File and Suspend

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File and Suspend

Postby Padlin » Tue Jan 22, 2013 8:22 pm

My wife will have a considerably lower SS benefit then myself, if family history holds true she also has a longer life expectancy then me. She turns 66 and 4 months 11 months before me, Jan 56 vs Dec 56.

I'm planning to file and suspend at 66 and 4 months (born in 56), at which time she'll put in for spousal. The question is, can she, should she, file at 62 for her own reduced benefits? If she can do this does it effect the spousal benefit at 66? Sounds like it should but I can't find any specifcs on this in the SS regs.

Thanks
Regards | Bob
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Re: File and Suspend

Postby BudgetForWealth » Tue Jan 22, 2013 8:38 pm

She cannot take both her own benefit and spousal at the same time. She has to choose between on or the other. If you attempt to file for both, SS will automatically give her the one that has the higher amount.

If you don't expect to have a long life expectancy, it might be best to take your benefit when you qualify and have your wife take the spousal benefit at the same time. She'll qualify for a higher amount when you pass away.
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Re: File and Suspend

Postby sscritic » Tue Jan 22, 2013 8:46 pm

Yes it will. The so called spousal benefit it composed of two parts, your own plus an additional amount as a spouse. Once your own is reduced, it doesn't come "unreduced" later.

Example:
PIA = $1000
FRA = 66 and 4
Start at 62, 52 months before FRA
Reduction = 26.67% (20% for the first 36 months, 6.67% for the next 16- 5/12% per month)
Reduced benefit = $733.33
http://www.ssa.gov/retire2/agereduction.htm

Your PIA = $2400
Unreduced wife's benefit = $1200 = $1000 + $200
Her benefit at FRA as a wife = $733.33 + $200 = $933.33

How is my wife's or husband's benefit reduced when I am entitled to a reduced old-age benefit in the same month? When a person is first entitled to a wife's or husband's benefit in or after the month of attainment of age 62, that benefit is reduced if, in the first month of entitlement, she or he is also entitled to an old-age benefit (but is not entitled to a disability benefit) to which she or he was first entitled before attainment of full retirement age. Under these circumstances, the wife's or husband's benefit is reduced by the sum of:
(1) The amount by which the old-age benefit would be reduced under the provisions of § 404.410; and
(2) The amount by which the spouse benefit would be reduced under the provisions of § 404.410 if it were equal to the excess of such benefit
(before any reduction for age but after reduction for the family maximum under § 404.403) over the individual's own primary insurance amount.
http://www.socialsecurity.gov/OP_Home/c ... 4-0411.htm

Note that in the example, the wife's benefit was not taken before FRA, so (2) does not apply. Also note that such a reduction only applies to the excess of "such" benefit ($1200) over the PIA ($1000). Thus if your fictional wife started as herself at 62, (1) is a reduction of $266.67, and if she then started as your wife at 65, (2) is a reduction applied to the $200 excess of $1200 over $1000.

P.S. What BFW said would be true if she waited until FRA. Well, it would still be false technically. Even if the wife's benefit were larger, she would get her own plus the extra amount.
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Re: File and Suspend

Postby sscritic » Tue Jan 22, 2013 8:52 pm

When a person is entitled simultaneously to reduced RIB and a reduced spouse's benefit, first reduce the RIB PIA by the RIB reduction factor. Then subtract the RIB PIA from the unreduced spouse's benefit, and reduce the excess by the spouse's reduction factor. The reduced excess is the amount actually payable as a spouse. Add the reduced spouse's benefit to the reduced RIB to determine the full AB benefit.

The spousal benefit is only the excess. The paid benefit is the sum of the RIB (retirement insurance benefit) and the spousal benefit.

P.S. A is yourself; B is wife; B1 is husband. AB benefit is the combination of self and spouse.
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Re: File and Suspend

Postby Padlin » Tue Jan 22, 2013 9:12 pm

Thanks, that's what I was thinking would happen but couldn't find it specified.
Regards | Bob
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Re: File and Suspend

Postby Epsilon Delta » Tue Jan 22, 2013 11:05 pm

Padlin wrote:My wife will have a considerably lower SS benefit then myself, if family history holds true she also has a longer life expectancy then me. She turns 66 and 4 months 11 months before me, Jan 56 vs Dec 56.

