Facts on SS spousal benefits

[Rothman]

I've been trying to understand how the SS spousal benefit works and reading online I get conflicting answers. My wife had limited working years but does qualify for a reduced benefit of $550 at 62. But reading the SS website it also says she gets larger of her benefit or spousal, and since my FRA benefit is around $3000 puts her spousal at $1500 at her FRA with reduction to 62 will still be greater than $550. However many references say she can't qualify for spousal until I file, and based on input here my thought was I file and suspend at 67 my FRA and delay claim to 70. As I understand I can't file and suspend at 62?
So my question is can she get spousal benefit prior to me filing? If not I think best scenario in our case is she files at 62 on her record, refiles or gets for spousal when I file and suspend at 67 and then would get my higher survivor benefit based on my 3 years of waiting to collect? I think this does mean we lose the delta of reduced spousal versus her benefit for 8 years so maybe it needs more thought.
Appreciate guidance


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[Ed_The_Gypsy]

Hi, Rothman,
As I understand it,
1) you must be Full Retirement Age to file-and-suspend
2) she cannot get spousal benefit until you file (or die)

I do not know if the spousal benefit is permanently reduced if she files early for her own benefits first. I should know this because DW did file a little early at 65 but she wanted to do it regardless so no point in knowing.

We did discover that her Medicare cost more because I was making too much money at the time and will continue to be so until after we file taxes next time even though my income is greatly reduced this year. Her Medicare payments are being deducted from her SS payments, so she has been getting less than she was hoping for net.

 

[BooBoo]

I am trying to understand the process as well. DW and I are in a similar situation (she is 3 year older). My understanding is that you only get one chance to file for spousal benefits. If she files at 62 on her own she will only be able to get her reduced benefit and a reduced benefit from me after I file. From what I can tell my wife will need to wait until 66 to get her full benefit. Wait until I am at FRA (3 years later), I will either file and suspend until 70 or collect at 66. After I file and suspend, she should be able to collect on 1/2 of my FRA benefit. I think this is correct ?

 

[pb4uski]

Rothman, I have the same situation. DW is 8 months older than me and was a SAHM so her benefit based on her work record is less than my benefit.

She will file for benefit based on her own work record (in her case at her FRA rather than age 62). 8 monhts later, I will file and suspend and her benefit will get bumped up to half of my FRA benefit. I will begin my benefits at age 70. If I die before her, she will receive my benefit.

So for example, let's say her FRA benefit is $1,000 and my FRA benefit is $2,500. She's collect $1,000 for 8 months and then get bumped up to $1,250 (50% of $2,500). I'll start collecting $3,300 at age 70 (my $2,500 FRA benefit * 1.32) so between the two of us we will be collecting $4,550/month. If I predecease her, then she will receive $3,300 for the rest of her life.

As I understand it, if she files at age 62 rather than at her FRA she would only collect $750 based on her own benefit ($1,000 * 75%), it would be bumped up to $938 ($1,250 * 75%) when I file and suspend (a 25% discount in each case).

Also, I think that perhaps if I die that her survivor benefit might also be discounted $2,475 since she started collecting early but I'm not totally sure about that part.

 

[bradaz2488]

Since my ER plan is not counting on SS benefits I have not done a lot of research on this topic. I'm pretty sure they will change the rules and the amount of benefits by the time we get to FRA. However I did come across this tool (link below). Has anyone tried this SS tool? Not sure how accurate it is, but it is easy to use. SSAnalyze - Bedrock Capital Management

 

[Ed_The_Gypsy]

pb4uski, I think you are right; early benefits will permanently reduce all of her benefits including survivor benefits. No free lunch.

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[ERD50]

Rothman, I have the same situation. DW is 8 months older than me and was a SAHM so her benefit based on her work record is less than my benefit. ...

So for example, let's say her FRA benefit is $1,000 and my FRA benefit is $2,500. She's collect $1,000 for 8 months and then get bumped up to $1,250 (50% of $2,500). I'll start collecting $3,300 at age 70 (my $2,500 FRA benefit * 1.32) so between the two of us we will be collecting $4,550/month. If I predecease her, then she will receive $3,300 for the rest of her life.

As I understand it, if she files at age 62 rather than at her FRA she would only collect $750 based on her own benefit ($1,000 * 75%), it would be bumped up to $938 ($1,250 * 75%) when I file and suspend (a 25% discount in each case).

