Social Security Strategies

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runnergirl
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Social Security Strategies

Post by runnergirl »

If spouses A and B have an FRA of 67, and spouse A is 2 years older than spouse B and a low wage earner (spouse B is a high wage earner), what should this couple's social security strategy be in order to maximize benefits? They do not need to rely on social security and could wait until age 70 if need be. I have read a few articles and the Social Security website and cannot make sense of it.

Thank you.
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BL
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Re: Social Security Strategies

Post by BL »

Here is one option (sorry, I refuse to do the math so there may be a better option):

low earner begins early (62-67)
higher earner begins spousal at FRA, begins own at age 70
redhounds
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Re: Social Security Strategies

Post by redhounds »

I asked a somewhat similar question a few days ago and got some great info http://www.bogleheads.org/forum/viewtop ... 2&t=125638

If you have real numbers from your social security estimated benefits information you'll probably be able to get a more specific answer for your situation. I used made up numbers because I didn't look up my real ones first, but once I got my answers I went and got an updated estimate and plugged in my actual numbers.
--Red
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runnergirl
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Re: Social Security Strategies

Post by runnergirl »

the younger spouse (by 2 years):
age 62: $1900
age 67: $2634
age 70: $3273

the older spouse:
age 62: $552
age 67: $784
age 70: $784

the younger spouse comes from a family of average longevity. the older spouse comes from a family of above average longevity.
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ThePrune
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Re: Social Security Strategies

Post by ThePrune »

Here at the Forum we encourage people to learn about the resources that allow them to "figure it out on their own."

For all questions about Social Security claiming strategies, a good place to start is Dana Anspach's website article Social Security Calculators - Don't Claim Without Trying One First. I suggest starting with the free calculators discussed in "3. FOR FREE - ONLINE SOCIAL SECURITY CALCULATORS" since for most couples these will give the correct strategy.

I have personally used one of the "FEE" calculators - Maximize My Social Security - for my wife and myself. It confirmed the strategy that was recommended by the free calculators, thereby giving me additional confidence.
Investment skill is often just luck in sheep's clothing.
gerrym51
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Re: Social Security Strategies

Post by gerrym51 »

my opinion is both should claim at 62 :mrgreen:
john94549
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Re: Social Security Strategies

Post by john94549 »

BL wrote:Here is one option (sorry, I refuse to do the math so there may be a better option):

low earner begins early (62-67)
higher earner begins spousal at FRA, begins own at age 70
This is what we did. As a practical matter, it enables one and one's spouse to secure a tidy cash flow while maximizing survivor benefits.

My wife was (and is) the higher earner by a tad. I claimed at 62. She filed for spousal at FRA. She now gets 50% of what I would have obtained at my FRA, and continues to receive DRCs.

Quite some time ago, SScritic explained how this strategy resulted as a combination of two laws, one passed in the Great Depression, and one in the early 2000s.

PS: I suspect the "best option" is "file and suspend" with spousal, but few have the resources to avail.
Ron
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Re: Social Security Strategies

Post by Ron »

john94549 wrote:This is what we did. As a practical matter, it enables one and one's spouse to secure a tidy cash flow while maximizing survivor benefits.

My wife was (and is) the higher earner by a tad. I claimed at 62. She filed for spousal at FRA. She now gets 50% of what I would have obtained at my FRA, and continues to receive DRCs.
That's what we will be doing in 2014. I reach FRA in January, wife in May.

While I have the higher earnings/SS, she will probably outlive me.

I'll be filing a restricted SS application in May, upon her approval for SS to get 50% of her benefit for 3.5 years. After that time, I'll claim SS (age 70) and accumulate the DRC's (Delayed Retirement Credit).

- Ron
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Cut-Throat
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Re: Social Security Strategies

Post by Cut-Throat »

gerrym51 wrote:my opinion is both should claim at 62 :mrgreen:
You overlooked a lot. The surviving spouse will get to collect the higher S.S. Amount. Assuming you are about the same age, delaying the higher earner to age 70 protects the surviving spouse.
It also provides a much higher income, if you both survive to your late 80s and into your 90s.
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englishgirl
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Re: Social Security Strategies

Post by englishgirl »

runnergirl wrote:the younger spouse (by 2 years):
age 62: $1900
age 67: $2634
age 70: $3273

the older spouse:
age 62: $552
age 67: $784
age 70: $784

the younger spouse comes from a family of average longevity. the older spouse comes from a family of above average longevity.
There is an error here in that spouse A's benefit does not increase between 67 and 70. Presumably the age 70 benefit should be around $972 (age 67 * 1.24).

