Social Security Strategies For Married Couples

by Joe Plemon on June 23, 2010

Married couples: Social Security is complicated and don’t let anyone tell you otherwise. Is either of you (or both of you) close to retirement age? Are you wondering if you should start earlier or later? Before you decide, make sure you understand these two aspects of Social Security: “spousal benefit” and “surviving spouse benefit”. Let’s start with the definitions.

Spousal benefit

The lower earning spouse has a choice: to claim a “spousal” benefit of up to 50% of the higher earning spouse’s benefit or to claim his own earned benefit. The higher earning spouse must be already collecting benefits before the lower earning one can qualify for a spousal benefit. And this spousal benefit will be reduced for every month under full benefit age. For example, if the spouse is already drawing a $1600, the lower earning spouse could qualify for $800 a month at full retirement age; or 75% of $800 ($600) if starting at age 62.

Surviving spouse benefit

A surviving spouse of a retiree drawing Social Security will receive 100% of that pension, with the following provisions:

  • The survivor must be full retirement age. If not, the benefit will be reduced based on age.
  • If the survivor is insured on her own record and the benefit of the deceased spouse is higher, the survivor will continue to receive her own benefit and also the difference between her benefit and the deceased spouse’s benefit.

Simply put, the surviving spouse will receive the greater of her benefit or the deceased spouse’s benefit, providing she is full retirement age.

Got those definitions? Good! Now for some Social Security strategies.

For clarity’s sake (and because it is this way in most families), I will refer to the higher earner as the man and the lower earner as the woman throughout the rest of this article.

Strategy of waiting

All Social Security benefits are greater when delayed. Because the spousal benefit is dependent on the higher earner’s benefit, the advantages are compounded. Say the higher earning spouse’s benefit is $2,000 at full retirement age. If his spouse also waits until full retirement age to start her spousal benefit, she will draw 50%, or $1,000, for a combined $3,000 monthly benefit. On the other hand, if the higher earning spouse starts his benefit at age 62, it will be reduced by 25% to $1,500. Because 50% of $1,500 is less than 50% of $2,000, this reduction also affects the spousal benefit. But if the spouse starts drawing at age 62, she won’t even receive the full 50% of the $1,500; her benefit will likewise be reduced by 25% from $750 to $562.50 for a combined benefit of $2062.50. Obviously, waiting can make a huge difference.

In the same way, waiting will also affect the surviving spouse benefit. In the above scenario, the surviving spouse benefit drops by $500 (from $2,000 a month to $1,500 a month) when the benefits start early. If you consider this benefit as a form of life insurance, a $500 per month decrease is substantial.

Should Spousal Benefit always be delayed until full retirement age?

Not necessarily. The age differential of the spouses should be considered. For example, if the husband is 70 and the wife is 62, she should consider beginning her spousal benefit at the reduced rate. Why? Because the husband is likely to die earlier and, at that time, her survivor’s benefit (based on HIS pension) would kick in. This is the same benefit she will receive whether she starts at age 62 or not, so she should consider bringing the extra money into the household now.

How to draw Spousal Benefit while waiting

Suppose the husband is full retirement age and wants to wait until age 70 before starting his benefits. Will the wife, who cannot draw the spousal benefit unless her husband has started his pension, need to wait until he is 70? Not if the couple takes advantage of voluntary suspension.

Here is how it works: The husband files for his benefit and the wife files for the spousal benefit. The husband then immediately requests a voluntary suspension of his pension. The wife will be able to collect her spousal benefit while the husband’s future benefit will grow by 8% annually. I like this strategy because the couple is bringing in “bonus” household income while the husband is patiently maxing out both his future pension and his wife’s future survivor benefit.

Another way to claim a Spousal Benefit while waiting

Suppose the husband wants to wait until age 70 to start his pension but his wife also qualifies for benefits based on her own work record. Think through this one with me: she could start her benefit and he could sign up for the spousal benefit while waiting until age 70 to start his own. At that point he switches to his own higher benefit. As in previous examples, this will increase the survivor’s benefit, but will do so while bringing extra income into the household. And the wife could also switch to a spousal benefit based on what the husband’s benefit would have been at age 66. This is very similar to having your cake and eating it too.

One caveat: the higher earning spouse cannot use this tactic if he is younger than full retirement age.

Summary

Social Security can be complicated, but you can make intelligent decisions if you understand these basics. This is your pension that you have paid into all of your working life. Make sure you maximize your benefits.

