SS Confusion

[Richard8655]

Hi All,
I'm a bit confused about social security scenarios and can't figure it out from their website. Requesting advice from members here who may know.

Scenario #1. I retire from my career job at age 60 (now). My spouse is non-working and entitled to 50% of my SS benefit. She applies for SS when she reaches age 62, but I wait for my full benefit until 66. Does my spouse receive 50% of my estimated age 62 or age 66 benefit?

Scenario #2: I retire from my career job at age 60 (now). Both non-working spouse and I apply for early SS when we each turn 62 (about the same time). I know I will receive reduced SS because of early retirement. Does my spouse receive 50% of my age 62 reduced benefit or 50% of estimated age 65 full benefit?

Any thoughts much appreciated.

(By the way, I've read that a good SS strategy in a situation like this is for the non-working spouse to take early SS at 62, and the career working spouse wait until 66 for full benefit.)

 

[dmdunca44]

I am not a SS expert, but I believe that your spouses's benefit will be reduced if she takes it at age 62 - regardless of when you take yours.

BTW, the full retirement age now is 66.

 

[MichaelB]

I am not a SS expert, but I believe that your spouses's benefit will be reduced if she takes it at age 62 - regardless of when you take yours.

BTW, the full retirement age now is 66.

This is my understanding as well. Her spousal pension is 50% of your full pension amount and qualifies for the entire 50% on her 66th birthday. If she takes an earlier benefit the amount will be reduced.
Check this calculator Benefits for Spouses

 

[Richard8655]

Yes, that's right and almost forgot about spouse's penalty for also starting early at age 62. I believe that's a 25-30% penalty reduction. But still, is the non-working spouse's age 62 benefit before the early penalty based on working husband's age 62 or age 66 benefit?

(edited my initial post to reference full retirement as 66 not 65 - must have been wishful thinking on my part!)

 

[MichaelB]

Yes, that's right and almost forgot about spouse's penalty for also starting early at age 62. I believe that's a 25-30% penalty reduction. But still, is the non-working spouse's benefit before the penalty based working husband's age 62 or age 65 benefit?

Her benefit is based on the earning spouses PIA, so it is the full retirement amount.

 

[dmdunca44]

Yes, that's right and almost forgot about spouse's penalty for also starting early at age 62. I believe that's a 25-30% penalty reduction. But still, is the non-working spouse's benefit before the penalty based working husband's age 62 or age 65 benefit?

I believe that the non working spouse's benefit is based on the working spouses's benefit at full retirement age (66). So if he takes his beneift at age 62, his benefit would be reduced. If she waited until she was 66, her benefit would be 1/2 of what his benefit would have been had he waited until FRA (66)....

 

[Richard8655]

Okay, thanks all. It sounds like in all scenarios, the non-working spouse would always be entitled to 50% of the working spouse's age 66 FULL benefit. But the non-working spouse's benefit would be reduced to 35% rather than 50% of that amount if started at age 62.

 

[homestead]

Try this calculator, it will show you some of the basic options.
Social Security calculator: retirement options for you and spouse.

 

[Midpack]

Try this calculator, it will show you some of the basic options.
Social Security calculator: retirement options for you and spouse.

Nice resource, thanks!

 

[packrat44]

I believe the working spouse would have to be receiving benefits prior the non-working spouse being able to file for spousal benefits. However, once she is receiving spousal benefits you could stop you benefits and resume taking them at a later date at the increased rate.

 

[ducky911]

Try this calculator, it will show you some of the basic options.
Social Security calculator: retirement options for you and spouse.

Cool but what about taxes on your benifits?

 

[clifp]

I could be wrong but I don't believe there is any financial benefits for taking it early or waiting (assuming that the SS folks calculated everything correctly) while you are both still alive.

However the big benefit for you waiting to file until you are 66 or even 70 is when you die your spouse will get your entire check. So if your spouse is younger or more likely to live longer she will get more money.

 

[ronocnikral]

My understanding is the same as everyone else's here. It is based on your FRA benefits, but it is reduced based on her age and when she starts.

• If you start receiving spouse's benefits at age 62, your monthly benefit amount is reduced to about 32.5 percent of the amount your spouse would receive if his or her benefits started at full retirement age. (The reduction is about 67.5 percent.) The reduction for starting benefits as a spouse at age
  
  • 63 is about 65 percent;
  • 64 is about 62.5 percent;
  • 65 is about 58.3 percent;
  • 66 is about 54.2 percent; and
  • 67 is 50 percent (the maximum benefit amount).