In this case, spouse A's highest possible benefit is never going to be more than their spousal benefit. Also, spousal benefit does not benefit from delayed retirement credits beyond FRA (in this case, age 67). Thus, as far as I see, there's no point in having spouse A wait past age 67 to collect anything.

My strategy (whether it would be the best, I don't know), is to have Spouse B "file and suspend" at age 69, to enable Spouse A collect spousal benefit ($2634*0.5 = $1317) at Spouse A's full retirement age. Then when Spouse B is 70, they start claiming their own benefit of $3273. Total benefit received in the household from Spouse B's age 70 is $1317 + $3273 = $4590. After the first of them dies, the surviving person would then collect $3273 going forward.
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gerntz
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Re: Social Security Strategies

Post by gerntz »

runnergirl wrote:If spouses A and B have an FRA of 67, and spouse A is 2 years older than spouse B and a low wage earner (spouse B is a high wage earner), what should this couple's social security strategy be in order to maximize benefits? They do not need to rely on social security and could wait until age 70 if need be. I have read a few articles and the Social Security website and cannot make sense of it.

Thank you.
To some degree It depends on your income & sources w/o SS. If you have a lot of LTCG, not collecting at all could leave room for more 0% Fed tax LTCG.
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jjustice
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Re: Social Security Strategies

Post by jjustice »

I concur with englishgirl's answer. It maximizes benefits according to the situation presented by the OP.

No, wait a minute. A is older. If B files and suspends at FRA, then A can start spousal benefits at 69.

John
SGM
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Re: Social Security Strategies

Post by SGM »

Run your numbers through the free AARP retirement calculator. I found it to be helpful for our planning (despite BobK telling me "You get what you pay for."
"Let us endeavor, so to live, that when we die, even the undertaker will be sorry." Mark Twain
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Cernel
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Re: Social Security Strategies

Post by Cernel »

My wife's and my situation is somewhat similar:
1. FRA for both A&B is 66
2. Spouse A is only 10 months older and is the lower wage earner with a SS benefit more than 50% lower than Spouse B
3. Don't need the SS to meet living expenses.
4. Longevity on both sides of the family.

So, here is our strategy:
1. Spouse A claims her SS benefit when she reaches FRA of 66.
2. 10 months later when Spouse B reaches FRA of 66, he files a "Restricted Application" which allows him to draw a benefit of 50% of Spouse A's benefit while allowing his benefit to grow.
3. When Spouse B reaches 70, he files for his SS benefit which has now grown by 32% of what it would have been at FRA. Also at this time, Spouse A then claims a Spousal Benefit which is higher than her FRA benefit.

This gives us the maximum SS benefit (if I ran the numbers correctly) if we both live to around 81 or 82, plus it will provide Spouse A a larger benefit if Spouse B were to leave this fine world before Spouse A.
dbr
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Re: Social Security Strategies

Post by dbr »

People may not want to pay a few bucks for the service, but I do feel this tool was quite good:

https://www.socialsecuritysolutions.com/
rixer
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Re: Social Security Strategies

Post by rixer »

Say that spouse A is FRA, and spouse B is younger and hasn't yet filed. Can spouse A file Restricted Application for spousal benefits from spouse B if spouse B hasn't yet filed for Social Security?
manwithnoname
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Re: Social Security Strategies

Post by manwithnoname »

john94549 wrote:
BL wrote:Here is one option (sorry, I refuse to do the math so there may be a better option):

low earner begins early (62-67)
higher earner begins spousal at FRA, begins own at age 70
This is what we did. As a practical matter, it enables one and one's spouse to secure a tidy cash flow while maximizing survivor benefits.

My wife was (and is) the higher earner by a tad. I claimed at 62. She filed for spousal at FRA. She now gets 50% of what I would have obtained at my FRA, and continues to receive DRCs.

Quite some time ago, SScritic explained how this strategy resulted as a combination of two laws, one passed in the Great Depression, and one in the early 2000s.

PS: I suspect the "best option" is "file and suspend" with spousal, but few have the resources to avail.
Not exactly. Even if you have other financial resources it can be better to commence SS before 70 so as to increase value of more tax efficient types of wealth. Best option is what is most suitable for your retirement needs and wealth management.

I elected to commence SS benefits at 65 because

1) I calculated that in order to get more total benefits by delaying until 70 I would have to live to 84 which made the difference in commencing benefits trivial.

