Social Security - Spousal Benefits - Another Question

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HornDad
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Social Security - Spousal Benefits - Another Question

Post by HornDad » Tue Sep 22, 2009 2:50 pm

Rather than hijack the recent thread that deals with a somewhat related issue, I thought I should start a new topic. I think several of the posts on the other thread are relevant (and helpful), but I don't think they specifically answer my questions.

I am 66 years and 9 months old. My wife will turn 62 next month. Based on my prior research, our social security plan (based on what we thought was the most economically advantageous for us) was as follows: I would not take social security benefits until sometime later (to be determined, but perhaps at age 68 or 69) and my wife would start taking benefits based on her own record at age 62 (she will be entitled to substantially less than one-half of my full retirement (age 66) benefit based on her own record) and then, when she reaches her full retirement age of 66, she would take her spousal benefit based on my record, which I understood would be 50% of my full retirement benefit. (I understand that it doesn't technically work exactly that way - that she actually would receive benefits based on her account and an extra (spousal) benefit based on my account, but that the total cannot exceed 50% of my full benefit.)

When we filed for my wife to begin receiving benefits a month ago, the Social Security agent we wound up talking to told us that my understanding is not correct. One other fact -- earlier this year, around my 66th birthday, I signed up for Medicare Part A. I am still covered by my employer's medical plan and have not signed up for Medicare Part B and don't intend to do so for perhaps 2 to 4 more years. When I signed up for Part A, I was told I had to sign up for Social Security benefits at the same time, but that I could defer receiving benefits and receive delayed credits. I understood this to be the same thing I was intending to do (or at least reaching the same result), so I did it.

In any event, the Social Security agent says that my wife can start taking based on her record at age 62, but that when I start taking benefits, she will be required to begin taking her spousal benefit at the same time. The difference (from what I understood and intended) is that if I start taking benefits before she reaches full retirement age, her spousal benefit will be forever reduced by the percentage discount applicable because she begins taking it before her full retirement age. If this is correct, we will have to reconsider everything.

Questions:

1. Is the advise we have received from the Social Security agent correct?

2. If so, would it have made any difference if I had not registered for Social Security and deferred my benefits (that is, if I had just delayed reistering until I wanted to start receiving benefits)?

3. If so, would it be possible to undo my registration now so as to achieve the other result. I have not had any claims under Medicare since I signed up.

One other thing I was told by Social Security (that I didn't understand, but that I now beleive is correct) that may be of interest to others: the spousal benefit for my wife maxes out at 50% of my full retirement (age66) benefit, she will not receive any increased amount even though my benefit increases as a result of my delaying receiving benefits until after age 66.

Based on my reading of the other thread, some of you are very knowledgeable about these matters. Your thoughts will be greatly appreciated.

sscritic
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Re: Social Security - Spousal Benefits - Another Question

Post by sscritic » Tue Sep 22, 2009 4:33 pm

HornDad wrote: I am 66 years and 9 months old. My wife will turn 62 next month. Based on my prior research, our social security plan (based on what we thought was the most economically advantageous for us) was as follows: I would not take social security benefits until sometime later (to be determined, but perhaps at age 68 or 69) and my wife would start taking benefits based on her own record at age 62 (she will be entitled to substantially less than one-half of my full retirement (age 66) benefit based on her own record) and then, when she reaches her full retirement age of 66, she would take her spousal benefit based on my record, which I understood would be 50% of my full retirement benefit. (I understand that it doesn't technically work exactly that way - that she actually would receive benefits based on her account and an extra (spousal) benefit based on my account, but that the total cannot exceed 50% of my full benefit.)

When we filed for my wife to begin receiving benefits a month ago, the Social Security agent we wound up talking to told us that my understanding is not correct. One other fact -- earlier this year, around my 66th birthday, I signed up for Medicare Part A. I am still covered by my employer's medical plan and have not signed up for Medicare Part B and don't intend to do so for perhaps 2 to 4 more years. When I signed up for Part A, I was told I had to sign up for Social Security benefits at the same time, but that I could defer receiving benefits and receive delayed credits. I understood this to be the same thing I was intending to do (or at least reaching the same result), so I did it.

In any event, the Social Security agent says that my wife can start taking based on her record at age 62, but that when I start taking benefits, she will be required to begin taking her spousal benefit at the same time. The difference (from what I understood and intended) is that if I start taking benefits before she reaches full retirement age, her spousal benefit will be forever reduced by the percentage discount applicable because she begins taking it before her full retirement age. If this is correct, we will have to reconsider everything.

