SS and spousal benefits

[SenorDave]

Good evening.
We've passed our first year of early retirement and haven't looked back! We're loving it!
Anyway, looking towards the future I want to make sure that we are understanding SS spousal benefits correctly.
We are both 57. Our plan is to have DW claim her own SS benefit of $400 per month at 62.
Once I turn 67, I will claim my SS benefit of $2200 per month and DW will claim spousal benefit of $1100 per month.
Is our understanding correct on how this would work?
Thanks

 

[Carol1862]

Not exactly. If you both were full retirement age then yes. But because she is taking it early it will be adjusted. She will get her $400 plus spousal benefits up to one half of yours at FRA adjusted for the 5 years she took hers early.

Go to [url=http://www.opensocialsecurity.com and you’ll get a spreadsheet that should help.

Also, you can call social security directly. Be aware though that I called them 3x and twice got very wrong information. Kind of scary that they’re misinformed and I knew more than they did.

 

[RetiredHappy]

Not exactly. Because your wife claims early, i.e. at 62 on her own record, she will permanently have reduced spousal benefits. Instead of $1,100, she will get a lower amount when she files for spousal benefit at her FRA. I don't have a formula for that on hand.

 

[RetiredHappy]

I THINK the formula is $400 + 0.675*700 = $872.50.

 

[SenorDave]

Not exactly. If you both were full retirement age then yes. But because she is taking it early it will be adjusted. She will get her $400 plus spousal benefits up to one half of yours at FRA adjusted for the 5 years she took hers early.

Go to
Thanks for the clarification.
You hit the problem exactly, asking for clarification from SSA is a crap shoot at best. ��

 

[ivinsfan]

Thanks for the clarification.
You hit the problem exactly, asking for clarification from SSA is a crap shoot at best. ��

You have much better results calling SS if you have a grasp of the basics before hand. Phone calls can get confusing to both parties. Write some questions down beforehand. I've had all good interactions with SS

For example is the 400 numberforyourwife already adjusted for claiming before FRA.

 

[Sunset]

OP - If the goal is for you to get full SS , and your wife to get full spousal benefits, then you both have to wait until FRA.

What is the goal ?

 

[pb4uski]

I suggest that you go to opensocialsecurity.com

My understanding is that your spouse will get the benefit based on her own work record, reduced permanently if she takes SS early.

The spousal benefit isn't paid until the higher earning spouse files and will be 50% of your PIA less her PIA. If her age 62 benefit is $400 then I'm guessing her PIA would be ~$533, so her spousal benefit would be $1,100-$533 or $567 and her total benefit would be $967 (not $1,100 because she started benefits early).

We had a similar situation... DW's PIA was 30% of mine and we were born in the same year. We decided to have her claim at FRA and I'll claim at 70... so she'll receive her PIA from her FRA until I am 70 and then 50% of my PIA thereafter as long as I am alive. If I predecease her, then she'll get survivor benefits that will increase her benefit to my age 70 benefit.

Part of the reason that we waited until FRA for her to start rather than age 62 was so we would have 4 more years of more headroom for low-cost Roth conversions between when we were 62 and 66.

 

[Fermion]

Is waiting until FRA still a good idea? Still a ways off from collecting our SS but we will be in a similar situation as the OP, one collecting half the other's benefits. It is hundreds of thousands of dollars lost waiting 5 to 8 years to collect.

 

[golfnut]

Is waiting until FRA still a good idea? Still a ways off from collecting our SS but we will be in a similar situation as the OP, one collecting half the other's benefits. It is hundreds of thousands of dollars lost waiting 5 to 8 years to collect.

Nobody nor any calculator knows the answer.. Depends how long 0ne stays upright.

 

[pb4uski]

Is waiting until FRA still a good idea? Still a ways off from collecting our SS but we will be in a similar situation as the OP, one collecting half the other's benefits. It is hundreds of thousands of dollars lost waiting 5 to 8 years to collect.

It depends. Tell how long you will live and we can give you a definite answer but I think generally yes.

For most of these calculations, the breakeven is around 82.

