted percentage. Is that right?

If the above is true, then when I finally do apply for my SS, (AFTER she's already drawing on her own benefit but before my FRA)

1. is she automatically deemed for the spousal benefit she now is eligible for? From what I understand, it's not automatic, she has to actually now apply for the spousal benefit.
2. If she does have to manually apply for the spousal benefit because I didn't start my benefit until after she started hers, but still well before my FRA, and she delays the application until her FRA, will she then get the 50% bump up based on my PIA at FRA(minus what she' already drawing from her own benefit), or is it based on the benefit amount I started to draw at an early benefit age?

My HOPE is that she can draw on her earnings at 62, I wait until after she's done that to draw mine at my age of 63 and she holds off applying for the spousal benefit until she's FRA and get's 50% of my PIA at FRA minus her current benefit she's been collecting since 62.

 

[joeea]

For me, it's letting go of the actual dollars we've worked to get to FIRE. It's odd, I feel like the savings and investments are mine and I don't want to let go of them. I want to budget knowing exactly what I'm dealing with. But, SS isn't mine until I get the check. Yes, the check offsets the WD of "my money." I have this uncanny desire to get my SS as soon as possible so it does't go away. I know, markets go up and down, but are we really guaranteed SS?

These feelings are all normal behavioral economics. You are attached to "your" money, and are more willing to spend "their" money. It's difficult to overcome these feelings and look at the actual situation and the math behind it.

You can't ever really "know exactly what you are dealing with". You must make some assumptions.

Nothing is guaranteed. It's possible that the entire government will collapse and SS, Medicare, Medicaid, will completely go away. It's possible that ROTH 401ks will become taxable. All of today's rules could change. But that's not something that would worry me. I fully expect SS to be there when I expect it.

 

[VanWinkle]

I'm still confused;
If my wife applies for her benefit at 62 and I've not yet applied for mine, then there is no spousal benefit to 'deem' and she will get her own earned benefit minus the early discounted percentage. Is that right?

If the above is true, then when I finally do apply for my SS, (AFTER she's already drawing on her own benefit but before my FRA)

1. is she automatically deemed for the spousal benefit she now is eligible for? From what I understand, it's not automatic, she has to actually now apply for the spousal benefit.
2. If she does have to manually apply for the spousal benefit because I didn't start my benefit until after she started hers, but still well before my FRA, and she delays the application until her FRA, will she then get the 50% bump up based on my PIA at FRA(minus what she' already drawing from her own benefit), or is it based on the benefit amount I started to draw at an early benefit age?

My HOPE is that she can draw on her earnings at 62, I wait until after she's done that to draw mine at my age of 63 and she holds off applying for the spousal benefit until she's FRA and get's 50% of my PIA at FRA minus her current benefit she's been collecting since 62.

You are correct in your first statement.

Your wife will most likely automatically get bumped up to spousal benefit once you apply, but don't leave it to chance and call to make sure. If she is FRA when you apply for your benefit, then she would get 50% of your FRA benefit(even if you claim before your FRA) less the penalty for her own early benefit claim.

If she would get 1000.00 at FRA but takes early at 750.00(250 reduction) at age 62, then her 50% of your FRA amount (2700/2) will also be reduced by the same 250.00. So instead of 1350.00, she would get 1100.00.

If it sounds confusing, welcome to the club!!

 

[pb4uski]

Bumping old thread for something that I read today that did a great job of explaining how a spouse's SS is permanantly reduced if they take SS before FRA and later receive spousal benefits.

Can My Wife File At 62 And Later Get Full Social Security Spousal Benefits?​​

Hi Larry, My wife will turn 62 in a few months. She spent most of her adult years raising a family but did work sufficiently to be eligible for a Social Security retirement benefit. I am planning on waiting until 70 to begin to receive my Social Security retirement benefit and she'll then file for her spousal benefit based on my record. Do I have this wrong or am I correct that she can apply for her Social Security retirement benefit based on her own record at 62, receive it until I turn 70 and then receive her full spousal benefit, which would be 50% of my retirement benefit amount at that time? We are the same age. Thanks, Hal


Hi Hal, Your wife cannot start drawing her own retirement benefits at 62 and later switch to a spousal benefit equal to 50% of your benefit amount when you start drawing your benefits. Once a person files for their own retirement benefits, that becomes their primary benefit for life. Any other type of benefit (e.g. spousal, widow) for which they subsequently qualify could only be paid as a partial secondary benefit. So if your wife files for reduced benefits on her own record at 62, she will keep the resulting reduction for age for as long as both of you are living. Also note that even if it was unreduced, her spousal benefit would be 50% of your Primary Insurance Amount (PIA), which is equal to your full retirement age (FRA) retirement benefit amount, not 50% of your increased benefit at 70.