Questions:

1. Is the advise we have received from the Social Security agent correct?

2. If so, would it have made any difference if I had not registered for Social Security and deferred my benefits (that is, if I had just delayed reistering until I wanted to start receiving benefits)?

3. If so, would it be possible to undo my registration now so as to achieve the other result. I have not had any claims under Medicare since I signed up.

One other thing I was told by Social Security (that I didn't understand, but that I now beleive is correct) that may be of interest to others: the spousal benefit for my wife maxes out at 50% of my full retirement (age66) benefit, she will not receive any increased amount even though my benefit increases as a result of my delaying receiving benefits until after age 66.

Based on my reading of the other thread, some of you are very knowledgeable about these matters. Your thoughts will be greatly appreciated.
1) I believe you were given incorrect advice.

2) Yes it makes a difference. By filing and suspending, you are "entitled." Because you are "entitled," your wife is "eligible" for wife benefits. If you had not filed, your wife would not be eligible for wife benefits. Since you don't want her to have to take wife benefits, you don't want to be entitled.

3) Yes, you may withdraw your application for social security. While some people use this as part of a financial plan, withdrawal is intended for just this situation, when a mistake was made or bad advice received.

Let me go through some of the problems. First you, in italics above.

If she takes her benefits at 62, her benefit is reduced by 25%. Suppose her PIA is $800. Her benefit would be $600. Suppose your PIA is $2000. When she reaches 66 and applies for a wife benefit, her benefit will be $600 plus $200 (the difference between 1/2 your PIA, $1000, and her PIA, $800. Her total benefit will be $800, not $1000. The $200 lost for starting her benefit early is lost forever (well, until you die). By starting her own benefit before FRA, she will not get 50% of your benefit as a wife (your mistake).

Now for the agents bad advice, in bold above.

You do not have to take social security to sign up for medicare. People sign up for medicare at 65 and wait until FRA at 66 or until 70 to start social security.
Although the retirement age is now 67, 65 remains as the starting date for Medicare eligibility. You will be eligible to apply for Medicare if you have paid into Social Security for at least 10 years or you are eligible to receive Social Security benefits on your spouse's (or your former spouse's) earnings.
http://questions.medicare.gov/cgi-bin/m ... _faqid=121

Here is the actual medicare part A section of the law
The insurance program for which entitlement is established by sections 226 and 226A provides basic protection against the costs of hospital, related post-hospital, home health services, and hospice care in accordance with this part for (1) individuals who are age 65 or over and are eligible for retirement benefits under title II of this Act
http://www.ssa.gov/OP_Home/ssact/title18/1811.htm

Note that you are not required to be receiving benefits, just be eligible (Title II is old age, survivors, and disability, aka social security).

The second agent also gave bad advice. Given that you have filed for your own benefit and suspended and she is under FRA, she must apply for both her own and her wife benefit at the same time. Her benefit will then be her own ($600) plus a reduced portion of the $200 difference. At age 62, the reduction on the wife's benefit is 30%, so she would get $600 + $140 = $740. It doesn't matter that you are not taking benefits, you have filed and are "entitled." Most people use this the other way around. They file and suspend because they want their wives to get wife benefits. Her wife benefits will have to begin when she files for her own, not when you start taking benefits. Here is the actual law about delayed credits:
(w)(2)For purposes of this subsection, the number of increment months for any individual shall be a number equal to the total number of the months—
(A) which have elapsed after the month before the month in which such individual attained retirement age (as defined in section 216(l)) or (if later) December 1970 and prior to the month in which such individual attained age 70, and
(B) with respect to which—
(i) such individual was a fully insured individual (as defined in section 214(a)),
(ii) such individual either was not entitled to an old-age insurance benefit or, if so entitled, did not receive benefits pursuant to a request by such individual that benefits not be paid,
http://www.ssa.gov/OP_Home/ssact/title02/0202.htm

