TexxinMike wrote: ↑
Wed Oct 24, 2018 11:54 am
My expat parents are both 63 totally forgot about Social Security. They asked me to look into this for them. Dad is working full time but his income is foreign income and does not apply to social security. They are both in average health and don’t need the money right away, so my strategy is to simply maximize the benefit. The rules are confusing but after reading a few threads on this topic below is what I come up with
Data from Social Security Admin:
- PIA $839
Current Age 63: $717
Age 70: $1107
- PIA $1766
Current Age 63: $1405
Age 70: $2308
1) Mom to file on at age 64 where benefits will be ~$738 per month
2) Dad to delay filing till age 70 where benefits will be $2,308 and Mom to immediately file for spousal benefits of $1766/2 = $883
Result: For the Years
- Before Dad filed: total monthly benefit = mom’s benefit at time of application: $738
- After Dad filed at age 70: total monthly benefit = Mom’s spousal benefit ($883) + Dad’s benefit at 70 ($2308) = $3191
Survivor Benefit after that
- Mom = mom’s benefit at time of application ($738) + Dad’s PIA ($1766) = $2504
- Dad = benefit after 70 ($2,308)
Please let me know if this all this is correct and any other any other away to improve on this.
Assuming your benefit numbers are correct, your strategy is reasonable, but you do have a couple of assumptions incorrect.
1) Mom's spousal benefit is computed as 1/2(Dad's PIA) - (Mom's PIA) = (1766/2)-839 = $44.
This gets added to mom's benefit. If she claims at her Full Retirement Age (FRA), then it works out to 1/2(Dad's PIA), or $883.
But, since your plan has her claiming before FRA, when she claims spousal, she will get her benefit + spousal, $738 + $44 = $782.
She does not get back what she gave up by claiming early.
Whether it makes sense to wait for her to reach FRA to claim or not depends on assumptions about her life span.
2) At either spouse's death, the surviving spouse gets the higher of either benefit. So, which ever spouse survives would get the $2308
Not sure where you are getting the $2504 number calculation from, I do not believe that is correct.
As for further optimization, you could try on of the calculators out there, but the answers are only as good as your assumptions about life span.
Assuming health is reasonably good, Dad waiting to 70 probably makes sense.
Mom, could claim now, or wait until FRA, or claim anywhere in between, the difference is not huge, and optimal choice is unknowable.
Once in a while you get shown the light, in the strangest of places if you look at it right.