One more thing: Social Security rules change, so I strongly recommend that you check with the Social Security Administration with all of your questions.

Have you started receiving your Social Security benefits?  What strategies did you use?  Would you recommend to those who haven’t started yet?

Creative Commons License photo credit: joguldi

email

{ 52 comments… read them below or add one }

Lowrie June 23, 2010 at 12:10 pm

You write, “And the wife could also switch to a spousal benefit based on what the husband’s benefit would have been at age 66. ” You’ve answered one question I had: A spouse can start Social Security, and later switch to a spousal benefit, if that’s advantageous, once her spouse files for his own SS. But why can she only get a spousal benefit based on his benefit at age 66, if he has waited until age 70 to begin collecting? Shouldn’t her spousal benefit be based on his higher, age-70, benefit?

Reply

joeplemon June 23, 2010 at 1:56 pm

Lowrie,
Your question makes perfect sense. I got much of my information from this Kiplinger article: http://www.kiplinger.com/features/archives/2009/09/krr_boost_your_social_security_benefits2.html?kipad_id=x.
This article gave the age 66 that I used in my post.

After I got your question, I went to the Social Security web site to read about maximum spousal benefit, only to learn that I couldn’t find anything about a spouse drawing a spousal benefit from a husband or wife who waits until they are 70 before starting. So I took a deep breath and called the Social Security office to learn that a spouse can indeed draw 50% of her spouse’s benefit if he waits until age 70, as long as she is full retirement age. Therefore, it seems that Kiplinger could be wrong, unless there is some sort of penalty for starting earlier and then switching to a spousal benefit.

Clear as mud? Like I said, this stuff is complicated.

Reply

Lowrie June 23, 2010 at 2:24 pm

Thanks Joe; I too have been fishing the muddy waters since I wrote you, and haven’t come up with anything definitive; I think you may have the critical factor– the spouse having already begun taking a SS benefit of her own, several years before switching to the spousal benefit; it seems possible that doing so “starts a clock,” tying her eventual spousal benefit to her (or her husband’s?) age at that initial time.

I didn’t have the courage to call Social Security, but I went to their website; the closest I could find to this question was “Benefit amount when receiving from multiple records,” which says in part, “Your wife can start receiving reduced retirement benefits on her own record at age 62. If the amount she receives on her own record is less than what she would be entitled to as a spouse, she would receive a higher spouse’s benefit when you start receiving benefits. However, because she began receiving Social Security before reaching full retirement age, she will receive a reduced benefit rate that is less than the full 50 percent amount for as long as she remains entitled to spouse’s benefits.”

Fine; but what it doesn’t address is: what if your wife is not 62 but 66, full retirement age, when she first applies for her own SS? Would she still get a reduced spouse’s benefit, when she later switches? That one, I still have no answer on!
Lowrie

Reply

Lowrie June 23, 2010 at 3:23 pm

I just received a response directly from Social Security. Along with a great deal of extraneous material, there was this nugget:

“Your spouse cannot receive spouse’s benefits until you file for retirement benefits… A spouse receives one-half of the retired worker’s full benefit unless the spouse begins collecting benefits before full retirement age (FRA). In that case, the amount of the spouse’s benefit is permanently reduced by a percentage based on the number of months before he/she reaches full retirement age.”

From that, I would infer that if the spouse _is_ FRA when she starts collecting benefits, then when her husband later begins collecting, she would receive a full (i.e. 50%) spousal benefit, if that is larger than her own benefit. But “inferring” is not quite the same as “knowing”!

Reply

joeplemon June 23, 2010 at 3:53 pm

Lowrie,
My head is spinning but I am going to believe until proven otherwise that Kiplinger was wrong when they said that the lower earning spouse, when switching to a spousal benefit at the time when her higher earning husband starts his benefits at age 70, will receive 50% of what he would have received at age 66.

The Social Security office told me on the phone that a spouse, at FRA, would receive 50% of her spouse’s benefit even if he waits until age 70. This validates the inference you made from the nugget you got from Social Security.

Still murky but maybe not muddy. Keep me posted if you learn anything different.