Note that if you make a request not to be paid, you remain entitled (retirement age means FRA, entitled means eligible and have applied). Since you are entitled to your own benefit (if not receiving it), she will be eligible for wife benefits at 62.
(b)(1) The wife (as defined in section 216(b)) and every divorced wife (as defined in section 216(d)) of an individual entitled to old-age or disability insurance benefits, if such wife or such divorced wife—
(A) has filed application for wife's insurance benefits,
(B) has attained age 62 or (in the case of a wife) has in her care (individually or jointly with such individual) at the time of filing such application a child entitled to a child's insurance benefit on the basis of the wages and self-employment income of such individual,
(C) in the case of a divorced wife, is not married, and
(D) is not entitled to old-age or disability insurance benefits, or is entitled to old-age or disability insurance benefits based on a primary insurance amount which is less than one-half of the primary insurance amount of such individual,
shall (subject to subsection (s)) be entitled to a wife's insurance benefit
http://www.ssa.gov/OP_Home/ssact/title02/0202.htm
Because of presumed filing under FRA, her application for her own benefit will also be an application for wife benefits.
(r)(1) If the first month for which an individual is entitled to an old-age insurance benefit is a month before the month in which such individual attains retirement age (as defined in section 216(l)), and if such individual is eligible for a wife's or husband's insurance benefit for such first month, such individual shall be deemed to have filed an application in such month for wife's or husband's insurance benefits.
same web page for the actual law

Again, nothing requires that you be collecting benefits. Because you filed and suspended, you are entitled. Because you are entitled, she is eligible for wife benefits. When she applies for her own retirement benefit, she will be deemed to apply for wife benefits. Whether you are collecting is irrelevant.

I would print out the relevant sections of the law and go back to a social security office and withdraw your application for social security (not medicare). Then she can apply at 62 for her own benefits (reduced). You can then wait to apply for your own. Although this is a tricky point, I believe that you can then start your own and she won't have to apply for wife benefits even if she is still under FRA. Note that the presumed filing law refers to the first month:"if such individual is eligible for a wife's or husband's insurance benefit for such first month, such individual shall be deemed to have filed an application in such month for wife's or husband's insurance benefits." Since when she applies at 62 she is not eligible, and when she is eligible it is not the same month, she won't have to file for wife benefits when you start.

Levett
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Post by Levett » Tue Sep 22, 2009 5:10 pm

sscritic--

Your response is what I call genuine help. You are a heckuva an asset to this site. Bob U.
There are some things that count that can't be counted, and some things that can be counted that don't count.

HornDad
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Post by HornDad » Tue Sep 22, 2009 5:19 pm

sscritic --

Thank you very, very much for your most impressive reply to my questions. I am new to this site, but you have already made it more than worthwhile. Hopefully, I can be helpful to other posters in the future, and your post has certainly inspired me to try to do so. Great job, and thanks again.

Ron
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Post by Ron » Tue Sep 22, 2009 6:13 pm

bob u. wrote:sscritic--

Your response is what I call genuine help. You are a heckuva an asset to this site. Bob U.
Amen!

I was about to answer a part of it, but I thought it would be better to wait till sscritic got here to answer everything :roll:

Well, I made one good decision, today :lol: ...

- Ron

sscritic
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Post by sscritic » Tue Sep 22, 2009 8:03 pm

First, I want to thank both Bob U and Ron for their praise. Both give thoughtful and practical advice here (and Bob on the M* TIAA forum as well).

But, I may have been a little hasty. Not that I made a mistake, as far as I know, but by ignoring the issue of "does it really matter?".

You will have to look at your own numbers, but let's look at two or three examples.

1) Your PIA = $2000, her PIA = $800.

She starts her own at 62; she gets $600 (75% of $800).
She starts wife at 62; she gets additional $140 (70% of the $200 difference between 1/2 of your PIA and her PIA); total $740.
She starts wife at 66; she gets additional $200 (100% of $200 difference); total $800.
By waiting to start as a wife, she gives up $140 a month for four years to get an extra $60 a month from age 66 until one of you dies.

[While people think about how important the larger benefit is because it lasts as long as either of you are alive - either you as yourself or she as your widow, the wife benefit only lasts as long as you are both alive - if she dies first it ends, and if you die first she becomes a widow and she gets your benefit instead.]

If you both live past the time she turns 75.3, waiting gives you more using a simple break-even. ($140 a month for 48 months = 6720; divide by extra $60 a month after 66 = 112 month payback.)

If she waits until 66 to start both her own and wife, she gets $1000 a month until the first of you to die. As compared to starting both at 62, she gives up four years of $740 to get an extra $260 a month until one of you dies. The break-even point is her age = 77.4.

2) Your PIA is $2000 and hers is $400. The numbers are now

$300 for her at 62.
Additional $420 (70% of $600 difference) as wife at 62 (total $720).
Additional $600 (100% of $600 difference) as wife at 66 (total $900).

Now the break-even for waiting is again her age 75.4! (48 months of extra $420 = 20160; divide by extra $180 for waiting = 112 month payback.)

Waiting until age 66 gives $720 vs $1000 if she waits (as opposed to $740 vs $1000 in the first example). In this case, the break-even is her age = 76.3. There is a greater advantage in waiting for both if she has a very small PIA.