Full Retirement Age

 

[MasterBlaster]

I believe that the OP has been given some incorrect information by some of the earlier posts. If your spouse claims a benefit at 62 then the spouse will ultimately receive a smaller total (spousal plus individual) benefit than waiting until FRA... No free lunch there either.

"Q. Is it correct that if my wife draws based on her own earnings at 62 she cannot switch to 50% of my benefit assuming I draw later than she (which would be more in our case)? ...

A. Your wife may begin her own reduced Social Security benefit and still qualify for an additional spouse benefit when you begin your benefit. However, a wife who retires early never receives the full 50 percent. Her own early retirement must be taken into consideration. A very simple example may help. Assume your wife's full retirement age benefit is $400 and your full-retirement age benefit is $1,400. If she begins her benefit at age 62, her early retirement reduction will reduce her benefit to approximately $300. Assuming she is full retirement age when you retire, her $300 will increase by $300 – the difference between her full benefit ($400) and half of your full benefit ($700). Her new monthly payment would be $600. "

NCPSSM: Ask Mary Jane

 

[PaddyMac]

This video interview on SS was quite informative, she's a leading expert on maxing out SS:
Mary Beth Franklin | WealthTrack on Blip

Have you run the numbers on whether one person can survive with only one SS? It may make sense for the wife to claim early and you to wait until at least FRA, if not 70. Then the survivor will get one good benefit going forward.

 

[Midpack]

This video interview on SS was quite informative, she's a leading expert on maxing out SS:
Mary Beth Franklin | WealthTrack on Blip

Have you run the numbers on whether one person can survive with only one SS? It may make sense for the wife to claim early and you to wait until at least FRA, if not 70. Then the survivor will get one good benefit going forward.

Really depends on your most likely longevity prediction, typically based on family history, known illnesses or you're just convinced you'll get hit by a bus. If you're not likely to live past 80, early may be best. If you're likely to live past 80, waiting until 70 may be most beneficial. And of course all the options in between...

 

[jclarksnakes]

Watching that video I think I just learned something. DW and I are about the same age with similar SS benefit numbers. Our plan was for DW to start drawing her SS at 62 and me to start the spousal benefit at 66 and later take my enhanced SS at 70. From what I saw in the video I think I should take the reduced spousal benefit when DW starts drawing her SS at age 62. My thinking is that 8 years of 37.5% is more than 4 years of 50%. Is there a flaw in my logic on this subject?

 

[oldphd]

Watching that video I think I just learned something. DW and I are about the same age with similar SS benefit numbers. Our plan was for DW to start drawing her SS at 62 and me to start the spousal benefit at 66 and later take my enhanced SS at 70. From what I saw in the video I think I should take the reduced spousal benefit when DW starts drawing her SS at age 62. My thinking is that 8 years of 37.5% is more than 4 years of 50%. Is there a flaw in my logic on this subject?

Yes, there's a catch to that approach. If you start before FRA (presumably 66 from your example), you must begin with your benefit, and will only draw on hers if what you're entitled to as a spouse is more than your own benefit. You can only draw a spousal benefit without affecting yours if you've reached FRA. And what you draw as a spouse is reduced if she started early.

 

[jclarksnakes]

Yes, there's a catch to that approach. If you start before FRA (presumably 66 from your example), you must begin with your benefit, and will only draw on hers if what you're entitled to as a spouse is more than your own benefit. You can only draw a spousal benefit without affecting yours if you've reached FRA. And what you draw as a spouse is reduced if she started early.

Bingo! Thanks for the clarification. I must have earlier arrived at decision to start spousal benefit at 65 based on that information and today got the wrong impression looking at the video.

 

[73ss454]

I'm a little confused from the video, maybe someone has an answer. I have not taken SS as of yet and I'll be 63 next month. DW will turn 62 in Dec. of this year. Let's say DW worked only about 12 years and on her own will get about $600 a month but will get $800 working off of my earnings. So in Dec. if DW takes SS and I don't will she be elligible for the $600 or the $800? Do I have to take my SS for her to get the $800 or do I have to start and then stop for her to get the $800.