Also, I think that perhaps if I die that her survivor benefit might also be discounted $2,475 since she started collecting early but I'm not totally sure about that part.

Thank you for that. I also get lost in the legalese wording at the SS, where they try to cover all these different cases with words and it just turns into a long confusing string to me. It really helps me to see an example, and I think they should include one for several 'typical' cases, and then maybe the 'corner cases', and people could pretty easily interpolate/extrapolate from there.

Your explanation fits what I thought I understood, so I hope you are right!


Maybe we could put together a few clear examples, start with equal ages and:

#1 - one spouse with 1/3 the SS at FRA of the other(*),
#2 - one spouse with 2/3 the SS at FRA of the other(*),
#3 - equal SS at FRA


and illustrate (not debate!) the mechanics (not pros/cons!) of taking early, at and a delay for each case?

If that gets cleared up, try it with a few age combos? I think if we could edit these examples down for clarity and correctness, we could have a mod put the final, edited post as a sticky/FAQ (w/o all the long, distracting, sometimes tedious and error filled discussion leading up to the final 'product'). Further discussion could take place outside that sticky, and only update the sticky/FAQ when/if needed.

Or are these examples out there on the interwebs somewhere?


(*) I was thinking of the 1/3rd and 2/3rds points, as they straddle the half-way point, and might help illustrate how to handle these, but maybe just one at the 1/2 the other would work as well?

-ERD50

 

[ivinsfan]

pb4uski, I think you are right; early benefits will permanently reduce all of her benefits including survivor benefits. No free lunch.

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Is this correct info, I thought that when a couple collects 2 checks and one passes away, the default survivor payment is simply the higher benefit amount without a reduction.

 

[NW-Bound]

SS rules are so complex, reading about them raises my blood pressure, and I have to refrain from swearing if I am within earshot of someone else. And why is it that I get more out of 3rd party Web sites, compared to reading the official SS.gov site?

Anyway, there's a difference between spousal benefits and survivor benefits. Regarding the latter, one site says that

"Once you and your spouse are both receiving social security benefits, upon the death of your spouse, you will continue to receive the larger of your benefit, or your spouse’s, but not both."​

The above agrees with what ivinsfan says. If the surviving spouse has not reached FRA, and has not claimed SS, there is a reduction. It also depends on whether the late spouse was already receiving SS or not at time of death, I think.

Darn, as I said it is complicated.

 

[kaneohe]

You may want to post your question on bogleheads.org. and hope you get a response from sscritic. He doesn't seem to post publicly these days but if he sees an answer that is incorrect that offends him, you may get a PM directly from him.

 

[NW-Bound]

The more I look into SS survivor benefit, the more complications I see. For example, if the deceased spouse takes early SS, then the surviving spouse should also take the survivor benefit early, as it will not increase if he/she waits. It is because of the "special RIB-LIM" formula. Hah! How many more of these secret formulas that we do not know about?

See: What Social Security's Survivors Planner won't tell you about taking widows benefits.

 

[Ronnieboy]

I am trying to understand the process as well. DW and I are in a similar situation (she is 3 year older). My understanding is that you only get one chance to file for spousal benefits. If she files at 62 on her own she will only be able to get her reduced benefit and a reduced benefit from me after I file. From what I can tell my wife will need to wait until 66 to get her full benefit. Wait until I am at FRA (3 years later), I will either file and suspend until 70 or collect at 66. After I file and suspend, she should be able to collect on 1/2 of my FRA benefit. I think this is correct ?

My wife is 3 years older than me, too. I was hoping that she could file on her own at 62, I could get 1/2 spouse benefits at 59 and then file for mine at FRA or file and suspend till 70 while she gets spousal off mine at my FRA. I think that was a pipe dream though. If I understand it correctly, I can't get 1/2 spousal benefits till I'm at least 62

But I haven't looked into it thost close yet, as we are a number of years off.

 

[NW-Bound]

My wife is 3 years older than me, too. I was hoping that she could file on her own at 62, I could get 1/2 spouse benefits at 59 and then file for mine at FRA...

No, you cannot get spousal benefit until you are 62. And then, as you file early before FRA, your own benefit will be permanently reduced.