3) Your PIA = $2000 and hers is $1200.

She starts at 62; her benefit is $900. She will never get a wife benefit (she is collecting on her own record with a PIA larger than 1/2 of yours).
If she waits until 66, she gets $1200. Break-even is her age = 78.
(From your description, this is not your case.)

Look at your numbers and think about your health. When she is 75.4, you will be 80. Remember for the larger benefit, the key is the longer of your two lives; for the smaller, the key is the shorter of your two lives. You waiting until 70 (or 69 or as long as you can) is a good plan because that will last as long as either of you live. Whether you should withdraw your ss application so she can take her own benefits at 62 and delay wife benefits until 66 is not as important a decision, and depends on the shorter lifespan. If you withdraw so she can wait and you die before 80, it is a losing proposition. If you withdraw and live just a short time past 80, is it worth the hassle?

If you read stories of people like Bob U who have withdrawn, you see that withdrawal is a great pain. In your case, since you took no payments and therefore have nothing to pay back, it will be much simpler (I imagine). I will let Bob comment on that.

Levett
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Post by Levett » Wed Sep 23, 2009 5:28 am

sscritic writes:

"If you read stories of people like Bob U who have withdrawn, you see that withdrawal is a great pain. In your case, since you took no payments and therefore have nothing to pay back, it will be much simpler (I imagine). I will let Bob comment on that."

Bob couldn't agree more with sscritic! :) Bob U.
There are some things that count that can't be counted, and some things that can be counted that don't count.

trooper75
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Post by trooper75 » Wed Sep 23, 2009 8:43 am

I am new on this site and really excited about all the interesting data. You folks are great and very generous with your valued knowledge. My question/concern about SS is: we have a disabled child. When we started drawing SS at age 65 we had the 50 percent for a dependent sent to him and my wife gets the remaining up to the family limit. Now, when I die and someone is entitled to the 100 percent. Will it be my son or my wife. If my wife can choose she will give it to our son. And if so can he receive it all his life along with medicare? It will be a blessing to my wife and me if it can be.
Thanks for all the excellent advice on this and many other topics. I hope to find a way to contribute. Paul

Ron
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Post by Ron » Wed Sep 23, 2009 8:50 am

trooper75 wrote:My question/concern about SS is: we have a disabled child.
It just so happens that I/wife also have a disabled "adult" child.

I won't speak about a condition such as this on a public forum, but I'm more than willing to discuss the situation with you via PM.

BTW, sscritic is probably a good resource for you concerning early family benefits (regardless of condition), based upon his personal experience. However, I will let him discuss his situation.

- Ron

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Hondo
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Re: Social Security - Spousal Benefits - Another Question

Post by Hondo » Wed Sep 23, 2009 8:59 am

Thanks so much for this important information. I had not seen this before and was assuming the low income spouse had nothing to loose by starting Social Security at age 62 and switching to a spousal benefit at FRA.
sscritic wrote: If she takes her benefits at 62, her benefit is reduced by 25%. Suppose her PIA is $800. Her benefit would be $600. Suppose your PIA is $2000. When she reaches 66 and applies for a wife benefit, her benefit will be $600 plus $200 (the difference between 1/2 your PIA, $1000, and her PIA, $800. Her total benefit will be $800, not $1000. The $200 lost for starting her benefit early is lost forever (well, until you die). By starting her own benefit before FRA, she will not get 50% of your benefit as a wife (your mistake).

sscritic
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Post by sscritic » Wed Sep 23, 2009 9:34 am