For example, let's say that the lower earning spouse PIA is $1,000 and age 62 benefit is $750 and FRA is 67. If they wait from 62 to 67 to claim they forgo $45,000 ($750*12*(67-62)). But at 67 they's get $250 more or $3,000/year more... so they don't breakeven for 15 years... or when they are 82.

Assuming that they don't have chronic health issues, a non-smoker female born in 1960 of average health retiring at 67 would live to 89 according to the American Academy of Actuaries/Society of Actuaries longevity calculator.

Including the time value of money would extend the breakeven out a bit.

Part of the reason that we deferred SS for DW until her FRA was because it gave us more time and headroom for low-cost Roth conversions and she is in good health.

Have you played around with opensocialsecurity.com? If you do, be sure to click the little checkbox at the top and explore the Mortality Table, Discount Rate and Possible Future Cut options.

 

[Fermion]

I have not played around with anything yet as we are still 9 years out from even thinking about SS.

I was just wondering, as the NPV calculations for some of the companies I invest in seem like it should flow into SS as well.

A complicated calculation to be sure as you have to estimate the real returns you might get on that 5 to 8 years of extra cash if you don't delay SS until 67 or 70.

And then you might factor in possible cuts to SS, making it more of a bird in the hand worth two in the bush thing too.

 

[latexman]

A complicated calculation to be sure as you have to estimate the real returns you might get on that 5 to 8 years of extra cash if you don't delay SS until 67 or 70.

And then you might factor in possible cuts to SS, making it more of a bird in the hand worth two in the bush thing too.

That's why I use opensocialsecurity.com. It was written specifically to address when and how to take SS.

 

[qwerty3656]

I am in a similar situation to OP (where my SS is much more than my wife's). I was surprised when I used opensocialsecurity.com that it seemed indifferent when my wife took her benefit (but had me waiting til 70). It seems it must be assuming there is a good chance both parties won't live past the break even date (once one party dies then its just the SS at 70 that matters)?

 

[Sunset]

I am in a similar situation to OP (where my SS is much more than my wife's). I was surprised when I used opensocialsecurity.com that it seemed indifferent when my wife took her benefit (but had me waiting til 70). It seems it must be assuming there is a good chance both parties won't live past the break even date (once one party dies then its just the SS at 70 that matters)?

There is a very good chance both parties won't live past breakeven, but a great chance that one of them will.

I think you could play with this assumption by changing the mortality expectation. (right at the top click on the word "here")

 

[pb4uski]

I have not played around with anything yet as we are still 9 years out from even thinking about SS.

I was just wondering, as the NPV calculations for some of the companies I invest in seem like it should flow into SS as well.

A complicated calculation to be sure as you have to estimate the real returns you might get on that 5 to 8 years of extra cash if you don't delay SS until 67 or 70.

And then you might factor in possible cuts to SS, making it more of a bird in the hand worth two in the bush thing too.

opensocialsecurity.com covers that complex calculation.

What it does is based on the information that you provide it calculates the cash flows for each claiming alternative from when one or the other of you is 62 to when you are 70. Then it multiplies those cash flows with the probability of your being alive to receive them based on the mortality inputs that you have selected (I used the 2017 CSO Nonsmoker Preferred table)... to calculate "expected cash flows". It then discounts those expected cash flows for teh time value of money using the real discount rate that you provide... I use the real rate of return that I expect on the money that I would use for spending if I took SS early. At that point it has an expected present value for each possible claiming strategy and the highest expected present value is the optimal claiming strategy.

You can also include a haircut to SS beginning at a time you specify and for a magnitude that you specify... but they recommend the SS 23% cut in 2034 consistent with the most recent SS Trustees Report.

You can also look at the expected present value of other claiming strategies like both at 62, both at 65, both at FRA, both at 70 of various combinations thereof. In our case, the expected present values were not significantly different. The last time I looked at it I was 64-1/2 and DW was 65-1/4 and our results were:

	No haircut	Haircut
Optimal solution	100.0%	100.0%
Both now	91.2%	94.0%
Both 65	92.3%	94.9%
Both at FRA	94.5%	96.6%
Me 70/DW FRA	100.0%	100.0%