I'm planning to file and suspend at 66 and 4 months (born in 56), at which time she'll put in for spousal. The question is, can she, should she, file at 62 for her own reduced benefits? If she can do this does it effect the spousal benefit at 66? Sounds like it should but I can't find any specifcs on this in the SS regs.

Thanks

Because of the widows benefit rules it does not matter much which of you has a longer life expectancy. It might matter if one of you is likely to die before age 70.
Also how much is "considerably lower"? if your wifes PIA is close to or more than 1/3 of yours you should also consider:

1) Wife files for her own benefit at FRA and you apply for spousal at FRA. You continue to earn delayed retirement credits on your benefit, which will benefit you if you reach age 70 and your wife if she is widowed.
2) Wife files for her own benefit at 62 and you file for spousal at FRA. This is actually likely to be optimal in a lot of cases.
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Re: File and Suspend

Postby Padlin » Thu Jan 24, 2013 11:36 am

[quote="Epsilon Delta]Because of the widows benefit rules it does not matter much which of you has a longer life expectancy. It might matter if one of you is likely to die before age 70.
Also how much is "considerably lower"? if your wifes PIA is close to or more than 1/3 of yours you should also consider:

1) Wife files for her own benefit at FRA and you apply for spousal at FRA. You continue to earn delayed retirement credits on your benefit, which will benefit you if you reach age 70 and your wife if she is widowed.
2) Wife files for her own benefit at 62 and you file for spousal at FRA. This is actually likely to be optimal in a lot of cases.[/quote]


At FRA my benefit is 2479, hers is 886.

I'd get spousal on her 886 and at take my own at 70?. Would she put in for spousal at some point or stay at her reduced?
Regards | Bob
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Re: File and Suspend

Postby Epsilon Delta » Fri Jan 25, 2013 11:45 pm

Padlin wrote:
Epsilon Delta wrote:Because of the widows benefit rules it does not matter much which of you has a longer life expectancy. It might matter if one of you is likely to die before age 70.
Also how much is "considerably lower"? if your wifes PIA is close to or more than 1/3 of yours you should also consider:

1) Wife files for her own benefit at FRA and you apply for spousal at FRA. You continue to earn delayed retirement credits on your benefit, which will benefit you if you reach age 70 and your wife if she is widowed.
2) Wife files for her own benefit at 62 and you file for spousal at FRA. This is actually likely to be optimal in a lot of cases.



At FRA my benefit is 2479, hers is 886.


I'd get spousal on her 886 and at take my own at 70?. Would she put in for spousal at some point or stay at her reduced?


She's eligible for spousal when you file for benefits on your own record, at age 70 in this case. I don't know off hand if it's automatic or if she has to explicitly file for spousal. Her "spousal benefit" would be 2479/2 - 886 = 353. She would get this in addition to her own benefit for a total of 1239 if she filed at FRA, less if her own benefit is reduced because she filed early.

In either case you won't file for your own benefits till age 70 so your benefit at age 70 remain the same, as do any widows benefits she would get.


Her benefit is more than a third of yours so her taking her own benefit at FRA and you filing for as a spouse at FRA gets her gets 886 and you 443 for a total of 1329, somewhat more than the 1239 she would get if you file and suspend and she files as a spouse as you originally planed. In addition her payments start when she reaches FRA so she gets a few extra months of payments, since you can't file and suspend before your FRA. So you should file as her spouse instead of filing and suspending. It's less clear if she should file for her own benefits at age 62 or wait until FRA. Her filing early maximizes expected payments, but there are arguments for optimizing for other things so rational people can go either way.