trooper75 wrote: My question/concern about SS is: we have a disabled child. When we started drawing SS at age 65 we had the 50 percent for a dependent sent to him and my wife gets the remaining up to the family limit. Now, when I die and someone is entitled to the 100 percent. Will it be my son or my wife. If my wife can choose she will give it to our son. And if so can he receive it all his life along with medicare? It will be a blessing to my wife and me if it can be.
I have no experience with disability, but from reading the Code of Federal Regulations, it appears that your son who is dependent on you will continue to be your child for benefit purposes as long as he is disabled and not married (exception: he marries another person receiving benefits). Your wife will be your widow and get widow benefits (100% of yours). However, the child benefit of a deceased person is 75% of PIA, not 50%, so he should get an increase.
§404.350 Who is entitled to child's benefits?
(a) General. You are entitled to child's benefits on the earnings record of an insured person who is entitled to old-age or disability benefits or who has died if—
(1) You are the insured person's child, based upon a relationship described in §§404.355 through 404.359;
(2) You are dependent on the insured, as defined in §§404.360 through 404.365;
(3) You apply;
(4) You are unmarried; and
(5) You are under age 18; you are 18 years old or older and have a disability that began before you became 22 years old; or you are 18 years or older and qualify for benefits as a full-time student as described in §404.367.
http://www.socialsecurity.gov/OP_Home/c ... 4-0350.htm
§404.352 When does my entitlement to child's benefits begin and end?
(a) We will find your entitlement to child's benefits begins at the following times: ...
(b) We will find your entitlement to child's benefits ends at the earliest of the following times:
(1) With the month before the month in which you become 18 years old, if you are not disabled or a full-time student.
(2) With the second month following the month in which your disability ends, if you become 18 years old and you are disabled. If your disability ends on or after December 1, 1980, your entitlement to child's benefits continues, subject to the provisions of paragraphs (c) and (d) of this section, until the month before your termination month (§404.325).
(3) With the last month you are a full-time student or, if earlier, with the month before the month you become age 19, if you become 18 years old and you qualify as a full-time student who is not disabled. If you become age 19 in a month in which you have not completed the requirements for, or received, a diploma or equivalent certificate from an elementary or secondary school and you are required to enroll for each quarter or semester, we will find your entitlement ended with the month in which the quarter or semester in which you are enrolled ends. If the school you are attending does not have a quarter or semester system which requires reenrollment, we will find your entitlement to benefits ended with the month you complete the course or, if earlier, the first day of the third month following the month in which you become 19 years old.
(4) With the month before the month you marry. We will not find your benefits ended, however, if you are age 18 or older, disabled, and you marry a person entitled to child's benefits based on disability or person entitled to old-age, divorced wife's, divorced husband's, widow's, widower's, mother's, father's, parent's, or disability benefits.
...
http://www.socialsecurity.gov/OP_Home/c ... 4-0352.htm
§404.353 Child's benefit amounts.
(a) General. Your child's monthly benefit is equal to one-half of the insured person's primary insurance amount if he or she is alive and three-fourths of the primary insurance amount if he or she has died. The amount of your monthly benefit may change as explained in §404.304.
http://www.socialsecurity.gov/OP_Home/c ... 4-0353.htm

There are some sections that I left out that deal with the case that the disability resulted from drug use.

PaulW
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Post by PaulW » Wed Sep 23, 2009 11:02 am

What is PAI? I see this in discussions on Social Security but have been unable to find what the initials represent.

Thanks
Paul

Parthenon
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Post by Parthenon » Wed Sep 23, 2009 11:48 am

PaulW wrote:What is PAI? I see this in discussions on Social Security but have been unable to find what the initials represent.

Thanks
Paul
You may have better luck with PIA which is Primary Insurance Amount.

Ed
"What am I gonna do if I run out of money?"

HornDad
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Post by HornDad » Wed Sep 23, 2009 12:45 pm

sscritic--

Thanks very much for your thoughtful and helpful additional post.

I have read carefully your posts, and considered your analysis of the statutes and their application to our facts. I have also spent some time looking at the statutes myself, but frankly got bogged down.

I have one question concerning a stataement in your first post. You said: "By starting her own benefit before FRA, she will not get 50% of your benefit as a wife (your mistake)". I assume you are saying that this is so whether or not I withdraw my ss application; that regardless of whether I had ever applied, as long as she takes her own benefit before FRA, her total benefit after she starts taking the spouse benefit will continue (until I die) to be affected by the reduction in her own benefit.

If the above is true, then I agre with your analysis in your second post; it becomes much less important to implement my original plan, and it may even be disadvantageous to do so. Our actual numbers are closest to your example number 2, and the breakeven number still comes out 112 months. However, if my wife can begin to receive 1/2 of my PIA at 66 even though she has received benefits for the prior 4 years based on her own account, then I believe my original plan is pretty clearly worthwhile. I certainly am not doubting what you said, I just want to make sure I understood it correctly.

Thanks again for all your help.

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dcnut
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another spousal question

Post by dcnut » Wed Sep 23, 2009 12:45 pm

This has been a very useful discussion, and I will certainly save the information. Thanks, sscritic!

I am 64 and my wife is 10 months younger than I. My PIA is quite large, and my wife's PIA is just a few hundred dollars as she has only worked part-time since 1970. I may wait until age 70 to begin taking SS. From what I am reading, it appears that my wife should begin taking SS when she reaches FRA (based on her own work record). Is it correct that her eventual spousal benefit will not be reduced by taking SS at FRA?

