Question about Spousal Social Security Benefits

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stuper1
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Question about Spousal Social Security Benefits

Post by stuper1 »

I apologize, because I know this must have been answered many times, but I can't find the answer.

My wife is the lower earner, and she is three years older than me. We are both in our 50s now. We are planning that she will claim her small benefit based on her own earnings when she turns 62, and we will wait until I am 70 to claim my much larger benefit. She will be 73 when I am 70.

This is where I get a little confused. Can she start claiming the maximum spousal benefit when she turns 67? Or when I turn 67? Or when I turn 70?

And one more question about the maximum spousal benefit. Is it correct that it is capped at 50% of what my benefit would be when I turn 67? In other words, the maximum spousal benefit doesn't increase by 8% per year after I turn 67 the way that my personal benefit does?
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gorow
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Re: Question about Spousal Social Security Benefits

Post by gorow »

I believe you understand it correctly, though I am not 100% sure if your spouse being older than you matters in this case.
If she claims her benefit at 62, she will not be able to claim spousal benefit until after you begin receiving your benefit. If you wait until you are 70, she will have to wait as well.
As your benefit increases while you wait from FRA to claiming at 70, the spousal benefit will not. That is based on your full retirement age.
Also, her spousal benefit will not be 1/2 of your FRA benefit. There is still an adjustment for her early claiming.
I recommend you check out the calculator at: https://opensocialsecurity.com/
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RickBoglehead
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Re: Question about Spousal Social Security Benefits

Post by RickBoglehead »

Bingo.

Using the calculator shows you when it's best to file, because it's not just the amount collected before you start to collect, it's the REDUCTION that could last for years and years.
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stuper1
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Re: Question about Spousal Social Security Benefits

Post by stuper1 »

Regarding the adjustment for her early claiming, please tell me if I have this right:

Let's say she claims at 62 and gets $1,050 per month (30% reduction from $1,500 per month if she had waited to 67).

Let's say my benefit at 67 is $4,000. If I wait to age 67 or older to claim, then will her spousal benefit be $500, which would bring her total monthly benefit up to $1,550? In other words the $450 penalty that she got for claiming at age 62, essentially transfers to her spousal benefit and reduces it by $450 from the $2,000 total that she would have received by waiting to 67?
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ObliviousInvestor
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Re: Question about Spousal Social Security Benefits

Post by ObliviousInvestor »

Example:

Her PIA is $600. Your PIA is $2,000.

She files for her retirement benefit at 62 (60 months prior to FRA). Her retirement benefit is $420 (70% of her PIA).

You file at 70 for your retirement benefit (36 months after FRA). You get $2,480 (124% of your PIA). Her spousal benefit begins at that time, and it is $400 (half of your PIA, minus her PIA).

Note that her total monthly benefit is $820 (i.e., $420 + $400). That's $180 less than half of your PIA, because her retirement benefit is still reduced by $180 for early entitlement.
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stuper1
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Re: Question about Spousal Social Security Benefits

Post by stuper1 »

Thank you all. Very clear.
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Re: Question about Spousal Social Security Benefits

Post by David Jay »

stuper1 wrote: Fri May 14, 2021 1:08 pm Regarding the adjustment for her early claiming, please tell me if I have this right:

Let's say she claims at 62 and gets $1,050 per month (30% reduction from $1,500 per month if she had waited to 67).

Let's say my benefit at 67 is $4,000. If I wait to age 67 or older to claim, then will her spousal benefit be $500, which would bring her total monthly benefit up to $1,550? In other words the $450 penalty that she got for claiming at age 62, essentially transfers to her spousal benefit and reduces it by $450 from the $2,000 total that she would have received by waiting to 67?
Correct. But remember that she gets 5 years of cash flow ($1050 per month) compared to waiting to age 67.
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Re: Question about Spousal Social Security Benefits

Post by RickBoglehead »

stuper1 wrote: Fri May 14, 2021 1:11 pm Thank you all. Very clear.
When you play with Mike's great tool, https://opensocialsecurity.com/, you see all this. It takes her life expectancy, your life expectancy (both of which you can tweak), and shows the optimal time for her, and you, to file.