Reply

Lowrie June 24, 2010 at 9:27 am

By dint of a lot of ferreting last night, I believe I have the answer–from the Soc. Sec. website, in fact. It hinges on two definitions.
The first is Primary Insurance Amount, as in: “The spousal benefit can be as much as half of the worker’s “primary insurance amount,” depending on the spouse’s age at retirement.” (If the spouse has reached her full retirement age, she gets the 50%.)
The “primary insurance amount” (PIA) is the benefit a person would receive if he/she elects to begin receiving retirement benefits at his/her normal (or full) retirement age. At this age, the benefit is neither reduced for early retirement nor increased for delayed retirement.
The second definition is for Normal/Full Retirement Age. For me, it was 65 and 10 months; for most folks now reading, it’s 66.
So, bottom line: If a spouse of Full Retirement Age chooses to take a spousal benefit, she gets 50% of what the worker was (or even _will_ be, if he’s younger than 66) entitled to at his Full Retirement Age; and it doesn’t change from that. I think it might be inflation adjusted–that would make sense–but it doesn’t grow with age, like deferred benefits do. So, Kiplinger was right.
I hope this helps.

Reply

joeplemon June 24, 2010 at 10:17 am

Lowrie,
Your next assignment is to read the entire Health Care Bill and explain it in three paragraphs. 🙂

I think I get what you are saying. The PIA is an actual amount while the FRA is the optimum age for the PIA.

If the maximum spousal benefit is based on 1. her being FRA and 2. the pension of her husband at FRA, was the Social Security rep I spoke with on the phone wrong when she told me that a FRA spouse could draw 50% of her husband’s benefit if he waits until age 70 to start?

Reply

Mami2jcn June 24, 2010 at 12:19 pm

Hi. I’m following you on Twitter for the GRABBBR Contest.

Reply

Lowrie June 24, 2010 at 12:23 pm

It depends. 😉
If the SS Rep meant, the FRA spouse can draw 50% of her husband’s benefit *at age 70*, then I think the rep was wrong. If she took the tunnel vision approach, and meant merely, the FRA spouse draw 50% of her husband’s benefit *from when he was FRA*, regardless of when the spouse starts, age 70 or any other–then that’s true, but not very useful.

Reply

Mami2jcn June 25, 2010 at 7:53 am

I subscribed to your RSS Feed via email for the GRABBBR contest.

Reply

Mrs. Accountability June 25, 2010 at 10:05 pm

Joe, do you know what happens if one spouse is disabled and receiving disability benefits? Also, I’ve lived in trailer parks at various times in my life which tend to have a lot of older folks and I’ve known more than one elderly couple “living in sin” since their SS benefits would be affected. I always thought only one person could get it, so it’s good to know the second spouse would get at least 50% of what is due.

Reply

joeplemon June 26, 2010 at 8:14 am

Mrs. Accountability,
I refer you to this link: http://www.socialsecurity.gov/pubs/10029.html#part7.

As I read it, a spouse can receive spousal benefits from his/her spouse’s disability benefit in a similar way that the spousal benefit is received on their husband/wife pension.

Specifically, this portion of the SS web site (in reference to disability benefits) reads:

“Certain members of your family may qualify for benefits based on your work. They include:

* Your spouse, if he or she is 62 or older;
* Your spouse, at any age if he or she is caring for a child of yours who is younger than age 16 or disabled;
* Your unmarried child, including an adopted child, or, in some cases, a stepchild or grandchild. The child must be under age 18 or under age 19 if in elementary or secondary school full time; and
* Your unmarried child, age 18 or older, if he or she has a disability that started before age 22. (The child’s disability also must meet the definition of disability for adults.)

NOTE:
In some situations, a divorced spouse may qualify for benefits based on your earnings if he or she was married to you for at least 10 years, is not currently married and is at least age 62. The money paid to a divorced spouse does not reduce your benefit or any benefits due to your current spouse or children. ”

I hope that helps. I don’t know of any instances where “living in sin” is helpful with drawing SS benefits, but I don’t doubt that those cases exist. Like I said in the post, Social Security is complicated.

Reply

Mrs. Accountability June 26, 2010 at 8:23 am

Joe, in regards to “living in sin” – if I’m understanding your post correctly, Husband would get $2000 and Wife – also eligible for $2000 – would only get $1000. These couples I knew years ago had met after they’d retired, and had already been getting the maximum each. If they married, instead of getting $4000, that would have dropped to $3000. Sorry for the confusion in not explaining that better. Or am I still confused?

Reply

joeplemon June 26, 2010 at 8:47 am

Mrs. Accountability,
I think you are still confused. The first sentence in my post under the heading Spousal Agreement reads, “The lower earning spouse has a choice: to claim a “spousal” benefit of up to 50% of the higher earning spouse’s benefit or to claim his own earned benefit.”