Glenn

sscritic
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Post by sscritic » Wed Sep 23, 2009 6:49 pm

HornDad wrote: I have one question concerning a stataement in your first post. You said: "By starting her own benefit before FRA, she will not get 50% of your benefit as a wife (your mistake)". I assume you are saying that this is so whether or not I withdraw my ss application; that regardless of whether I had ever applied, as long as she takes her own benefit before FRA, her total benefit after she starts taking the spouse benefit will continue (until I die) to be affected by the reduction in her own benefit.
Yes, taking her own benefit before FRA does affect her wife's benefit, but not her widow's benefit.

Here is an example from the POMS (Program Operations Manual System - what a ss agent should use if the computer isn't working).

A is aged worker (retirement)
B is aged wife (wife, but not young wife with child in care)
http://www.socialsecuritybenefitshandbo ... html#App_8

If she takes her own benefit and later takes a wife's benefit, she is A then B
Examples of Calculations

The following are examples of each of the four methods of calculating the reduced benefits:
Method A – [snip]
Method B – A spouse is entitled to a benefit of $1000 before reduction. She is also entitled to a RIB of $400 before reduction. Each benefit is reduced separately. The spouse benefit is reduced to $900 and the RIB is reduced to $380. The reduced RIB is subtracted from the reduced spouse benefit. The result is the excess spouse benefit payable - $520. The total paid is $900, the sum of the reduced excess spouse benefit and the reduced RIB.
Method C - A spouse is entitled to a benefit of $1000 before reduction. She is also entitled to a RIB of $400 before reduction. The full RIB is subtracted from the full spouse benefit. The excess ($600) is then reduced to $540. The RIB is reduced to $380. The total payable is $920, the sum of the reduced spouse excess and the reduced RIB.
Method D – snip

Code: Select all

If the Type Benefits is...    Then the Calculation Category is...
       A then B                    c
       A with B                    c
       B then A                    b
https://secure.ssa.gov/apps10/poms.nsf/lnx/0300615020
RIB is retirement insurance benefit (worker's own retirement benefit)

Now to apply this. If your PIA is $2000 and hers is $400, then you are exactly the example for method c, the method for A with B or A then B. Her full retirement benefit (unreduced), $400, is subtracted from the full wife's benefit (unreduced) of $1000 to get the excess of $600. If she takes her own benefit at 62, her $400 is reduced to $300 (75%). If she later takes the wife's benefit at 66, there is no reduction applied to the excess, so the wife's benefit is $600. The total paid is $900.

[I had actually never noticed the different method used if she takes the spouse benefit first. If she starts as a wife at 63, say, she will get 75% of $1000 or $750. If she then starts her own benefit at 66, method b says she gets $750 - $400 = $350 as a wife's benefit and $400 as her own retirement benefit. The total paid is $750, the same as the wife's benefit she was already getting. There is no increase when she starts her own benefit. If method c were used, she would get $400 + 75% of $600 (the excess) or $850. But method c is not used in this case; it is only used if she starts her own retirement before or at the same time as her wife's benefit. However, in the case that her PIA was $900, she would get the $900 and no wife's benefit would be paid, as I understand the manual.]

sscritic
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Re: another spousal question

Post by sscritic » Wed Sep 23, 2009 7:00 pm

dcnut wrote: I am 64 and my wife is 10 months younger than I. My PIA is quite large, and my wife's PIA is just a few hundred dollars as she has only worked part-time since 1970. I may wait until age 70 to begin taking SS. From what I am reading, it appears that my wife should begin taking SS when she reaches FRA (based on her own work record). Is it correct that her eventual spousal benefit will not be reduced by taking SS at FRA?
The answer is yes, but she should start her wife's benefits at 66 and not wait. Let's use the same example: your PIA = $2000, her PIA = $400.

At 66 you file and suspend your benefits. You are now "entitled" but not collecting. 10 months later, she turns 66 and files for wife's benefits. She will get $1000 a month even while you are waiting to reach 70. This is one reason to "file and suspend." This is much better than if you did not file and suspend and she started her own benefit at 66. This would produce only $400 a month until you turn 70 and file. At that point, she could file as a wife, but you will have given up $600 a month for 38 months from when she turned 66 to when you turn 70. Her wife's benefit will never be more than $1000, half of your PIA; the wife's benefit does not increase when you earn delayed credits by waiting past 66.

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Post by JW-Retired » Wed Sep 23, 2009 8:12 pm

sscritic,
Thanks, you are giving golden insights into the SS rules to those who can see them here. We are all very lucky that you are so willing and able to patiently answer all these difficult questions in detail. My DW just applied for SS (at 66) last week. I'll be taking benefits as her spouse in a few months when I am FRA. Then we plan to wait until I'm 70, if all goes well.