From a Web site:

If you file for a spousal benefit before your FRA, you will end up with a smaller amount. You can file as early as age 62 but if you do, you will be hit with benefit reductions. Retirement benefits will rise each month they are deferred between FRA and age 70. Spousal benefits peak at FRA, so there is no reason to defer claiming them past that point.

An early filing will also trigger a Social Security provision called deeming—this means the agency considers you to be filing both for your individual retirement benefit and you spousal benefit. You will be paid an amount roughly equal to the greater of the two benefits. But you lose the opportunity to get increases for delayed claiming on your individual benefits. This is a bad deal.​

See: Social Security: 3 Secrets to Maxing out Spousal Benefits

 

[Ronnieboy]

No, you cannot get spousal benefit until you are 62. And then, as you file early before FRA, your own benefit will be permanently reduced.

From a Web site:

If you file for a spousal benefit before your FRA, you will end up with a smaller amount. You can file as early as age 62 but if you do, you will be hit with benefit reductions. Retirement benefits will rise each month they are deferred between FRA and age 70. Spousal benefits peak at FRA, so there is no reason to defer claiming them past that point.

An early filing will also trigger a Social Security provision called deeming—this means the agency considers you to be filing both for your individual retirement benefit and you spousal benefit. You will be paid an amount roughly equal to the greater of the two benefits. But you lose the opportunity to get increases for delayed claiming on your individual benefits. This is a bad deal.
​

See: Social Security: 3 Secrets to Maxing out Spousal Benefits

A ha, thanks for the link. I thought it was wishful thinking, but you never know

 

[gerntz]

since my FRA benefit is around $3000

No one today gets that much at FRA. The maximum FRA SS benefit today is $2663. You can get more by delaying taking benefits beyond FRA towards age 70.

 

[NW-Bound]

Here's something that simplifies things a bit regarding spousal and survivor benefits. It does not get into the "special RIB-LIM formula" mentioned earlier, because it does not recommend that the higher-earner takes SS prior to FRA.

I do not recall where I ran across this info, and it could be from earlier discussions in this forum.

See: http://www.blackrock.com/investing/...urity-retirement-benefits-one-pager-va-us.pdf

 

[homestead]

This calculator will show you some options on when to start.
Social Security calculator: retirement planning for you and spouse.

 

[Rothman]

Thanks for many replies especially pb4uski as I think you have confirmed what I believe to be correct with the exception you say her survivor benefit would be reduced, I understood she would get my amount which will be higher due to waiting to 70, I do agree with ERD50 a clear explanation with examples, although I'd prefer example numbers rather than fractions, would be a great item for the board, I'm surprised we don't have a SS expert. Gerntz my amount was rounded up but directly from my statement says at FRA $2,706 delayed to 70 $3,364. I've got a lot of years to find out but was trying to use firecalc with proper estimates. Should be easier to have good info on SS website.


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[jpjr]

Here is another wrinkle that will apply to DW and me. She is 63 1/2 I am 65.
My FRA benefits are $ 2,358 and hers are $ 1,000.
DW is going to take her benefits earlier - age 64 1/2 when I am FRA at 66.
Her reduced benefits will be appx $ 855.
I will file for spousal benefits which will be 50% of $ 1,000. Since I am FRA I get the full 50% of spousal benefits, I am not penalized for her taking benefits early.
At a later date, hopefully at age 70 I will file for my own benefits. appx $ 3,100.
DW will then apply for spousal benefits which should be 50% of my $ 3,100 x's .85 which represents the "penalty" for her taking her benefits early.
Upon my demise, DW will get survivor benefits of $ 3,100.

If anyone sees an issue with the calculations, let me know, as I am very sure these options are available under the current SS program.

 

[NW-Bound]

Yes, that's the strategy called "Married Couple—Intermediate Difference in Benefits (62/70 Strategy)" in the Black Rock summary I referred to earlier.

They describe another strategy called "Married Couple—Large Difference in Benefits (Hybrid Strategy)", but that does not work as well in your case, as it requires the difference in benefits to be even larger!

 

[jpjr]

NW-Bound,

You are correct!

Thanks

 

[Clone]

I didn't see this linked in this thread yet, so I will add it here: Social Security Benefits Evaluator - T. Rowe Price

This tool allows you to put in your ages and the amounts from your social security statement. You can then run 7 different scenarios to look at what strategies might work out.