The spousal benefit does not penalize anyone, but could possibly benefit the lower earning spouse if she is drawing less than 50% of her spouse’s benefit on her own record.

For example, if Husband draws $2,000 on his record and Wife draws $2,000 on her record, they get $4,000. But, if the Wife could only draw $500 on her record, she would get $1,000 (50% of her spouse’s benefit) assuming she is full retirement age.

In my understanding, being married can help but not hurt the Social Security benefits. I always leave this caveat: I am not a Social Security expert, just a blogger who has read and tried to understand how it works. If anyone reading this can point out anything I have missed, please do!

Reply

joeplemon July 13, 2010 at 1:22 pm

Tom,
I am not an attorney. If the PA court made a determination to place a lien on your check, that sounds pretty “final” to me unless you could hire an attorney to appeal that decision.

Sounds like the best thing you could do is reconcile with your wife.

Reply

rich October 10, 2010 at 9:30 am

As long as they do not privatize social security we are going to run out of money and no one will get paid.

http://www.thebest-mortgage-rates.com

Reply

joeplemon October 10, 2010 at 4:50 pm

Rich,
Social Security as we know it today can’t continue indefinitely. I agree that it will run out of money unless some major action is taken. Would privatization save it? I don’t know. I do know that it is a huge political hot potato because of all of the Senior Citizen voters.

Reply

rich October 10, 2010 at 5:45 pm

I hope social security is still there when I need it. It looks like more people are getting paid then are putting in so this has to come to an end somehow.

Reply

Barry May 22, 2011 at 9:58 am

Joe, I read with great interest your article concerning social security and spousal benefits. I wonder if you could help with a question. My wife has just reached FRA. I am five years younger and thus not yet eligible. She is collecting a government pension. Accordingly, her SS benefit will be reduced. I would like to defer collecting on my own account until I am 70. She will never collect on my account as the offset (based upon her gov’t pension) would virtually eliminate the benefit. My questions… if she begins collecting now, can I, from age 66 to age 70, collect 50% of her benefit and then switch to my own? Could I start collecting on her account earlier? What if I am still working? Thanks for your help.

Reply

joeplemon May 23, 2011 at 10:20 am

Barry,
Thanks for reading. Because I don’t consider myself to be a Social Security expert, I always recommend talking directly to your Social Security representative before making your final decisions.

Based on my understanding, yes, you could start drawing a spousal benefit on your wife’s benefit. This benefit is 50% of what she draws IF you are full retirement age. That percentage would be reduced incrementally for every month you are under age 66, to a reduction of 25% of that 50% (which is 37.5% of your wife’s benefit) if you started at age 62. So, one strategy is to start drawing your 50% spousal benefit at age 66. Another is to draw 37.5% spousal benefit at age 62. In your case, because you are going to start your own SS at age 70, I think you would be better off tapping into that spousal benefit at age 62. If your spousal benefit happened to be $500 per month at FRA, you would draw $500 x 48 months (age 66 – 70)= $24,000 by age 70 if you waited till age 66 to start. However, if you were to draw the reduced benefit ($500 less 25%) of $375 per month starting at age 62, you would receive $36,000 by age 70. See this link: http://www.socialsecurity.gov/OACT/quickcalc/spouse.html

I cannot find any information about whether that spousal benefit is reduced if you continue to work, but my rough math indicates that you would still be better off starting to draw the spousal benefit at age 62 even if you were penalized by working. You should call your SS rep to learn if work affects spousal benefits. Let me know what you find out.

I hope this helps. Like I said, SS is complicated!

Reply

Chuck June 7, 2012 at 2:58 pm

In order for Barry, in the example above, to obtain the spousal benefit, (between 62 and FRA/66) wouldn’t Barry need to file for benefits, and the spousal benefit would need to be greater than the monthly benefit based on his own work record? My understanding is that Barry’s benefit will be based on his own record or a percentage of the spouses record, which ever is greater, no choice. Please let me know if I am mistaken.

Reply

Joe Plemon June 13, 2012 at 9:03 am

Chuck — You are exactly right — thanks for keeping us on our toes! The following is a quote from the SS site:

“If a spouse is eligible for a retirement benefit based on his or her own earnings, and if that benefit is higher than the spousal benefit, then we pay the retirement benefit. Otherwise we pay the spousal benefit.”

Barry MUST receive the benefit based on his own earnings if it is higher than the spousal benefit. Sorry for giving a wrong explanation…my bad. This is why I always recommend talking to the SS office.

