What's the deal with two working spouses and SS?

[tuffshed]

I came upon this on an old thread about retiring at 62 and someone brought up the point about 50% spousal benefit which I had not even considered. Since DW and I were single most are lives and married late (just 3 years ago) and with a prenup (you never know) we always figured what is mine is mine and what is yours is yours and that included SS benefits. We were always under the impression that each of us worked so each of us would get a benefit. Add her benefit to my benefit and live in the same house and that's a lot of benefit, but now I'm confused about the 50% spouse benefit and reading the SS site is no real help.

I think what I read was this, I retire retire first and get a benefit, when my spouse retires she get 50% of my benefit if her benefit is less than mine.

Whoa, now wait a minute I think there is a point here that I missed that needs to be cleared up. So at 59 and planning on retiring at 60 I need to get this straighted out.

At 62 (in 3 years) I was planning on claiming a benefit of approx 23k year. 6 years later at 62 DW was planning on retiring and claiming a benefit of 19k a year. Yippee 42K year ain't too bad for free money as I have 2 pensions and we both have good 401k savings.

Am I reading that those figures are actually 23k for me, then later 50% of 23k (11.5k) for her, a grand total of 34.5k for us and NOT 42k? Please so it ain't so as we love each other but wouldn't hesitate to divorce and live in sin to right this.

 

[tuffshed]

Ahh rats, now I'm even more confused when I read this from the SS site:
If your spouse is eligible for retirement benefits on his or her own record we will pay that amount first. But if the benefit on your record is a higher amount, he or she will get a combination of benefits that equals that higher amount.

Is that now telling me that when DW retires our combined benefit will be my 23k a year plus the greater of her 19k a year or my benefit, which would then make our combined benefit 46k a year at that time? Yippee again if this is true, more free money.

 

[pb4uski]

It is really pretty easy. Your benefit is based on your work record or 50% of your spouse's benefit, whichever is greater. The details get complicated bu that is the essence of it.

If you have both worked a long time, it probably won't apply unless their is a big difference in your earnings.

I think you would end up with 42k in total if you both claim at 62. Then if you pass on first, your spouses benefit will be increased to be equal to yours. That is why it is usually better for the higher earner to wait.

You should learn about claiming strategies. AARP has a pretty good claiming strategy calculator. I suggest you go through that ans see what it suggests.

 

[RetiringAt55]

It might be economically better for you to wait until 70 to claim your SS and for your wife to claim hers at 62. That way your wife would continue to get the higher survivor's benefit if you were to die. This is especially important as there is a large age difference between you.

My DH and I also married late in life and have kept our finances pretty separate. But the agreement between us is that once we enter that retirement stage of life and my children are off to college, we will be merging most of our finances and making decisions based on what is best for us as a couple.

 

[tuffshed]

Thanks all this makes more sense. I definitely won't be waiting till 70 to take mine since I plan to retire in a year at 60 and DW won't be ready for a few more years since she has clients and wants to sock some more away in case it ends up being worse case for her (divorce). Like RetiringAt55 our finances are separate and both of us could retire on our own resources and take SS at 62, but we have no children or needs for others to inherit.

Our take on the marriage/finances/retirement is that each of us has enough to go it alone at the worse case of splitting up (although DW would have to work a few more years). At the best case of staying together till one of us passes, our combined savings and SS are more than enough to keep a lifestyle better than we had in our working lives since neither of us are big spenders even though we travel a lot even now. So far after being together 10+ years and married for 4 it's looking good for a best case scenario.

So when I say SS is "free money" by that I mean we are not counting on it at all and could get along without it, but by taking it we have even more to use to keep savings from being depleted so no need to be stingy and wait till 70, heck that's 11 more years for me... I can't last that long at my megacorp job considering layoff potential and stress. Our frugal lifestyle all our lives is paying off!

 

[pb4uski]

Don't confuse retiring with taking SS - though I realize that is the reality for many people they are really separate decisions.

If you really can get along without it then you're probably better off waiting until you are 70 as it is cheap longevity insurance.