Regarding ERDs suggestion for 1/3 2/3 benefit amount, you can do that. In my situation, my benefit is almost exactly 2x that of my spouse. Tweaking her benefit up a few more dollars will sometimes change the strategies, but the impact on the total payout over many years is not a big difference. The one thing that is not flexible is the expected age of demise, which is set at 83 for one and 95 for the other.

 

[Clone]

Here is another wrinkle that will apply to DW and me. She is 63 1/2 I am 65.
My FRA benefits are $ 2,358 and hers are $ 1,000.

I used 1 May 50 and 1 Nov 51 for birth dates. Life expectancy his 83, hers 95. Using the calculator, here are a few of the scenarios:

GOAL:
We want to maximize the survivor benefit and receive income early if possible.
[FONT=&quot]We want to get the maximum benefit possible as a couple – over both our lifetimes.[/FONT]
[FONT=&quot]We want to maximize our income over the years we have together. [/FONT]
[FONT=&quot]We want the surviving spouse to receive the maximum annual benefit available. [/FONT]
[FONT=&quot]We want to minimize drop in income for surviving spouse.[/FONT]


STRATEGY: (They all came out the same)
May 2016: He files and suspends so that She may apply for spousal benefits.
May 2016: She files for spousal benefits, receiving approximately $12,394 per year.
May 2020: He files for own benefits, at age 70, receiving approximately $37,351 per year.
Based on the life expectancy chosen, She is assumed to receive the survivor's benefit of approximately $37,351 per year in May 2033.

 

[pb4uski]

Here is another wrinkle that will apply to DW and me. She is 63 1/2 I am 65.
My FRA benefits are $ 2,358 and hers are $ 1,000.
DW is going to take her benefits earlier - age 64 1/2 when I am FRA at 66.
Her reduced benefits will be appx $ 855.
I will file for spousal benefits which will be 50% of $ 1,000. Since I am FRA I get the full 50% of spousal benefits, I am not penalized for her taking benefits early.
At a later date, hopefully at age 70 I will file for my own benefits. appx $ 3,100.
DW will then apply for spousal benefits which should be 50% of my $ 3,100 x's .85 which represents the "penalty" for her taking her benefits early.
Upon my demise, DW will get survivor benefits of $ 3,100.

If anyone sees an issue with the calculations, let me know, as I am very sure these options are available under the current SS program.

My understanding is that you cannot file for spousal benefits alone as you plan to do when you hit your FRA. My understanding is that you apply and will receive the higher of your benefit based on your work record and your age when you file or, if your spouse has filed, 50% of their benefit if it is higher than your benefit. So if your DW is collecting based on her own record and you apply at your FRA, you will receive benefits based on your work record and your FRA and will forgo the 8%/year increase in benefits from FRA to age 70.

 

[Bestwifeever]

Here is another wrinkle that will apply to DW and me. She is 63 1/2 I am 65.
My FRA benefits are $ 2,358 and hers are $ 1,000.
DW is going to take her benefits earlier - age 64 1/2 when I am FRA at 66.
Her reduced benefits will be appx $ 855.
I will file for spousal benefits which will be 50% of $ 1,000. Since I am FRA I get the full 50% of spousal benefits, I am not penalized for her taking benefits early.
At a later date, hopefully at age 70 I will file for my own benefits. appx $ 3,100.
DW will then apply for spousal benefits which should be 50% of my $ 3,100 x's .85 which represents the "penalty" for her taking her benefits early.
Upon my demise, DW will get survivor benefits of $ 3,100.

If anyone sees an issue with the calculations, let me know, as I am very sure these options are available under the current SS program.

Your plan is addressed here (i think it is telling you it won't work as planned): Social Security Q&A: Can My Spouse File and Suspend at 63 to Enable Spousal Benefits? - Forbes

If she files before FRA she cannot switch to a bigger spousal benefit later but will be awarded it then prorated to her early filing. She would have to wait til FRA to be able to file and suspend as you describe. And since only one of you can do the file and suspend, you wouldn't be able to at FRA (and collect half her earnings) if she does.

ETA: DH filed in 2014 at FRA and I will file and suspend at my FRA to collect spousal on his record until I am 70 when mine will be a few thousand more per year. Amazing how much we have learned about collecting SS as we grew older and closer to taking it!