You can then look at it many ways. For example, it tells my wife, depending on tweaking the discount factor, that she should file in March, or Feb, or the previous December. To make things easy, as of now we're going with that January.
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JoeRetire
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Re: Question about Spousal Social Security Benefits

Post by JoeRetire »

stuper1 wrote: Fri May 14, 2021 12:50 pmCan she start claiming the maximum spousal benefit when she turns 67? Or when I turn 67? Or when I turn 70?
A person can't claim any spousal benefit until the spouse claims their own benefit.
Just remember: it's not a lie if you believe it.
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Re: Question about Spousal Social Security Benefits

Post by #Cruncher »

ObliviousInvestor wrote: Fri May 14, 2021 1:09 pm Example: Her PIA is $600. Your PIA is $2,000.
She files for her retirement benefit at 62 ... Her retirement benefit is $420 ... You file at 70 for your retirement benefit ... Her spousal benefit begins at that time, and it is $400 (half of your PIA, minus her PIA). ... her total monthly benefit is $820 (i.e., $420 + $400).
Correct. Since she is three years older, when he starts SS at age 70, she will then be age 73 and beyond her normal retirement age (NRA). The spousal benefit doesn't increase beyond NRA. [*] The following table shows this plus what her spousal and total benefit would be if she started before NRA. E.g., if he began his SS at age 62, her spousal benefit would start at her age 65 and would only be $333 instead of $400. If she still claimed her own benefit at age 62, her total would be $753. If she claimed her own at age 65, the total would be $853.

Code: Select all

Row        Col A    Col B   Col C   Col D  Col E  Col F    Col G  Col H   Col I     Col J   Col K   Col L
  1         Born     1960
  2          NRA       67
  3          PIA      600
  4   Spouse PIA    2,000
  5  Show months        1
                                   -------- Age Start Spousal Benefit, Benefit Pct, & Benefit Amt -------
  6                                   62     63     64       65     66      67        68      69     70+
  7                                65.00% 70.00% 75.00%   83.33% 91.67% 100.00%   100.00% 100.00% 100.00%
  8          ---- Claim Own -----     260    280    300     [333]   367     400       400     400    [400]
             Age   % PIA  Benefit  ---------------------  T o t a l   B e n e f i t ---------------------

Code: Select all

  9           62   70.00%    [420]    680    700    720     [753]   787     820       820     820    [820]
 10           63   75.00%     450            730    750      783    817     850       850     850     850
 11           64   80.00%     480                   780      813    847     880       880     880     880

 12           65   86.67%    [520]                          [853]   887     920       920     920     920
 13           66   93.33%     560                                   927     960       960     960     960
 14           67  100.00%     600                                         1,000     1,000   1,000   1,000

 15           68  108.00%     648                                                   1,000   1,000   1,000
 16           69  116.00%     696                                                           1,000   1,000
 17           70  124.00%     744                                                                   1,000
To calculate this table with different assumptions, follow these steps:
  • Select All, Copy, and Paste [ * ] the following at cell A1 of a blank Excel sheet.