We would have been clueless how to proceed with this if we didn't have the benefit of all your posts.
thanks again,
JW

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Post by sscritic » Wed Sep 23, 2009 9:44 pm

JW Nearly Retired wrote:sscritic,
Thanks, you are giving golden insights into the SS rules to those who can see them here. We are all very lucky that you are so willing and able to patiently answer all these difficult questions in detail. My DW just applied for SS (at 66) last week. I'll be taking benefits as her spouse in a few months when I am FRA. Then we plan to wait until I'm 70, if all goes well.
Just curious, did you work out the benefits the other way around?

Assume she is two months older than you.

1) She files at 66 for her own. You file at 66 as a husband, then file at 70 for your own.

2) She waits the two months. You file and suspend at 66; she files as a wife at 66 and 2 months. She files as herself at her age 70. Two months later, you "unsuspend" at 70.

Example: Your PIA = $2000; her PIA = $1400.

1) Two months at $1400; 48 months at $2100 (1400 + 700); at your age 70, 1400 + 2640 (your age 70 benefit with delayed credits) = $4040 as long as you both live; $2640 to the survivor after the first dies.

2) Two months at $0; 46 months at $1000 (she as your wife); 2 months at $1848 (she as herself at 70 with delayed credits); at your age 70, 1848 + 2640 = $4488 as long as you both live; $2640 to the survivor after the first dies.

If you both live 120 months after you turn 70, method 1 collects $588,400 and method 2 collects $588,256. After 121 months of joint living, method 2 gives you more total income. Here are the 120 month numbers; the difference is less than $448 (please double check my calculations) - one more month of joint living puts method 2 ahead.

Method 1 = 2*1400 + 46*2100 + 2*2100 + 120*4040
Method 2 = 2*0 + 46*1000 + 2*1848 + 120*4488.

Method 2 gives up a lot of income in the first 4 years and 2 months, so you have to have other sources of income to cover expenses. Also, since she has already filed, method 2 requires a withdrawal of her application. It's probably not worth the hassle for you, but I did this as an exercise for myself (and others) to see what the difference is (Since you are the one waiting until 70, I assumed that you had the larger PIA.)

Method 2 is less attractive if she is more than 2 months older (more zeros up front). The same is true if her PIA is closer to yours. If her PIA is smaller, method 2 becomes more attractive. Sticking with $2000 for your PIA, I got break even points (actually, when method 2 passes method 1) at 144 months of joint living past your age 70 with her PIA at $1800, 121 months with her PIA at $1400, and 80 months with her PIA at $1000.

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Post by JW-Retired » Thu Sep 24, 2009 7:24 am

sscritic wrote:Just curious, did you work out the benefits the other way around?

Assume she is two months older than you.

1) She files at 66 for her own. You file at 66 as a husband, then file at 70 for your own.

2) She waits the two months. You file and suspend at 66; she files as a wife at 66 and 2 months. She files as herself at her age 70. Two months later, you "unsuspend" at 70.

Example: Your PIA = $2000; her PIA = $1400.

1) Two months at $1400; 48 months at $2100 (1400 + 700); at your age 70, 1400 + 2640 (your age 70 benefit with delayed credits) = $4040 as long as you both live; $2640 to the survivor after the first dies.

2) Two months at $0; 46 months at $1000 (she as your wife); 2 months at $1848 (she as herself at 70 with delayed credits); at your age 70, 1848 + 2640 = $4488 as long as you both live; $2640 to the survivor after the first dies.
Hmmmm. I didn't in detail because her FRA PIA is 20% less than 1/2 mine and we just assumed we wanted to end up post 70 with her getting spousal. Didn't consider a file and suspend option but we should have. She is 3 months older. In pretty close round numbers for us.....

Example: My PIA = $2400; her PIA = $1000.
1) 3 months at $1000; 48 months at $1500 (1000 + 500(me as spouse)); at my age 70, 1200 + 3168 (her spousal + my age 70 benefit with delayed credits) = $4368 as long as we both live; $3168 to the survivor after the first dies.
Adds to $75000 by my age 70. $4368/month thereafter.

2) 3 months at zero.; 45 months at $1200 as spouse; 3 months at $1320 (she as herself with delayed credits); at my age 70, 1320+3168 = $4488 thereafter. Same $3168 to survivor. Adds to $57960 by my age 70. $4488/month thereafter.