Reply

TomD October 15, 2011 at 12:11 pm

I just discovered your article, Joe, but I remain hopeful that you are still entertaining comments/questions on it. Better late than never — which is kinda the theme of my own question.

I recently discovered that my 80something mother has been receiving SS benefits for many years from her own benefit account. She was either unaware, or too proud, to opt for the spousal benefit available through my 90something father’s PIA which (at 50% of his benefit) would have been hundreds of dollars a month more. This situation has gone on for years. Is too late for her to switch and collect the greater benefit? And how do we start?

Reply

joeplemon October 15, 2011 at 5:19 pm

TomD,
Although I am not a SS expert, I am certain that it is not too late for your mother to start drawing her spousal benefit instead of her own. She needs to talk to her local SS office to find out for sure if she can switch to the spousal benefit, then she needs to have that same office make the change. This being said, much of the SS transactions can be made online. Either way, she is giving up hundreds of dollars a month, so the sooner the better. It is also important to keep in mind that if she survives your father, she is eligible to draw his full benefit instead of her 50% spousal benefit.

Write back and let me know how it goes.

Reply

Trying to help October 20, 2011 at 9:33 am

Hi!!

My best friend’s father just passed away. He was getting reduced benefits of $1200. Her mother is only 60 but would qualify for survivor benefits. It appears that if she takes the survivor benefits now, she will get a reduced rate on his already reduced rate. Is that what you see? When you go to the SSA, do they run all these projection for you so that you can make a well informed decision?

Many Thanks!

Reply

joeplemon October 21, 2011 at 1:48 pm

Trying to help,

It is true that your friend’s mother could start could start drawing survivor benefits as early as age 60, but she could not receive the full $1200 unless she was full retirement age (66). That benefit is reduced based on how much younger than 66 the widow or widower would be.

Check this SS publication for more info: http://ssa.gov/pubs/10084.html

According to this publication, she would receive about 71% of the $1200, or about $850, but I would recommend going to the local SS office to get the exact amounts.

I hope this helps.

Reply

Steve January 3, 2012 at 2:45 pm

Hi – have enjoyed reading the posts back and forth regarding spousal benefits and when to take them or not. Let me try and lay out a scenario to help with:

My wife is 64 and I am 59 and I am the higher earner. If my wife waits till FRA I assume she can start benefits on her own record coming soon. I will ask about tax implications and the SS benefits later in further posts since I will still be working.

I want to wait as long as possible before starting payments – till 70 if I can. She will be 75 at that point. Questions then are – when should I start my benefits (62 or FTA or 70) and when should she switch to the spousal benefit to get the maximum amounts…? As a basis – if we both wait until FRA to take benefits her benefit will be $800 and my FRA benefit will be $2550 according to the SS site.

Thanks much!

Reply

joeplemon January 4, 2012 at 9:52 am

Steve,
Let me run this by you: It seems that a good strategy would be for you to draw a spousal benefit on what your wife is drawing, then, when you start your own benefit, she could start drawing a spousal benefit on yours (because 50% of your benefit will be more than what she is drawing on her own). However, I am not sure this would work unless you wait till FRA to begin drawing on hers. In other words, you draw a spousal benefit from age 66 to age 70. At that time, you start your own benefit, and your spouse switch to a spousal benefit (50% of what you draw). This is very similar to the scenario I used in the article under “Another Way to Claim a Spousal Benefit While Waiting”.

These rules are changing all of the time, so I strongly suggest you contact SSA to learn if this strategy is an option. Let me know what you learn!

Reply

Marco February 5, 2012 at 8:13 pm

In Steves case, it looks like by him drawing a spousal on his wifes $800, he would receive $400 from age 66-70. Total for both would be $1200. If, instead, he does a file and suspend at age 66, his wife would get a spousal at that time of $1275 (half of his fra $2550) which would be $75 more. At age 70, he would draw his $2550 plus increase while his wife would continue to receive $1275. Since $1275>$1200 he should NOT take a spousal on her SS from 66-70, but have her take a spousal under his file and suspend.

Reply

Joe Plemon February 6, 2012 at 5:10 pm

Marco,
Thanks for thinking this through with us. As I understand filing and suspending, your strategy will indeed be better for Steve and his wife than the one I recommended.

Steve…are you reading? Why don’t you ask your Social Security office about both of these strategies and report back to us. I would like to know what they say!