    Code: Select all

    Born	1960
    NRA	=MIN(67,66+MAX(0,B1-1954)/6)
    PIA	600
    Spouse PIA	2000
    Show months	1
    			62	63	=2*E6-D6	=2*F6-E6	=2*G6-F6	=2*H6-G6	=2*I6-H6	=2*J6-I6	=2*K6-J6
    			=IF(D6<$B2,1-(25/3600)*MIN(36,($B2-D6)*12)-(5/1200)*MAX(0,($B2-D6)*12-36),1)
    Age	% PIA	Benefit	=$B5*MAX(0,D7*($B4*0.5-$B3))
    62	=IF(A9<B$2,1-(5/900)*MIN(36,(B$2-A9)*12)-(5/1200)*MAX(0,(B$2-A9)*12-36),1+(8/1200)*(A9-B$2)*12)	=B$3*B9*B$5	=IF(D$6<$A9,0,MIN($C9+D$8,MAX($C9,$B$5*$B$4*0.5)))
    63
    =2*A10-A9
    =2*A11-A10
    =2*A12-A11
    =2*A13-A12
    =2*A14-A13
    =2*A15-A14
    =2*A16-A15
  • Copy cells D7:D9 right to column L.
  • Copy cells B9:L9 down to row 17.
  • Format for readability.
  • Change assumptions in cells B1, B3, & B4 as needed.
  • Change cell B5 from "1" to "12" to see yearly instead of monthly benefits.
* However, the total benefit may increase. It doesn't show in this case. But if the PIA was $900 instead of $600, the total benefit would be $1,116 if both own and spousal started at age 70. Apparently the total of own and spousal benefits can't exceed the greater of one's own benefit and one-half of the spouses PIA. (I confirmed this through repeated tests with Mike Piper's Open Social Security calculator.)

Code: Select all

Row        Col A    Col B   Col C   Col D  Col E  Col F    Col G  Col H   Col I     Col J   Col K   Col L
  1         Born     1960
  2          NRA       67
  3          PIA      900
  4   Spouse PIA    2,000
  5  Show months        1
                                   -------- Age Start Spousal Benefit, Benefit Pct, & Benefit Amt -------
  6                                   62     63     64       65     66      67        68      69      70+
  7                                65.00% 70.00% 75.00%   83.33% 91.67% 100.00%   100.00% 100.00% 100.00%
  8          ---- Claim Own -----      65     70     75       83     92     100       100     100     100
             Age   % PIA  Benefit  ---------------------  T o t a l   B e n e f i t ---------------------

Code: Select all

  9           62   70.00%     630     695    700    705      713    722     730       730     730     730
 10           63   75.00%     675            745    750      758    767     775       775     775     775
 11           64   80.00%     720                   795      803    812     820       820     820     820

 12           65   86.67%     780                            863    872     880       880     880     880
 13           66   93.33%     840                                   932     940       940     940     940
 14           67  100.00%     900                                         1,000     1,000   1,000   1,000

 15           68  108.00%     972                                                   1,000   1,000   1,000
 16           69  116.00%   1,044                                                           1,044   1,044
 17           70  124.00%   1,116                                                                   1,116
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stuper1
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Re: Question about Spousal Social Security Benefits

Post by stuper1 »

I have a followup question now about Survivor benefits. If she files at age 62 and I file at age 70, and then say I die at age 75, is her Survivors benefit decreased due to the fact that she filed at age 62?
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RickBoglehead
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Re: Question about Spousal Social Security Benefits

Post by RickBoglehead »

stuper1 wrote: Sat May 15, 2021 3:38 pm I have a followup question now about Survivor benefits. If she files at age 62 and I file at age 70, and then say I die at age 75, is her Survivors benefit decreased due to the fact that she filed at age 62?
No. She would be 78 at the time and get full survivor's benefit.
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Re: Question about Spousal Social Security Benefits

Post by Penguin »

RickBoglehead wrote: Sat May 15, 2021 4:09 pm
stuper1 wrote: Sat May 15, 2021 3:38 pm I have a followup question now about Survivor benefits. If she files at age 62 and I file at age 70, and then say I die at age 75, is her Survivors benefit decreased due to the fact that she filed at age 62?
No. She would be 78 at the time and get full survivor's benefit.
RickBoglehead gives the correct answer, but as usual it is more complicated.
Briefly, when you die at age 75 your wife continues to receive her reduced retirement benefit. In addition she will receive the excess of the widow benefit. (The difference between the widow benefit and the reduced retirement benefit). The resulting benefit is the same as the widow benefit. Apparently for bookkeeping social security wants a beneficiary to receive her own retirement benefit first before adding a supplementary benefit. This is described in the dual benefit section and the sections before and after.
https://secure.ssa.gov/apps10/poms.NSF/lnx/0300615020#a
Jon
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