All these numbers are "real dollars", all of the payments would get the same percentage COLA.
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Re: File and Suspend

Postby gerntz » Sat Jan 26, 2013 9:49 am

Epsilon Delta wrote:
Padlin wrote:
Epsilon Delta wrote:Because of the widows benefit rules it does not matter much which of you has a longer life expectancy. It might matter if one of you is likely to die before age 70.
Also how much is "considerably lower"? if your wifes PIA is close to or more than 1/3 of yours you should also consider:

1) Wife files for her own benefit at FRA and you apply for spousal at FRA. You continue to earn delayed retirement credits on your benefit, which will benefit you if you reach age 70 and your wife if she is widowed.
2) Wife files for her own benefit at 62 and you file for spousal at FRA. This is actually likely to be optimal in a lot of cases.



At FRA my benefit is 2479, hers is 886.


I'd get spousal on her 886 and at take my own at 70?. Would she put in for spousal at some point or stay at her reduced?


She's eligible for spousal when you file for benefits on your own record, at age 70 in this case. I don't know off hand if it's automatic or if she has to explicitly file for spousal. Her "spousal benefit" would be 2479/2 - 886 = 353. She would get this in addition to her own benefit for a total of 1239 if she filed at FRA, less if her own benefit is reduced because she filed early.

In either case you won't file for your own benefits till age 70 so your benefit at age 70 remain the same, as do any widows benefits she would get.


Her benefit is more than a third of yours so her taking her own benefit at FRA and you filing for as a spouse at FRA gets her gets 886 and you 443 for a total of 1329, somewhat more than the 1239 she would get if you file and suspend and she files as a spouse as you originally planed. In addition her payments start when she reaches FRA so she gets a few extra months of payments, since you can't file and suspend before your FRA. So you should file as her spouse instead of filing and suspending. It's less clear if she should file for her own benefits at age 62 or wait until FRA. Her filing early maximizes expected payments, but there are arguments for optimizing for other things so rational people can go either way.

All these numbers are "real dollars", all of the payments would get the same percentage COLA.

This is exactly what we're doing. DW started her benefits this month at 65.5, FRA = 66.0, since I retired in 2012 & we have no earned income this year. I reach FRA in 16 months & will file for spousal on her account then. We'll contine this way till I reach 70 - perhaps earlier if something life-shortening occurs to me - & then she'll start her spousal on my account. Her PIA is/was $1159 & mine is $2548 in 2012 dollars.
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Re: File and Suspend

Postby Padlin » Sat Jan 26, 2013 2:07 pm

Epsilon Delta wrote:
Padlin wrote:
Epsilon Delta wrote:Because of the widows benefit rules it does not matter much which of you has a longer life expectancy. It might matter if one of you is likely to die before age 70.
Also how much is "considerably lower"? if your wifes PIA is close to or more than 1/3 of yours you should also consider:

1) Wife files for her own benefit at FRA and you apply for spousal at FRA. You continue to earn delayed retirement credits on your benefit, which will benefit you if you reach age 70 and your wife if she is widowed.
2) Wife files for her own benefit at 62 and you file for spousal at FRA. This is actually likely to be optimal in a lot of cases.



At FRA my benefit is 2479, hers is 886.


I'd get spousal on her 886 and at take my own at 70?. Would she put in for spousal at some point or stay at her reduced?


She's eligible for spousal when you file for benefits on your own record, at age 70 in this case. I don't know off hand if it's automatic or if she has to explicitly file for spousal. Her "spousal benefit" would be 2479/2 - 886 = 353. She would get this in addition to her own benefit for a total of 1239 if she filed at FRA, less if her own benefit is reduced because she filed early.

In either case you won't file for your own benefits till age 70 so your benefit at age 70 remain the same, as do any widows benefits she would get.


Her benefit is more than a third of yours so her taking her own benefit at FRA and you filing for as a spouse at FRA gets her gets 886 and you 443 for a total of 1329, somewhat more than the 1239 she would get if you file and suspend and she files as a spouse as you originally planed. In addition her payments start when she reaches FRA so she gets a few extra months of payments, since you can't file and suspend before your FRA. So you should file as her spouse instead of filing and suspending. It's less clear if she should file for her own benefits at age 62 or wait until FRA. Her filing early maximizes expected payments, but there are arguments for optimizing for other things so rational people can go either way.

All these numbers are "real dollars", all of the payments would get the same percentage COLA.


Excellent, thanks for taking the time to help.
Regards | Bob
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