SS Spousal Benefit..Pros and Cons?

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investorforlife
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SS Spousal Benefit..Pros and Cons?

Post by investorforlife » Thu Apr 30, 2020 3:31 pm

Hi all,

Let's just pretend there will be enough social security in 30 years (:P) for this question or at least we can still be paid a portion of it.

Ok what is the incentive for the lower income spouse to work if (regardless whether they work during their lifetime), they will receive the spousal benefit of 50% of the ss benefit of the higher income spouse? Just from a purely financial perspective. Thoughts?

Silk McCue
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Re: SS Spousal Benefit..Pros and Cons?

Post by Silk McCue » Thu Apr 30, 2020 5:21 pm

Very odd question.

The incentive to work is to earn money now. With money you can buy stuff like food, shelter, clothing, cars, trips to Disney World, pay for your children’s schooling and college. You can invest for the future and give to charities to help the less fortunate. Much more can be accomplished in a two earner family even if there is income disparity between them if that’s what they want to do.

No one earns a living just because they want to collect SS when they are old. And no self respecting individual says, I don’t need to work solely because I can get a spousal SS benefit in 30 years.

Cheers
Last edited by Silk McCue on Thu Apr 30, 2020 5:29 pm, edited 1 time in total.

FoolMeOnce
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Re: SS Spousal Benefit..Pros and Cons?

Post by FoolMeOnce » Thu Apr 30, 2020 5:24 pm

In addition to the above, looking only at SS, the lower income spouse's personal benefit can still be greater than 50% of the spouse's benefit, especially if delayed to age 70.

HoosierJim
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Re: SS Spousal Benefit..Pros and Cons?

Post by HoosierJim » Thu Apr 30, 2020 5:28 pm

Let's say you worked for 40 quarters at the maximum social security taxable income ($137,000 for 2020). Just for fun, assume self employed so you are paying both the employee & employer contribution.

The tax rate is about 15% - so about $20,500 for 10 years. Ignoring time value of money and rate changes - that's $205,000 to get the max benefit 10 years from now.

The max rate today is $2,265 at 62 - so it would take $205,000 / (2265 *12 months)--> about 7.5 years.

The question is if the spouse can make the significant income, if the income is marginal, the 50% is better especially if the spouse doesn't want to work or if there are other costs like daycare to consider.


https://www.irs.gov/taxtopics/tc751
The current tax rate for social security is 6.2% for the employer and 6.2% for the employee, or 12.4% total. The current rate for Medicare is 1.45% for the employer and 1.45% for the employee, or 2.9% total.

Lalamimi
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Re: SS Spousal Benefit..Pros and Cons?

Post by Lalamimi » Thu Apr 30, 2020 5:31 pm

uhh--- I made over $200K last few years I worked (a lot less from 1972-2009). I am drawing $1100 a month spousal until I turn 70. Surely your spouse can make a lot more than that for 30 or 40 yrs. Make all you can while you can.

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David Jay
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Re: SS Spousal Benefit..Pros and Cons?

Post by David Jay » Thu Apr 30, 2020 7:52 pm

deleted - my error.
Last edited by David Jay on Thu Apr 30, 2020 8:07 pm, edited 1 time in total.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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Watty
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Re: SS Spousal Benefit..Pros and Cons?

Post by Watty » Thu Apr 30, 2020 8:06 pm

David Jay wrote:
Thu Apr 30, 2020 7:52 pm
investorforlife wrote:I just googled_id=5223618 time=1588278669 user_id=160696]Ok what is the incentive for the lower income spouse to work if (regardless whether they work during their lifetime), they will receive the spousal benefit of 50% of the ss benefit of the higher income spouse?
Just to confirm, you do understand that the spouse needs to have 40 quarters (nominally 10 years, but it does not to be full years) of qualifying income history to get the spousal benefit, right?
That is not correct, you may be thinking about them collecting under their own account. There are many people that were stay at home parents and home makers that never worked outside the home who are able to collect spousal benefits.

https://www.ssa.gov/planners/retire/applying6.html

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David Jay
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Re: SS Spousal Benefit..Pros and Cons?

Post by David Jay » Thu Apr 30, 2020 8:10 pm

Watty wrote:
Thu Apr 30, 2020 8:06 pm
That is not correct, you may be thinking about them collecting under their own account.
Yup, my bad. My wife took her personal benefit @62 because she had 41 quarters. She will claim a (much larger) spousal benefit when I claim in a few years. I got the two benefits confused.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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