So method 1 is (75000-57960)= $17040 ahead at age 70. Method 2 has a $1440/year advantage after that. 17040/1440 = 11.8 years to break even. Much longer if you consider the time value of the $17040 we would give up in the next 4 years. So we wouldn't have done it any differently than method 1 if we had done this analysis.

But as always, you are right about shoulda done the analysis. Looks like if her PIA was more like 50% of mine method 2 would be well worth doing.
thanks,
JW

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Post by HornDad » Thu Sep 24, 2009 5:18 pm

After further consideration, I have decided to withdraw my social security registration, have my wife take benefits based only on her record beginning at 62 and until she reaches FRA and then have her elect to take her spousal benefit based on my record. I will reapply and start taking my benefits at a later date, probably when I reach 70. I have made an appointment to go in to our local SS office and sign all required papers to accomplish this, and (based on my discussion with an agent today), it doesn't sound like there will be very
much hassle.

Based on sscritic's analysis, with which I concur, this plan will be economically advantageous if my wife and I both live for more than 9.3 years after she turns 66. Therefore, our breakeven ages will be 75.3 for her and 80 for me. Who knows if that will happen or not, but we are both currently in good health and have no reason to believe that our life expectancies are less than average.

I am very happy to have this resolved. I guess I'll know in 13+ years whether I made the right decision or, alternatively, I won't be around to worry about it. In any event, I am pleased that, thanks in significant part to sscritic's help, I am able to do what I want to do based on what I have concluded is in our best interest. I hope this discussion has been helpful to others also. Thanks again to everyone who participated, especially to sscritic.

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Post by ruralavalon » Thu Sep 24, 2009 6:35 pm

bob u. wrote:sscritic writes:

"If you read stories of people like Bob U who have withdrawn, you see that withdrawal is a great pain. In your case, since you took no payments and therefore have nothing to pay back, it will be much simpler (I imagine). I will let Bob comment on that."

Bob couldn't agree more with sscritic! :) Bob U.
We learned just today that my wife's taking her benefits early on her own earnings record costs $116/month when I later retire. We are both 64.

Is this a difficult process? Is there a thread, wiki article or some other resource about withdrawal of application and repaying benefits? I can't find this, and would appreciate being directed to a resource.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Post by sscritic » Thu Sep 24, 2009 7:44 pm

ruralavalon wrote:
bob u. wrote:sscritic writes:

"If you read stories of people like Bob U who have withdrawn, you see that withdrawal is a great pain. In your case, since you took no payments and therefore have nothing to pay back, it will be much simpler (I imagine). I will let Bob comment on that."

Bob couldn't agree more with sscritic! :) Bob U.
We learned just today that my wife's taking her benefits early on her own earnings record costs $116/month when I later retire. We are both 64.

Is this a difficult process? Is there a thread, wiki article or some other resource about withdrawal of application and repaying benefits? I can't find this, and would appreciate being directed to a resource.
Search for "form 521" in quotes.

Are you sure you want to do this? Have you computed the total she will get with her current benefit before she reaches 66 and how long it will take to get that back at $116 a month?

Is the reduction actually $116? It should be exactly the amount of her reduction for starting early. Example: she started at age 62 with a reduction of 25%. If her PIA was $464, she would get $348 (75%) or $116 less on her own record by starting early. If your PIA is $2000, when she gets to 66, her wife's benefit would be $1000 (assuming you have filed, with or without suspension by that date), but since she started her own benefit early, she will get $348 + 100% of $536 (the difference between 1/2 of your PIA and her PIA, i.e., 1000 - 464) for a total of $884, which is the same $116 less than the $1000 she would get at 66.

48 months of $348 is 16,704. At $116 a month, it will take 144 months to break even (12 years, when she is 78). This is the same break even that she would get for herself comparing $464 at 66 vs $348 at 62.

If she started at 63 (20% reduction), the numbers are $464 vs $580 ($116 reduction). 36 months of $464 is $16,704 (same total benefit), so the breakeven period is still 12 years.

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Post by trooper75 » Thu Sep 24, 2009 7:49 pm

I too, want to thank sscritic for his valued info. This is information that is available to we novice types, but not easy to find. Calling a government office is generally a waste of time and research is difficult. So, thanks sscritic very much. I now have a record of what help to expect toward a very difficult estate problem. Paul

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Post by ruralavalon » Fri Sep 25, 2009 9:28 am

sscritic wrote: Search for "form 521" in quotes.

Are you sure you want to do this?
No I am not sure, will look carefully at this before doing anything. Thank you very much for the help.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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