2) SS benefits have two major liabilities, they end at death and up to 85% of benefits are taxable. By commencing my SS benefits to pay for living expenses I am able to transfer a significant amount of my TIRA to a Roth each year at a 6-8% tax rate. Tax advantage to me is there are no minimum required distributions from the Roth at 70 1/2 and distributions will be paid tax free to heirs.

3) by commencing SS benefits I avoided tax on the 15% of SS benefits that are excluded from taxable income which allows 15% more to be transferred to the Roth each year.
sscritic
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Re: Social Security Strategies

Post by sscritic »

rixer wrote:Say that spouse A is FRA, and spouse B is younger and hasn't yet filed. Can spouse A file Restricted Application for spousal benefits from spouse B if spouse B hasn't yet filed for Social Security?
No. To be someone's spouse, the someone has to be entitled to old age (retirement) benefits. Entitled requires an application (and age and all the other requirements).
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runnergirl
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Re: Social Security Strategies

Post by runnergirl »

Thank you for your help. I will check out that website. Am I right that the higher earner cannot collect spousal benefits on the lower earner's record at age 62 if he his also eligible for his own reduced benefit at age 62 (and that benefit is substantially more than the spousal benefit)?
technovelist
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Re: Social Security Strategies

Post by technovelist »

sscritic wrote:
rixer wrote:Say that spouse A is FRA, and spouse B is younger and hasn't yet filed. Can spouse A file Restricted Application for spousal benefits from spouse B if spouse B hasn't yet filed for Social Security?
No. To be someone's spouse, the someone has to be entitled to old age (retirement) benefits. Entitled requires an application (and age and all the other requirements).
So now you can't be someone's spouse unless the other person is eligible for old age benefits? That seems pretty restrictive! :oops:
In theory, theory and practice are identical. In practice, they often differ.
sscritic
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Re: Social Security Strategies

Post by sscritic »

runnergirl wrote:Thank you for your help. I will check out that website. Am I right that the higher earner cannot collect spousal benefits on the lower earner's record at age 62 if he his also eligible for his own reduced benefit at age 62 (and that benefit is substantially more than the spousal benefit)?
Yes. There is a concept of "deemed or presumed filing" if you are under FRA. An application for old-age benefits is deemed to be an application for spousal benefits (if eligible) and an application for spousal benefits is deemed to be an application for old-age benefits (if eligible). So if you file for either at 62, you are also filing for the other, and if your own benefit is based on a PIA that is half or more of the PIA of the worker you are married to, you won't be eligible for spousal benefits.
Presumed filing for husband's or wife's benefits. If you file an application for old-age benefits, you are presumed to have filed an application for husband's or wife's benefits in the first month of your entitlement to old-age benefits, if—
(1) Your old-age benefits are reduced for age because you choose to receive them before you reach full retirement age (as defined in § 404.409); and
(2) You are eligible for either a husband's or a wife's benefit for the first month of your entitlement to old-age benefits.

(b) Presumed filing for old-age benefits. If you file an application for a husband's or a wife's benefit, you are presumed to have filed an application for old-age benefits in the first month of your entitlement to husband's or wife's benefits if—
(1) Your husband's or wife's benefits are reduced for age because you choose to receive them before you reach full retirement age (as defined in § 404.409); and
(2) You are eligible for old-age benefits for the first month of your entitlement to husband's or wife's benefits.

(c) Exception. Paragraph (b) of this section does not apply if you are also entitled to disability benefits in the first month of your entitlement to husband's or wife's benefits. In this event, you are presumed to have filed for old-age benefits only if your disability benefits end before you reach full retirement age (as defined in § 404.409)
sscritic
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Re: Social Security Strategies

Post by sscritic »

dbr wrote:People may not want to pay a few bucks for the service, but I do feel this tool was quite good:

https://www.socialsecuritysolutions.com/
Free for veterans on veterans day. See my post from earlier today.
http://www.bogleheads.org/forum/viewtop ... 2&t=125975
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Cut-Throat
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Re: Social Security Strategies

Post by Cut-Throat »

SGM wrote:Run your numbers through the free AARP retirement calculator. I found it to be helpful for our planning (despite BobK telling me "You get what you pay for."

I ran my numbers on this Calculator and was a bit surprised on what it recommended. My wife is 8 years younger than myself. It told me to delay to age 70 (Which I will do). Then it said to have my wife file for spousal benefits 4 years later when she turns 66, And then claim benefits on her own record when when she turns 70.

I was always under the impression that the wise thing to do was for here to take her S.S. at age 62, since I was already delaying to age 70? Being the case, if one of us dies, we could only collect the higher S.S. amount?

sscritic could you weigh in on this? What say you?
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