Reply

Steve February 7, 2012 at 6:53 am

Folks – thanks for the replies. Esentially I am finding out the same info that Marco indicates. To summarize here is my understanding of what I should do – since my wife is 5 years older than me and earned the lesser of our incomes – when she reaches 66 at FTA have her start her Social Security. When I reach FTA – start and suspend and have my wife file for spousal benefits at that time. She will now be 71. Once I reach 70 and have the benefit of higher SS checks due to waiting -start my payments. I think this is where all the advice at this point in time is pointing me to.

Reply

Joe Plemon February 7, 2012 at 3:35 pm

Steve,
Another thought. I don’t know if this would work or not, but here goes:

If your wife started her reduced benefit($600/month) at age 62 and continued drawing it until age 71, when she would then switch over to draw half of your $2550, she would have received $64,800 total. By waiting until she is FRA to draw her $800, she would only receive $48,000 total at age 71. Either way, she would then start drawing $1275 when you file and suspend at your FRA.

This would work only if the SSA allows it and if your wife was not planning to continue working full time after age 62 (she could still earn up to about $14,000 from age 62 to 66 with no penalty).

Thoughts?

Reply

Steve February 8, 2012 at 6:50 am

Joe – thanks for the reply! Had that same thought and did some checking and got the same advice. The situation you describe is possible since the spousal benefit my wife will command is based on my PIA (Primary Insurance Amount). So – she can start at 62 and draw a total amount of funds that is greater over drawing at 66. Where my thought thinking was going with waiting is that I don’t have a full picture of the tax implications yet of which much futher analysis is needed on my part. But – the situation you describe from what I understand in reading and other comments is that it is entirely possible.

Thanks,

Steve

Joe Plemon February 8, 2012 at 7:33 am

Steve,
This is a great dialogue…it definitely is helping me better understand the nuances of Social Security and learn how to think a bit out of the box. I am hoping that you and your wife come up with the plan that best suits your needs.

Reply

conrad March 6, 2012 at 3:23 pm

I may be wrong, but I am pretty sure that once a person starts any benefits at 62, be it their own, spousal, or take and suspend, they will always have their future benefits reduced by 25%. For example, if they take their own benefit at 62, which is reduced by 25% because they are below their FRA, if they later change to a spousal bebefits, regardless of what age they do this or what age their spouse is, any benefit will be reduced by 75%.

Once you start at 62, all strategies are impacted by the 255 rule for early benefits. If steve’s wife starts her own bereduced benefit at 62, when she switches to a spousal benefit at 66 or even 70, her 50% of Steve’s benefit will also be reduced by 25%. The SSA says this everal times – anyone starting before FRA is affected for their entire life.

Comments?

Reply

Steve March 7, 2012 at 8:01 am

Conrad – thanks for the reply and contribution. I also see the rule of reduced benefits as you indicate but I understood this to apply, when my wife pursues her spousal benefit, mainly to when I take my benefit. What I was reading is that her spousal benefit is directly tied to mine only and that she can take her own benefit at any time.

Example is when I take my benefit early and am reduced by 25% she will only be eligible for 50% of my reduced benefit. But in reading the text this seems to apply only to the spousal option of switching benefits so my interpertation is she can begin her benefit at any time. The time she switches will only be directly impacted by where my benefit sits at that time.

This again is my interpertation and not verified with the SSI but other comments from other sites seem to support this theory….Any other comments to align my thoughts are appreciated…

Steve

Reply

conrad March 7, 2012 at 10:32 am

Steve,

I disagree. Here are 2 sentences from the SSA pages: “If your spouse has reached full retirement age and is eligible for a spouse’s benefit and his or her own retirement benefit, he or she has a choice. Your spouse can choose to receive only the spouse’s benefit now and delay receiving retirement benefits until a later date.” ; and “•can receive a benefit equal to one-half of your full retirement amount if they start receiving benefits at their full retirement age.’

These paragraphs, along with communications with the SSA, makes me believe 2 things, assuming a husband and wife: 1) A wife can collect a spousal benefit of 50% of her husband’s full benefit, even if the husband takes his own benefit before FRA, ad 2) if the wife collects either her own or a spousal benefit before FRA, all of her benfits are permanently reduced, even if she chooses to take a spousal early and then switch to her own at FRA. This seems fairly clear to me.