For example, say Kate files for her retirement benefits at 62. Kate's PIA would be $600, but her reduced age 62 rate is $440. Eight years later when Kate's husband turns age 70, he applies for his retirement benefits. Kate's husband's PIA is $2,000, and Kate's spousal benefit would be calculated by subtracting her PIA from 50% of her husband's PIA, which would amount to $400 (i.e. $2,000 / 2 – $600) in this example. Kate would then be paid a combined benefit rate equal to the sum of her reduced retirement rate and her spousal rate, or $840 (i.e. $440 + $400) in this example. ...

https://www.forbes.com/sites/kotlik...ocial-security-spousal-benefits/#356e5a145917

Note that the $160 that her benefit is reduced for taking it at 62 rather than FRA ($440 vs $600) also flows through to her benefit once the spousal benefit starts ($840 vs $1,000).

 

[atmsmshr]

Thanks pb4uski for posting this reference.

We don't have to decide for awhile, but our current thinking is that I collect at 67 (FRA) and DW files under spousal to collect 4 months later when she turns 67. I was the high wage earner while DW focused on our children. DW currently collects SSDI which tilts the math to at least wait until FRA for her.

The part about spousal benefits not increasing after FRA is reached was not clear to me until last year. So the relative increase in SS benefits by my waiting until 70 is not roughly 8%/year delayed, its more like a combined couple's 6%/year.

For planning purposes, when one of us passes away, the SS PIA would then stay at my FRA PIA (assuming all else stays the same).

Strategy subject to change.

 

[joeea]

We don't have to decide for awhile, but our current thinking is that I collect at 67 (FRA) and DW files under spousal to collect 4 months later when she turns 67. I was the high wage earner while DW focused on our children. DW currently collects SSDI which tilts the math to at least wait until FRA for her.

The part about spousal benefits not increasing after FRA is reached was not clear to me until last year. So the relative increase in SS benefits by my waiting until 70 is not roughly 8%/year delayed, its more like a combined couple's 6%/year.

For planning purposes, when one of us passes away, the SS PIA would then stay at my FRA PIA (assuming all else stays the same).

Since you only recently learned some details about spousal benefits, are you familiar with the details about survivor benefits?

It's often best for the higher earner to delay until 70, in order to maximize survivor benefits.

You might want to play around with https://opensocialsecurity.com/ a bit.

 

[Perryinva]

We are/will be in that same situation. DW is currently 67, and filed for her own benefit at 62. Her PIA was $1530 (IIRC) and her benefit today (almost 5 years later) is now $1243. I am 61.5, and plan on filing no earlier than age 67. My PIA, I assume, increases every year, as it has, as long as my qualified income keeps adding to SS, even though I have 38 max years in. Like Skidpro33, I am still unsure as what to figure her spousal MIGHT be (if any) when I apply. I know it will be a very minor amount, (~50/m) and different calculators give different answers. My current PIA is right at $3045, so clearly, she would get no spousal based on that. But in 5 years when I reach FRA, presumably my PIA will have increased.

Its not the money, that’s irrelevant, but WHEN does SS look at your PIA for the calculation? Does your PIA freeze once you turn 62, regardless? According to the SSA website, after age 62, the PIA IS increased by the COLA amount each year, truncated to the lower dime. So even with only 1% COLAs for 5 years, my PIA WOULD increase about $150 by age 67, where she would get a spousal adder, because having already filed, her PIA IS frozen. So I see, in this example, an additional $70/mo added to her own benefit.

And opensocialsecurity is useless on this kind of minor point, fwiw.

 

[PatrickA5]

I get two different answers depending on which calculator I use. I really need to know when I'm going to die to get this figured out. My guess is I'll be lucky to make my life expectancy while DW could make it much longer.

Open Social Security shows me taking at 62 and 3 months and DW taking at 70. She has the highest SS PIA amount. Both of us waiting until 70 showed a decrease in PV of $20K.

Quicken Social Security Optimizer has me taking at 66 and DW at 70. For this calculator, I had to put in death dates, so I used 80 for me and 90 for her. Using this calculator we're $12K better off at 66/70 vs. 62/70.

