SS Spousal Benefit Strategy

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novicemoney
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SS Spousal Benefit Strategy

Post by novicemoney » Thu Jan 29, 2015 10:12 am

In planning our retirement I am looking at maximizing SS benefits for DW and myself and would like the forum brain trust to see if I have my facts straight. I am 54 and DW is 55. DW is now retired with a small pension. When she was working she made about half of my salary. i intend to retire in about 10 years. Here is our SS strategy:
1. DW will apply for SS at 62.
2. I will file at 67 then suspend benefits.
3. DW will then receive spousal benefits. As I understand this it will be 50% of my my PIA which is pretty close to what she is getting from early SS at 62.
4. I will start taking SS at 70.
5. DW will start taking her own SS at her now higher SS payout.

This is a little confusing to me, but does this sound right? I don't quite get the purpose of spousal benefits but it seems like a pretty good deal for married couples. I am pretty sure I am missing something any feedback would be appreciated. Thanks for looking.

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ObliviousInvestor
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Re: SS Spousal Benefit Strategy

Post by ObliviousInvestor » Thu Jan 29, 2015 10:21 am

novicemoney wrote:In planning our retirement I am looking at maximizing SS benefits for DW and myself and would like the forum brain trust to see if I have my facts straight. I am 54 and DW is 55. DW is now retired with a small pension. When she was working she made about half of my salary. i intend to retire in about 10 years. Here is our SS strategy:
1. DW will apply for SS at 62.
2. I will file at 67 then suspend benefits.
3. DW will then receive spousal benefits. As I understand this it will be 50% of my my PIA which is pretty close to what she is getting from early SS at 62.
4. I will start taking SS at 70.
5. DW will start taking her own SS at her now higher SS payout.
A few thoughts:

Not quite sure what you mean by step 5.

Filing and suspending doesn't seem to do much for you. (That is, if 50% of your PIA isn't significantly greater than the retirement benefit your wife would already be receiving, there isn't a great deal gained.) Instead, you may want to consider something like this:
1) Your wife files for her retirement benefit at 62.
2) At your FRA, you file a restricted application for spousal benefits only (getting 50% of her PIA).
3) At 70, you file for your own retirement benefit.

For better input though, sharing your PIA and your wife's PIA would be helpful.

Also, you don't mention whether the pension is a government pension or not. If so, the "government pension offset" (GPO) is something you'd want to read up on.
Mike Piper, author/blogger

NightFall
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Re: SS Spousal Benefit Strategy

Post by NightFall » Thu Jan 29, 2015 10:25 am

Take a look at the Oblivious Investor's strategy for married couples.

http://www.obliviousinvestor.com/social ... d-couples/

Of course, I see he's responded now with exactly the first strategy in the link.

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novicemoney
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Re: SS Spousal Benefit Strategy

Post by novicemoney » Thu Jan 29, 2015 11:39 am

ObliviousInvestor wrote:
novicemoney wrote:In planning our retirement I am looking at maximizing SS benefits for DW and myself and would like the forum brain trust to see if I have my facts straight. I am 54 and DW is 55. DW is now retired with a small pension. When she was working she made about half of my salary. i intend to retire in about 10 years. Here is our SS strategy:
1. DW will apply for SS at 62.
2. I will file at 67 then suspend benefits.
3. DW will then receive spousal benefits. As I understand this it will be 50% of my my PIA which is pretty close to what she is getting from early SS at 62.
4. I will start taking SS at 70.
5. DW will start taking her own SS at her now higher SS payout.
A few thoughts:

Not quite sure what you mean by step 5.

Filing and suspending doesn't seem to do much for you. (That is, if 50% of your PIA isn't significantly greater than the retirement benefit your wife would already be receiving, there isn't a great deal gained.) Instead, you may want to consider something like this:
1) Your wife files for her retirement benefit at 62.
2) At your FRA, you file a restricted application for spousal benefits only (getting 50% of her PIA).
3) At 70, you file for your own retirement benefit.