Reply

conrad March 7, 2012 at 10:41 am

Steve,

I have done further research and have found the site below:
http://retirementrevised.com/retirement-benefits/faq-social-security-spousal-and-survivor-benefits

Thissite includes the flowwing staements:

“When can I start receiving a spousal benefit? If you have reached your full retirement age (FRA), you can choose to receive only your spouse’s benefits and continue accruing delayed retirement credits on your own Social Security record. You could then file for your own benefits at a later date and receive a higher monthly benefit based on the effect of delayed retirement credits. However, a spouse cannot elect to receive spousal benefits below his/her retirement age and later switch to her own benefits.” , and

“Can my wife start collecting based on my account at age 62 and then switch to her own account at age 66? No, it’s not possible to switch if she files before her full retirement age.”

Reply

Barry March 8, 2012 at 1:17 pm

It is amazing how confused and complicated this all is. I have been looking into these issues and I agree with Conrad. If my wife collects benefits under own account before her FRA, her benefits will be reduced by a percentage based on her FRA and when she starts receiving benefits. The amount she can get if she switches to the spousal benefit will be reduced by the same percentage. Thus she might reduce her spousal benefit by more dollars per month than she collected under her own account. (I called SS and they agreed.)
Also, as I read it, the amount my wife’s spousal benefit is based on increases as my benefit increase such that if I file and suspend and wait until I am 70 to take benefits, her spousal benefit will also be higher than if I took benefits at 66.

Reply

conrad March 8, 2012 at 2:40 pm

Barry,

I am sorry to say, the SSA gets you yet again on the spousal benefit. From the SSA website: “A spouse can receive a benefit equal to one-half of your full retirement amount if they start receiving benefits at their full retirement age.

Note: The benefits for your spouse do not include any delayed retirement credits you may receive. ”

In other words, if you delay taking benefits until 70, the spousal benefit remains at 50% of your benefit at FRA, not the increased benefit at 70.

Reply

Barry March 9, 2012 at 8:31 am

Thanks, my other comment may be wrong also. I note that http://retirementrevised.com/retirement-benefits/faq-social-security-spousal-and-survivor-benefits has the following:
“Here’s an example, provided by the SSA:
Let’s say the wife’s Primary Insurance Amount (PIA) is $1,000. She files for her own benefit at 62 and receives a reduced retirement benefit of $750.
Her husband has a PIA of $2500. She is eligible to receive one-half of his PIA at her full retirement age. $2500 (his PIA); divided by two, that equals $1,250 (This is the full spouse’s rate). We will subtract the $1250 (the full spouse’s rate) – $1000 (her PIA)= $250.
Social Security will add that $250 to her reduced retirement benefit amount of $750 and her new benefit amount at full retirement age will be $1,000, which is less than the full spouse’s rate.”
I talked to SS and was told it would be a percentage deduction from 1/2 of spouse’s benefit, now I am thoroughly confused. Both these issues directly influence our choice of what to do now.

Reply

conrad March 9, 2012 at 9:39 am

More confusion. Let me tell you my plan and see if you find any holes in it. I am 64 and my wife is 60. In 2 years, at my FRA, my wife will begin collecting her reduced benefit at 62 and I will collect 100% of my spousal benefit while letting my own benefit continue to grow. At 70, I will drop the spousal benefit and collect my maximum 70 year benefit. My wife will remain at her reduced benefit level.

This way, we can both collect some benwfit in 2 years, but when one of us dies, the other will receive my full 70 year benefit, which is the maximum of all cases.

Tell me if you see a better alternative.

Reply

Joe Plemon March 9, 2012 at 11:06 am

Conrad,
First, I want to thank you for doing all of the research and sharing it with my readers. I have been following this conversation and have benefited greatly.

About your plan, I love it, but have a question: You stated in an earlier comment “Once you start at 62, all strategies are impacted by the 255 rule for early benefits. ” I understand that any future benefit strategies are going to be reduced because of the choice to start before FRA, but how about survivor benefits? For example, if your wife starts drawing her SS pension at age 62, and she survives you, will her survivor benefit (your pension) be negatively affected? I don’t think it would, but, as confusing as this is, I think the question is worth asking.

Reply

conrad March 9, 2012 at 3:12 pm

Joe,

From my interpretation of the SSA rules (which are clear as mud), when one married partner dies, the other gets the largest benefit earned by either spouse. In this case, my wife would get my benefit, even though she started collecting her benefit before FRA. This appears to be the only time that there is no penalty for early benefits.

Reply

Joe Plemon March 9, 2012 at 6:28 pm

That is also my understanding — that the survival benefit is the only exception to the penalties for early benefits. Assuming we are right, I totally concur with your plan. One possible downside is that money might be a little tight for the four years leading up to when you turn 70. Will you continue to work until you are 70?