Really, the difference in payouts from either of these calculators isn't enough to sway my decision one way or the other. We're both 61 now, so we've still got time to do more calculations. Supposedly, my Fidelity rep says he has a "robust" SS calculator, so we will probably set up a meeting with him to see what his says.

I'll also have to do some tax calculations and figure out if we plan on doing more Roth conversions - which could change when I start SS.

 

[joeea]

I get two different answers depending on which calculator I use. I really need to know when I'm going to die to get this figured out. My guess is I'll be lucky to make my life expectancy while DW could make it much longer.

Open Social Security shows me taking at 62 and 3 months and DW taking at 70. She has the highest SS PIA amount. Both of us waiting until 70 showed a decrease in PV of $20K.

Quicken Social Security Optimizer has me taking at 66 and DW at 70. For this calculator, I had to put in death dates, so I used 80 for me and 90 for her. Using this calculator we're $12K better off at 66/70 vs. 62/70.

Really, the difference in payouts from either of these calculators isn't enough to sway my decision one way or the other. We're both 61 now, so we've still got time to do more calculations. Supposedly, my Fidelity rep says he has a "robust" SS calculator, so we will probably set up a meeting with him to see what his says.

I'll also have to do some tax calculations and figure out if we plan on doing more Roth conversions - which could change when I start SS.

If you want to compare apples to apples, Open Social Security tool has "Advanced Options" that will also let you supply a "death date".

But if you've already decided your claiming strategy and the difference in payouts doesn't interest you, then there's no need for further exploration. Most people say they have no regrets no matter when they decide to claim their benefits anyway.

 

[PatrickA5]

If you want to compare apples to apples, Open Social Security tool has "Advanced Options" that will also let you supply a "death date".

But if you've already decided your claiming strategy and the difference in payouts doesn't interest you, then there's no need for further exploration. Most people say they have no regrets no matter when they decide to claim their benefits anyway.

Thanks for pointing out the "advanced" feature. I never knew it was there. When putting in the 80/90 ages in Open Social Security, the result is almost identical to Social Security Optimizer - me taking at 65 and 7 months and DW taking at 70.

I imagine we'll for sure delay DW's to 70. Mine will be from 62 - 65 depending on what we want to accomplish with taxes.

 

[pb4uski]

... Its not the money, that’s irrelevant, but WHEN does SS look at your PIA for the calculation? Does your PIA freeze once you turn 62, regardless? ....

My understanding is that your PIA could increases for earnings and it also increases for COLA.

It would increase for earnings if you are still earning and current years replace lower earning earlier years... if you are retired or your best years are behind you then it wouldn't change for earnings but it would increase for COLA.

I find it easier to look at and think about ignoring the COLA adjustments for comparison purposes since those will be the same no matter what I decide.

 

[joeea]

Thanks for pointing out the "advanced" feature. I never knew it was there. When putting in the 80/90 ages in Open Social Security, the result is almost identical to Social Security Optimizer - me taking at 65 and 7 months and DW taking at 70.

I imagine we'll for sure delay DW's to 70. Mine will be from 62 - 65 depending on what we want to accomplish with taxes.

Make sure you consider if you are working or not, whenever you are looking at starting benefits before your full retirement age.

 

[CRLLS]

FWII, what does not change is the benefit formula bend points. That is set for the year you turn 62. It remains the same, even if you continue to earn after age 62.

https://www.ssa.gov/oact/cola/bendpoints.html

 

[Perryinva]

Correct, so earnings after age 62 are based on face value against the now fixed compensated previous years. Once you have 35+ max years, then even added max earnings make very little difference, compared to COLA increases, which was my point. The COLA percentage might be small, but on a large benefit number, the dollar amount while not game changing, is appreciable enough, especially when potentially doubled with spousal adder, which wasn’t there to begin with.

I am retired now, but my early package severance is structured as earned income through 7/2020. This year will be my 38th max year, displacing the lowest corrected max of around $110k with this years max of $132.4k, so the increase from that is smaller than even a 1% COLA. 2020 is a total waste of contributions to FICA, benefiting me zero.

I know all SS calculations are done in present dollars, but I have always done my FIRE calcs without COLAs applied to income, but applied to expenses as my extra fudge factor. SS is too large a percentage of our future income (~60k) to ignore like some here, but ignoring it’s COLA increase at least adds a little extra margin. Something just under 60% of our projected income is COLA, not including the approx 27% that I plan to come from out our investment portfolio. That currently remains untouched for at least 7 years while I wait for my severance to expire & do Roth conversions starting in 2021 and income control from after tax cash accounts.