For better input though, sharing your PIA and your wife's PIA would be helpful.

Also, you don't mention whether the pension is a government pension or not. If so, the "government pension offset" (GPO) is something you'd want to read up on.
It's quite an honor to have you answer my post. I actually read your blog and did note the article on SS strategies. Amittedly a lot of that stuff went over my head hence this post. My PIA is $2,657. DW's PIA is $2,086. Her SS at 62 is $1,565. DW is a state government retiree and her pension come from that entity. I always thought that she would be getting spousal benefits from me. Your #2 suggests that spousal benefit would be from her. Am I getting this right? If so my concept of how to strategize SS for couples is pretty flawed. As you may have guessed this SS stuff is pretty confusing to me. Thanks for your response.

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ObliviousInvestor
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Re: SS Spousal Benefit Strategy

Post by ObliviousInvestor » Thu Jan 29, 2015 11:50 am

NightFall wrote:Take a look at the Oblivious Investor's strategy for married couples.

http://www.obliviousinvestor.com/social ... d-couples/
Thank you for recommending the blog, NightFall. That's always appreciated. :)
novicemoney wrote:My PIA is $2,657. DW's PIA is $2,086. Her SS at 62 is $1,565. DW is a state government retiree and her pension come from that entity. I always thought that she would be getting spousal benefits from me. Your #2 suggests that spousal benefit would be from her. Am I getting this right?
Yes, that is what I was suggesting. You would be getting a spousal benefit based on her work record. Doing so would allow you to collect some money (specifically, 50% of her PIA) while allowing your own retirement benefit to continue growing (which also then increases the amount your wife could potentially receive as your widow, if that ever became relevant).

Strategies in which the high-PIA spouse files and suspends tend to be more helpful in cases in which the difference in PIAs is greater (such that having the low-PIA spouse get access to spousal benefits would be a big increase in the amount received per month).

Also, as the recipient of a government pension, your wife could be subject to the GPO. This would reduce any benefits she receives based on your work record (either spousal benefits or widow's benefits) by 2/3 of her monthly pension amount. (Note the second bullet point on that linked-to page. It's particularly important in determining whether the GPO applies or not.)
Mike Piper, author/blogger

Topic Author
novicemoney
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Re: SS Spousal Benefit Strategy

Post by novicemoney » Thu Jan 29, 2015 12:06 pm

ObliviousInvestor wrote:
NightFall wrote:Take a look at the Oblivious Investor's strategy for married couples.

http://www.obliviousinvestor.com/social ... d-couples/
Thank you for recommending the blog, NightFall. That's always appreciated. :)
novicemoney wrote:My PIA is $2,657. DW's PIA is $2,086. Her SS at 62 is $1,565. DW is a state government retiree and her pension come from that entity. I always thought that she would be getting spousal benefits from me. Your #2 suggests that spousal benefit would be from her. Am I getting this right?
Yes, that is what I was suggesting. You would be getting a spousal benefit based on her work record. Doing so would allow you to collect some money (specifically, 50% of her PIA) while allowing your own retirement benefit to continue growing (which also then increases the amount your wife could potentially receive as your widow, if that ever became relevant).

Strategies in which the high-PIA spouse files and suspends tend to be more helpful in cases in which the difference in PIAs is greater (such that having the low-PIA spouse get access to spousal benefits would be a big increase in the amount received per month).

Also, as the recipient of a government pension, your wife could be subject to the GPO. This would reduce any benefits she receives based on your work record (either spousal benefits or widow's benefits) by 2/3 of her monthly pension amount. (Note the second bullet point on that linked-to page. It's particularly important in determining whether the GPO applies or not.)
Thanks again for clariying things. It seems the concept I need to understand is "restricted application". Have googled this and the light bulb is definitely going off :happy ! Will have to research the GPO issue. Won't this be reflected by the SS statements? Or do you have to calculate this on your own. I see there is another current thread on this same topic and this is also clarifying things a bit.