If I wait another year to take mine and DW takes the lower amount in Dec. would she get the $800 when I take mine or does she get a larger benefit because I waited and she took the lower amount. Confusing!

 

[oldphd]

I'm a little confused from the video, maybe someone has an answer. I have not taken SS as of yet and I'll be 63 next month. DW will turn 62 in Dec. of this year. Let's say DW worked only about 12 years and on her own will get about $600 a month but will get $800 working off of my earnings. So in Dec. if DW takes SS and I don't will she be elligible for the $600 or the $800? Do I have to take my SS for her to get the $800 or do I have to start and then stop for her to get the $800.

If I wait another year to take mine and DW takes the lower amount in Dec. would she get the $800 when I take mine or does she get a larger benefit because I waited and she took the lower amount. Confusing!

Haven't watched the video, and it's been a little while since I looked into this for my own strategy, but I think I've got this right.

She can only take the spousal benefit if you file. If you wait until FRA, you can file and suspend, which allows your delayed credits to build and her to collect. For her to collect spousal before you reach FRA, you must collect.

You need to run the numbers, but this looks like a case where you may find it best for her to collect her own as soon as eligible, you wait until FRA when she'll switch to a higher amount based on the spousal benefit.

 

[73ss454]

Thanks for the help!

One other question. If DW takes her's at 62 not based on my earnings, then a year later I take mine. Now let's say DW would have received $800 based on my earnings at 62. Let's say I'm 64 1/2 and I then take mine. Will DW get a larger amount than the $800 because she didn't use my #'s when she turned 62?

 

[oldphd]

Thanks for the help!

One other question. If DW takes her's at 62 not based on my earnings, then a year later I take mine. Now let's say DW would have received $800 based on my earnings at 62. Let's say I'm 64 1/2 and I then take mine. Will DW get a larger amount than the $800 because she didn't use my #'s when she turned 62?

For a person who is eligible for a benefit based on both their own earnings and a spouse’s, the calculation is treated as first calculating their own benefit, then checking for an incremental amount based on the spouse’s earnings. In the event that an individual collects prior to FRA, their own benefit is permanently reduced. The incremental spousal benefit is treated as a separate calculation. To make it more interesting, the spousal early reduction is not the same as the primary early reduction.

Just in case you think that’s not confusing enough, we now throw in the phased in age increase for FRA that affect those born from 1937-1960. Bottom line is you and your spouse’s SS benefits are a personal amount that comes from knowing your PIA, when you’re born, and when you want to collect. It’s tough to generalize any one right or wrong way to do things with this number of variables.

IMHO, one should also consider widow benefits. They are greater than spousal benefits, and are also reduced by taking SS early. In addition, they increase with delayed retirement credits, unlike spousal benefits.

At the risk of upsetting anyone here, I recommend you take a trip to the boglehead forum and do some searches. There is one poster in particular (sscritic) who is a great resource on the topic. There are numerous links to SS sites to sort it out. I just figured out enough for my own situation at the moment, which has other complicating factors (WEP, GPO, etc.).

 

[Backpacker]

My inner nerd must be showing but the nuances of all the SSA options is very interesting to me. I am 47 DW is 44 so quite a ways off for us. I am sure the rules will change several times before we can even think about drawing. Wonder if anyone has used the website mentioned in the video socialsecuritysolutions.com ?

 

[LRDave]

SS and other complicating factors

At the risk of upsetting anyone here, I recommend you take a trip to the boglehead forum and do some searches. There is one poster in particular (sscritic) who is a great resource on the topic. There are numerous links to SS sites to sort it out. I just figured out enough for my own situation at the moment, which has other complicating factors (WEP, GPO, etc.).

Yeah, I had some questions about SS with DW having over 40 quarters of lower value contributions but also a participant in a SS-replacement 403 (b) plan.

The simple calculators were not comprehensive enough. I downloaded the SSA detailed calculator (AnyPIA) and that is a great program if you are into DOS and C prompts. I finally got it to spit out an answer but I am not at all confident in the results.

That is OK - we've still got 6 or more years of earning and saving like our hair is on fire. By then the assumptions (and perhaps the program) will have changed. I just wanted a rough and conservative estimate - which I think I got.....

I apppreciate the tip and will wander over to bogleheads when I've got some time to kill.