 

[Animorph]

Take a look at this for some more detailed advice. It's a fairly simple calculator that will help with claiming strategies:

Social Security Benefits Evaluator - T. Rowe Price


Your DW would have a choice of receiving spousal benefits while delaying her own benefit. That might be nice. Both of you have the option of receiving the higher SS of either spouse if one of you dies first. That might be to DW's benefit if she claims at 62 or yours if she delays. I think you may need 10 years of marriage for some of these, unless that's only for divorces. Not something I had to pay attention to. Generally all to your benefit however.

 

[ivinsfan]

I know there is always talk about the "marriage penalty" when it comes to income taxes, that a married couple may pay more in tax then 2 single taxpayers. This SS benefit does the exact opposite, and a married couple paying SS taxes on one income, can collect up to 150% of one benefit and when one of them dies the remaining spouse continues to collect 100% , even if they were not the worker in the family.

In contrast an never married single worker may only collect a 100% benefit(adjusted for age of course) and when they die their benefit stops. I think a lot of people don't realize how complicated this gets until they look at their own benefits. I have friends age 60+ who are really uninformed about all the options. I comment if they ask, but you really have to research all this for yourself to get the answer that might work best for you and yours.

It certainly leads to a lot more planning options for a couple.

 

[tuffshed]

More options...Nice!

Take a look at this for some more detailed advice. It's a fairly simple calculator that will help with claiming strategies:

Social Security Benefits Evaluator - T. Rowe Price


Your DW would have a choice of receiving spousal benefits while delaying her own benefit. That might be nice. Both of you have the option of receiving the higher SS of either spouse if one of you dies first. That might be to DW's benefit if she claims at 62 or yours if she delays. I think you may need 10 years of marriage for some of these, unless that's only for divorces. Not something I had to pay attention to. Generally all to your benefit however.

I took a look at this site and it presents some nice planning options. Since I still have a bit of time to plan I'll look more at the options. There are 2 or 3 scenarios that I should ponder and consider. Even though I still consider SS as "free money" there is no need not to take it seriously and optimize what I can get out of it based on my wants.

Thanks for the link.

 

[Alan]

There are more discussions on this topic in the FAQ on the subject

http://www.early-retirement.org/forums/showthread.php?t=69366

 

[jclarksnakes]

You can call SS "free money" if you want but I would remind you that over the years you and your employers have paid a bunch of money into SS.

You mention that you have two pensions. Does your wife have a pension? What happens to her if you die? The likely best choice is for you to delay taking SS until you are 70 and then your wife start taking a spousal benefit of 50% of your FRA amount when she reaches SS full retirement age. Then when she turns 70 she can start drawing more SS on her own account. This method gets both of you the maximum longevity insurance benefit from SS and also gets your wife the maximum possible benefit if you die. The only way this could be a bad financial choice is if you AND your wife were to both die early.

 

[tuffshed]

You mention that you have two pensions. Does your wife have a pension? What happens to her if you die?

No she has no pension, and mine amounts to 18k year if taken at 60, no COLA. Since we have been planning all our lives as if we were alone, her savings is good enough to last her all the rest of her live if I die. Anything left of my savings is just gravy for her.

The likely best choice is for you to delay taking SS until you are 70 and then your wife start taking a spousal benefit of 50% of your FRA amount when she reaches SS full retirement age....

I'm still leaning toward 62 for both of us, even after running those figures. If it doesn't sound right calling it "free money" then let's just call it "gravy money" as it is not 100% necessary in our financial plan and it still seems like right now I'm only using SS as a floor with COLA for planning purposes.

The only way this could be a bad financial choice is if you AND your wife were to both die early.

If we both die early we couldn't give a hoot what kind of choice it is good or bad... we'll both be DEAD ! As a friend always says "Spend it now, there are no pockets in a shroud". There is some truth to that.

 

[tuffshed]

There are more discussions on this topic in the FAQ on the subject

(FAQ Archive) When to take SS - Early Retirement & Financial Independence Community

Yes, a good FAQ, in fact this is now circular because reading that FAQ and being confused about one of the threads led me to post this thread. I tried to post the question in the FAQ thread I was reading but it said it was more than a year old and I could not post to it, so here we are, but thanks for pointing that out to others who may be reading this thread.