One overlooked benefit of your plan is the amount of life insurance you WON’T have to buy because of the maximum survivor benefit you and your spouse will both be in line for.

Reply

conrad March 12, 2012 at 11:16 am

Joe,

I am hopeful that my savings, supplemented by some part-time consulting, will pay the bills until I reach 70.

Now let me throw something out-of-the-box at you. My plan is to have my wife take her reduced benefit at 62 and then me take a spousal benefit, letting my own benefit grow until 70. Is it possible for my wife to take a reduced spousal benefit on my record when she turns 62, and then me simultaneously take a spousal benefit on her record. Then, when he each reach our FRA, we take our own benefits. I can’t find anything regarding dual simultaneous spousal benefits – what do you think?

Reply

conrad March 12, 2012 at 11:20 am

Joe,

I need to correct my scenario in the previous post. When my wife is 62 and takes a reduced spousal benefit, I will already be at FRA and would take a full spousal benefit on her record. I would then take my own benefit at 70 and she would later take her own benefit at 70 also. Although her benefit would be reduced because she took the spousal at 62, it still would be greater than remaining on the spousal benefit. Can this be done? Can she let her regular benefit grow until 70, even though she already is collecting a reduced spousal benefit?

Reply

Joe Plemon March 14, 2012 at 9:10 am

I love the way you are thinking outside the box! First, I am assuming that your wife’s spousal benefit is greater than her own benefit. Right? My understanding of spousal benefit is that it is not possible to draw one unless the spouse has filed for benefits. From SS site: “When a worker files for retirement benefits, the worker’s spouse may be eligible for a benefit based on the worker’s earnings.” Therefore, you would need to file for your beneift before your wife would be eligible for a spousal beneift.

However, as indicated in my article, you may be able to file, let your wife sign up for spousal benefit, and then request a voluntary suspension on your benefit. At that point, your wife would be drawing a spousal benefit while your own benefit, on hold, continues to grow at 8% annually until you turn 70. Whether you could both file, both sign up for spousal benefits and then both request voluntary suspension of your own benefits while continuing to draw spousal benefits is doubtful.

Another quote from SS site is, “If a spouse is eligible for a retirement benefit based on his or her own earnings, and if that benefit is higher than the spousal benefit, then we pay the retirement benefit. Otherwise we pay the spousal benefit.” It appears that you don’t have a choice of spousal or your own benefit…SSA will pay whichever is greater.

This is confusing stuff. Did my response help, or make the waters even muddier?

Reply

conrad March 14, 2012 at 9:23 am

Thanks for looking at my proposal. I too think that the SSA will probably not allow both spouses to collect spousal benefits concurrently. But what about this. My wife files for benefits at 62. As stated above, she would get the larger of her own benefit or spousal benefit, reduced by the early filing penalty. However, I see a contradiction here. In one place, the SSA says you can’t file for a spousal benefit unless your spouse has filed for benefits. But if my wife files and I have not, it says she gets the larger of her own or the spousal benefit. Can she get the spousal benefit without me filing?

If she can, once she files and begins receiving her benfit, I can then file a spousal benefit on her claim and keep my own growing until 70.

Which rule takes precedence, 1) I have to file first before she gets a spousal, or 2) she files and I don’t but she has to get the larger benefit, which in this case is the spousal benefit, even though I have not filed?

Reply

Joe Plemon March 14, 2012 at 9:36 am

I understand the apparent contradiction. My understanding is that the spousal benefit is not on the table unless you file, at which point her own benefit would then be increased to the spousal benefit because it is larger.

I am glad I ended this article with “Social Security rules change, so I strongly recommend that you check with the Social Security Administration with all of your questions.”

Reply

Bob March 26, 2012 at 8:04 pm

Joe, Conrad,,
Interesting subject, but was wondering if I (66) wife (62) and wife still working, if I can collect spousal benefits ? and how much can she earn ?
before the deductions apply ??

Reply

Joe Plemon March 29, 2012 at 9:13 am

Bob,
Assuming you are not drawing your own SS benefit, you could collect a spousal benefit if your wife signs up to start her SS. I recommend talking to your local SS office to learn how much.

She can earn up to $14,640 in 2012 with no “penalty” from Social Security. Social Security will deduct $1 for every $2 earned over that amount. This jumps to $38,880 the year she reaches Full Retirement Age, and there is no limit to earnings after that year.

Does this help?

Reply

Leave a Comment

{ 12 trackbacks }

Previous post:

Next post: