How to calculate SS PIA for Spouse who died relatively young?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
User avatar
One Ping
Posts: 482
Joined: Thu Sep 24, 2015 4:53 pm

How to calculate SS PIA for Spouse who died relatively young?

Post by One Ping » Thu Aug 30, 2018 5:33 pm

Sister's spouse died at age 48 in 2011 (born in 1962). I'm helping her with some financial decisions and would like to be able to, independently from SSA, calculate her spouses PIA.

I know his highest 35 years of taxed social security earnings (25 years of earnings + 10 'zero' years). What I'm having trouble with is an apparent discrepancy in the definition of the "year of eligibility" used for determining the Indexed Earnings and the Bend Points.

The Indexed Earnings page says:

"Wage indexing depends on the year in which a person is first eligible to receive benefits. For retirement, eligibility is at age 62."

This tells me his year of eligibility for indexing earnings is 2024. Fine.

The bend points page says:

"Year of eligibility [is] the year in which a worker attains age 62, becomes disabled before age 62, or dies before attaining age 62."

This tells me his year of eligibility for the bend points is 2011. Fine.

Wait, ... what? :oops:

Does this mean there are two different years of eligibility, depending on what you are using the year of eligibility for?

Normally, I might be able to wrap my head around this, but in this case when I do the calculation for his PIA using those two different years of eligibility for the Earnings Indexes and Bend Points comes out significantly higher than mine. We both have essentially max earning for every year, but he has 25 years and I have 35 years. I fear something is amiss. What am I not understanding? Should I be using 2011 for the Earnings Indexing too?

Calling ObliviousInvestor!!

One Ping
"Re-verify our range to target ... one ping only."


User avatar
One Ping
Posts: 482
Joined: Thu Sep 24, 2015 4:53 pm

Re: How to calculate SS PIA for Spouse who died relatively young?

Post by One Ping » Thu Aug 30, 2018 7:21 pm

Hmm ... maybe. Thanks, FiveK. I'll have to take a look at it in detail to see. It's pretty dense.

The question still remains I think, is there only one year of eligibility to use for both indexing and bending or can/are they different in this case.
"Re-verify our range to target ... one ping only."

User avatar
ObliviousInvestor
Posts: 3383
Joined: Tue Mar 17, 2009 9:32 am
Contact:

Re: How to calculate SS PIA for Spouse who died relatively young?

Post by ObliviousInvestor » Thu Aug 30, 2018 7:45 pm

Whenever you want a Social Security answer with a high degree of certainty, it's best to turn to the CFR (or the Social Security Act itself or the POMS). Most of the "plain English" sorts of pages on SSA.gov are akin to IRS Publications in that they are a credible source, but can include simplifications. (I mention this, One Ping, because I can tell that you're serious about understanding this stuff.)

One thing it's helpful to know is that the rules for a person who dies or becomes disabled prior to age 62 are just different than they are for somebody who is alive and not disabled. Much is the same, but don't expect everything to be the same.

https://www.ssa.gov/OP_Home/cfr20/404/404-0210.htm
(b) Steps in computing your primary insurance amount under the average-indexed-monthly-earnings method. We follow these three major steps in computing your primary insurance amount:

(1) First, we find your average indexed monthly earnings, as described in § 404.211;

(2) Second, we find the benefit formula in effect for the year you reach age 62, or become disabled or die before age 62, as described in § 404.212; and

(3) Then, we apply that benefit formula to your average indexed monthly earnings to find your primary insurance amount, as described in § 404.212.

(4) Next, we apply any automatic cost-of-living or ad hoc increases in primary insurance amounts that became effective in or after the year you reached age 62, unless you are receiving benefits based on the minimum primary insurance amount, in which case not all the increases may be applied, as described in § 404.277.
Subparagraph (2) here is what you asked about. So, yes, this is one case where the rules differ for a person who dies prior to 62. We're going to use a different year's bend points in calculating PIA.

(There's a common sense reason for using a different year. For example, if a person dies at age 40 this year, they don't turn 62 until 2040. So we wouldn't be able to calculate their PIA for another 22 years. But we have to calculate their PIA now for the sake of survivor benefits.)

Subparagraph (1) is also important though. AIME is calculated differently if you die prior to age 62, as described in 404.211 mentioned above.
https://www.ssa.gov/OP_Home/cfr20/404/404-0211.htm

Key difference is that we use fewer years in the calculation. See paragraph (e).
(e) Number of years to be considered in finding your average indexed monthly earnings. To find the number of years to be used in computing your average indexed monthly earnings—

(1) We count the years beginning with 1951, or (if later) the year you reach age 22, and ending with the earliest of the year before you reach age 62, become disabled, or die. Years wholly or partially within a period of disability (as defined in § 404.1501(b) of subpart P of this part) are not counted unless your primary insurance amount would be higher. In that case, we count all the years during the period of disability, even though you had no earnings in some of those years. These are your elapsed years. From your elapsed years, we then subtract up to 5 years, the exact number depending on the kind of benefits to which you are entitled. You cannot, under this procedure, have fewer than 2 benefit computation years.

(2) For computing old-age insurance benefits and survivors insurance benefits, we subtract 5 from the number of your elapsed years. See paragraphs (e) (3) and (4) of this section for the dropout as applied to disability benefits. This is the number of your benefit computation years; we use the same number of your computation base years (see paragraph (b)(2) of this section) in computing your average indexed monthly earnings. For benefit computation years, we use the years with the highest amounts of earnings after indexing. They may include earnings from years that were not indexed, and must include years of no earnings if you do not have sufficient years with earnings. You cannot have fewer than 2 benefit computation years.
So if your brother in law was born in 1962, he turned 22 in 1984. He died in 2011, which means the elapsed years is 27. We subtract 5 from the elapsed years in this case. So his AIME will be calculated using his best 22 years of earnings.

And paragraph (d) of 404.211 tells us about indexing. It's huge, so I'm not going to copy/paste. Just go read it. :)

Key point: "your indexing year is the second year before the earliest of the year you reach age 62, or become disabled or die before age 62."

There's a possible exception in (d)(4). Basically, if it allows for a higher widow's benefit, his indexing year could be later.
Mike Piper, author/blogger

User avatar
One Ping
Posts: 482
Joined: Thu Sep 24, 2015 4:53 pm

Re: How to calculate SS PIA for Spouse who died relatively young?

Post by One Ping » Thu Aug 30, 2018 10:40 pm

Thanks, Mike.

You and FiveK have given me a lot to look at. I'll wade through it and see what I can figure out. Thanks, again. :beer
"Re-verify our range to target ... one ping only."

User avatar
Watty
Posts: 14086
Joined: Wed Oct 10, 2007 3:55 pm

Re: How to calculate SS PIA for Spouse who died relatively young?

Post by Watty » Thu Aug 30, 2018 10:50 pm

One Ping wrote:
Thu Aug 30, 2018 5:33 pm
Sister's spouse died at age 48 in 2011 (born in 1962). I'm helping her with some financial decisions and would like to be able to, independently from SSA, calculate her spouses PIA.
With as complicated as this can get there is a significant chance that you could make a mistake if you try to do it on your own. It would be good to work with the Social Security office to get the right number since using the wrong number could be very misleading.

User avatar
FiveK
Posts: 5570
Joined: Sun Mar 16, 2014 2:43 pm

Re: How to calculate SS PIA for Spouse who died relatively young?

Post by FiveK » Fri Aug 31, 2018 12:37 am

One Ping wrote:
Thu Aug 30, 2018 7:21 pm
Hmm ... maybe. Thanks, FiveK. I'll have to take a look at it in detail to see. It's pretty dense.

The question still remains I think, is there only one year of eligibility to use for both indexing and bending or can/are they different in this case.
Yes, dense reading, but perhaps relatively simple calculations as a result.

If you want to do your own calculation but don't already have a spreadsheet, the 'SocialSecurity' tab of the personal finance toolbox spreadsheet may give you a running start. Actual earnings go in column B next to the corresponding year in column A, and the actual birth date in cell B102.

Then you'll have to change some of the protected cells, but there is no password - simply Unprotect the sheet and you are in business.

AIME
As already noted, you don't have to use 35 years. Assuming 22 years is correct, change cells
H99 from =SUM(L62:L96) to =SUM(L62:L83), and
H100 from =INT(H99/(12*35)) to =INT(H99/(12*22))

Wage indexing and bend points
Change cell C103 if necessary to the Windexing eligibility year determined using D. Procedure. See Glossary of Acronyms if needed.

I think that will give you what you seek in cell D112, but wouldn't blame you at all for verifying that on your own. If you get the same answer as the SS office, it's probably unlikely that both are in error. ;)

Good luck!

User avatar
One Ping
Posts: 482
Joined: Thu Sep 24, 2015 4:53 pm

Re: How to calculate SS PIA for Spouse who died relatively young?

Post by One Ping » Fri Aug 31, 2018 4:47 pm

ObliviousInvestor wrote:
Thu Aug 30, 2018 7:45 pm
So if your brother in law was born in 1962, he turned 22 in 1984. He died in 2011, which means the elapsed years is 27. We subtract 5 from the elapsed years in this case. So his AIME will be calculated using his best 22 years of earnings.

And paragraph (d) of 404.211 tells us about indexing. It's huge, so I'm not going to copy/paste. Just go read it. :)

There's a possible exception in (d)(4). Basically, if it allows for a higher widow's benefit, his indexing year could be later.
Finally got through § 404.211, § 404.212 and appendix II of the references you gave. Makes sense, for the most part. Here is the relevant data and my interpretation of the process.

Deceased spouse: born 1962, died 2011
Surviving spouse: born 1963, reaches age 60 in 2023

This situation yields the following relevant benefit calculation parameters:

Computation base years: 1984-2011 [based on § 404.211 (b)(2)]
Elapsed years: 28 years [based on § 404.211 (e)(1)]
Benefit computation years: 23 years [based on § 404.211 (e)(2)]

Normal Indexing and Benefit Formula years (Case A):
Indexing year: 2009 [based on § 404.211 (d)(1)(ii)]
Benefit formula year: 2011 [based on § 404.212 (b)(1)]

An alternative approach to determining the Indexing and Benefit Formula years is also available (Case B):
Indexing year: 2021 [based on § 404.211 (d)(4)(ii)]
Benefit formula year: 2023 [based on § 404.212 (b)(1) ref. § 404.211 (d)(4)(ii)]

There are two benefit calculations to be done (Case A & Case B). The benefit calculation yielding the higher benefit is the one that will be received by the surviving spouse.

Case A: Calculate indexed wages for the elapsed years / computation base years using the indexing year 2009. Identify the benefit computation years (highest 23 years indexed wage values). Calculate the AIME by adding benefit computation years indexed wages and dividing by 276 (23 years x 12 months/year). Calculate the benefit using the benefit formula (bend points) for the year 2011.

Case B: Calculate indexed wages for the elapsed years / computation base years using the indexing year 2021. Identify the benefit computation years (highest 23 years indexed wage values). Calculate the AIME by adding benefit computation years indexed wages and dividing by 276 (23 years x 12 months/year). Calculate the benefit using the benefit formula (bend points) for the year 2023.

Case A is straight forward, wage indexing and benefit formula parameters (bend points) are readily available for 2009 and 2011 respectively. Case B is more problematic. While wage indexing is available for the year 2021, the benefit formula parameters (bend points) are not, and increasing the bend points using the percentages from the wage indexing table (as described in § 404.212 (b)(2)) doesn’t give results consistent for previous years bend point adjustments. :?:
FiveK wrote:
Fri Aug 31, 2018 12:37 am
Yes, dense reading, but perhaps relatively simple calculations as a result.

If you want to do your own calculation but don't already have a spreadsheet, the 'SocialSecurity' tab of the personal finance toolbox spreadsheet may give you a running start.

I think that will give you what you seek in cell D112, but wouldn't blame you at all for verifying that on your own.
Agree, the calculation is straight forward, once you have the correct input data.

I did run the social security tab of the personal tool box spreadsheet. Made the modifications you suggested and found I also needed to change the year of eligibility in C103 to be able to get the correct bend points for the benefit calculation formula. After some minor tweaking to fix the way the AIME and Benefit Calculation rounding was done on the social security tab, our spreadsheets get identical results ... to the penny! (Well, the nearest $0.10 anyway!) :sharebeer
"Re-verify our range to target ... one ping only."

User avatar
susa
Posts: 442
Joined: Sat Oct 06, 2007 4:30 pm
Contact:

Re: How to calculate SS PIA for Spouse who died relatively young?

Post by susa » Sat Sep 01, 2018 5:29 am

Would anyone / Has anyone - considered using the $40 calculator (https://maximizemysocialsecurity.com/) to resolve questions as presented in this thread ? Am just curious in case there is even anecdotal evidence of its' performance.

User avatar
ObliviousInvestor
Posts: 3383
Joined: Tue Mar 17, 2009 9:32 am
Contact:

Re: How to calculate SS PIA for Spouse who died relatively young?

Post by ObliviousInvestor » Sat Sep 01, 2018 8:37 am

One Ping wrote:
Fri Aug 31, 2018 4:47 pm
Finally got through § 404.211, § 404.212 and appendix II of the references you gave. Makes sense, for the most part. Here is the relevant data and my interpretation of the process.

Deceased spouse: born 1962, died 2011
Surviving spouse: born 1963, reaches age 60 in 2023

This situation yields the following relevant benefit calculation parameters:

Computation base years: 1984-2011 [based on § 404.211 (b)(2)]
Elapsed years: 28 years [based on § 404.211 (e)(1)]
Benefit computation years: 23 years [based on § 404.211 (e)(2)]
I keep getting 1984-2010, 27 years, and 22 years here.
404.211(e)(1) wrote:We count the years beginning with 1951, or (if later) the year you reach age 22, and ending with the earliest of the year before you reach age 62, become disabled, or die
One Ping wrote:
Fri Aug 31, 2018 4:47 pm
Normal Indexing and Benefit Formula years (Case A):
Indexing year: 2009 [based on § 404.211 (d)(1)(ii)]
Benefit formula year: 2011 [based on § 404.212 (b)(1)]
Agreed.
One Ping wrote:
Fri Aug 31, 2018 4:47 pm
An alternative approach to determining the Indexing and Benefit Formula years is also available (Case B):
Indexing year: 2021 [based on § 404.211 (d)(4)(ii)]
Benefit formula year: 2023 [based on § 404.212 (b)(1) ref. § 404.211 (d)(4)(ii)]
Agreed.

Great job really digging in with this dense material.

FYI I'm currently traveling with family for the weekend, so will likely be slower to reply than usual.
Mike Piper, author/blogger

User avatar
One Ping
Posts: 482
Joined: Thu Sep 24, 2015 4:53 pm

Re: How to calculate SS PIA for Spouse who died relatively young?

Post by One Ping » Sat Sep 01, 2018 11:39 am

ObliviousInvestor wrote:
Sat Sep 01, 2018 8:37 am
One Ping wrote:
Fri Aug 31, 2018 4:47 pm
Here is the relevant data and my interpretation of the process.

Elapsed years: 28 years [based on § 404.211 (e)(1)]
Benefit computation years: 23 years [based on § 404.211 (e)(2)]
I keep getting 1984-2010, 27 years, and 22 years here.
404.211(e)(1) wrote:We count the years beginning with 1951, or (if later) the year you reach age 22, and ending with the earliest of the year before you reach age 62, become disabled, or die
Mike, I see how you get 27/22.

I parsed the sentence as:
“We count the years beginning with 1951, or (if later) the year you reach age 22, and ending with the earliest of the year (1) before you reach age 62, (2) become disabled, or (3) die.”

You parsed the sentence as:
“We count the years beginning with 1951, or (if later) the year you reach age 22, and ending with the earliest of the year before you (1) reach age 62, (2) become disabled, or (3) die.”

I’ll bow to your interpretation … makes more sense grammatically that way.
"Re-verify our range to target ... one ping only."

User avatar
One Ping
Posts: 482
Joined: Thu Sep 24, 2015 4:53 pm

Re: How to calculate SS PIA for Spouse who died relatively young?

Post by One Ping » Sat Sep 01, 2018 11:41 am

susa wrote:
Sat Sep 01, 2018 5:29 am
Would anyone / Has anyone - considered using the $40 calculator (https://maximizemysocialsecurity.com/) to resolve questions as presented in this thread ? Am just curious in case there is even anecdotal evidence of its' performance.
Susa, I appreciate there are tools out there that will calculate this for you.

Being an engineer, I prefer to understand the nuts and bolts of a calculation and what I expect the answer to be before I use a tool and trust it enough to rely on it … especially in cases where the calculation itself is fairly straightforward. It’s not just about “the answer” it’s about understanding process to get to the answer. For example, by understanding the process, as opposed to relying on the output of a tool, I discovered an error in my Megacorp calculated pension. They would have ended up shorting me, now they aren’t.

Once I have vetted a tool enough to trust it, then I feel comfortable to use it to explore the trade space and edge cases.

One Ping
"Re-verify our range to target ... one ping only."

User avatar
ObliviousInvestor
Posts: 3383
Joined: Tue Mar 17, 2009 9:32 am
Contact:

Re: How to calculate SS PIA for Spouse who died relatively young?

Post by ObliviousInvestor » Sun Sep 02, 2018 8:06 am

One Ping wrote:
Sat Sep 01, 2018 11:39 am
I parsed the sentence as:
“We count the years beginning with 1951, or (if later) the year you reach age 22, and ending with the earliest of the year (1) before you reach age 62, (2) become disabled, or (3) die.”

You parsed the sentence as:
“We count the years beginning with 1951, or (if later) the year you reach age 22, and ending with the earliest of the year before you (1) reach age 62, (2) become disabled, or (3) die.”
Ah... Yes now I understand where you're coming from.

sscritic notes via email that the actual Act is more clearly worded with respect to this distinction.

https://www.ssa.gov/OP_Home/ssact/title ... #act-215-b
(b)(2)(B)(iii)
the term “number of elapsed years” means (except as otherwise provided by section 104(j)(2) of the Social Security Amendments of 1972[211]) the number of calendar years after 1950 (or, if later, the year in which the individual attained age 21) and before the year in which the individual died, or, if it occurred earlier (but after 1960), the year in which he attained age 62; except that such term excludes any calendar year any part of which is included in a period of disability.
Mike Piper, author/blogger

User avatar
One Ping
Posts: 482
Joined: Thu Sep 24, 2015 4:53 pm

Re: How to calculate SS PIA for Spouse who died relatively young?

Post by One Ping » Sun Sep 02, 2018 9:44 pm

ObliviousInvestor wrote:
Sun Sep 02, 2018 8:06 am
sscritic notes via email that the actual Act is more clearly worded with respect to this distinction.

https://www.ssa.gov/OP_Home/ssact/title ... #act-215-b
(b)(2)(B)(iii)
the term “number of elapsed years” means (except as otherwise provided by section 104(j)(2) of the Social Security Amendments of 1972[211]) the number of calendar years after 1950 (or, if later, the year in which the individual attained age 21) and before the year in which the individual died, or, if it occurred earlier (but after 1960), the year in which he attained age 62; except that such term excludes any calendar year any part of which is included in a period of disability.
Thanks, Mike and sscritic.

So, after eliminating the wording that doesn't apply in this case the quoted text above boils down to ...

"the term “number of elapsed years” means the number of calendar years after the year in which the individual attained age 21 and before the year in which the individual died."

The Individual in question was born in 1962, attained age 21 in 1983 and died in 2011. So the elapsed years would be the 27 years 1984 (year after 1983) through 2010 (year before 2011) and thus the benefit computation years is 22. Ta-dah! Now I have a firm understanding of how to get those numbers.

FYI - I also found projected AWI data, based on the trustees report, out to (and beyond) 2023 so it should be possible to compute the benefit using the Case B alternative approach (from above) also. More on that later ... :happy
"Re-verify our range to target ... one ping only."

Post Reply