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53timr
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Re: SS Spousal Benefit Strategy

Post by 53timr » Thu Jan 29, 2015 12:19 pm

Pardon the question, but what is "PIA"? That will help me follow this thread a little better. Thanks.
“I take my investment advice from my dentist, because he’s just as likely to lose me money as a financial advisor.” | ― Jarod Kintz, This Book Title is Invisible

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ObliviousInvestor
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Re: SS Spousal Benefit Strategy

Post by ObliviousInvestor » Thu Jan 29, 2015 12:22 pm

53timr wrote:Pardon the question, but what is "PIA"? That will help me follow this thread a little better. Thanks.
Primary insurance amount. It refers to the amount of retirement benefits you would receive per month if you started receiving them at exactly your full retirement age.
Mike Piper, author/blogger

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Re: SS Spousal Benefit Strategy

Post by ObliviousInvestor » Thu Jan 29, 2015 12:29 pm

novicemoney wrote:Will have to research the GPO issue. Won't this be reflected by the SS statements?
Not absolutely 100% sure here, but I think the answer is, "no, it wouldn't be reflected on the statement." For instance, the following example statement explicitly states that the GPO could be a reason why benefits received could be different from estimates provided by the statements.
https://secure.ssa.gov/poms.nsf/lnx/0101310010

But, that example statement is from 2006.
Mike Piper, author/blogger

Topic Author
novicemoney
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Re: SS Spousal Benefit Strategy

Post by novicemoney » Thu Jan 29, 2015 12:46 pm

ObliviousInvestor wrote:
novicemoney wrote:Will have to research the GPO issue. Won't this be reflected by the SS statements?
Not absolutely 100% sure here, but I think the answer is, "no, it wouldn't be reflected on the statement." For instance, the following example statement explicitly states that the GPO could be a reason why benefits received could be different from estimates provided by the statements.
https://secure.ssa.gov/poms.nsf/lnx/0101310010

But, that example statement is from 2006.
Thanks again for steering me in the right direction. Re: the GPO issue. Will continue to look into it, but man it's always something :( .

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Re: SS Spousal Benefit Strategy

Post by pshonore » Thu Jan 29, 2015 2:07 pm

If she paid into SS in her state job, the GPO usually does not apply. It does apply when you get a pension from a job not covered by Social Security (like a lot of teachers). If your wife files for her own benefit at 62, I thought the same early retirement factors would apply when she later applies for a Spousal benefit but I could be wrong. (Its hard to keep all those details straight)

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Re: SS Spousal Benefit Strategy

Post by choices » Thu Jan 29, 2015 6:18 pm

If wife did not pay substantially in SS, I think the wife's pension may be offset by the WEP. Then when she goes to claim on husband's, hers may then be offset by the GPO.

pshonore
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Re: SS Spousal Benefit Strategy

Post by pshonore » Thu Jan 29, 2015 8:34 pm

WEP may affect an individuals own SS benefit if they worked in a job not covered by SS. GPO affects a spousal or widows benefit if they are collecting a pension from a job not covered by SS. OP has not told us if wife paid SS taxes in her state job. I suspect she did since her PIA is over $2000.

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novicemoney
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Re: SS Spousal Benefit Strategy

Post by novicemoney » Thu Jan 29, 2015 11:53 pm

pshonore wrote:WEP may affect an individuals own SS benefit if they worked in a job not covered by SS. GPO affects a spousal or widows benefit if they are collecting a pension from a job not covered by SS. OP has not told us if wife paid SS taxes in her state job. I suspect she did since her PIA is over $2000.
Thank you for taking the time to respond. DW's employer (State of Hawaii) definitely particpates in SS. I am hoping that GPO and WEP rules do not apply therefore. Did not even know about these things (never a dull moment in SS land). I am definitely learning a lot :shock: .

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