Can Spousal SS Benefit EVER be greater that 50% of Spouses PIA??

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One Ping
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Can Spousal SS Benefit EVER be greater that 50% of Spouses PIA??

Post by One Ping » Thu Jul 11, 2019 7:11 pm

I thought I knew the answer to this, but ...

Someone whose opinion I usually respect said at lunch today that since they were waiting to claim their spousal benefit until FRA + 11 months (starting in August or September 2019), they would be getting more than 50% of their spouses FRA benefit. I don't think that is right.

They have an appointment next week at the SS office to file and I expect him to be very disappointed if not set straight before then. I wanted to give them a heads up in time for them to 'get over it' before they go to the meeting.

One Ping

ETA: His spouse is filing for her retirement benefit at the same time (at age 62). They are following Mike Pipers OpenSocialSecurity recommendation, but I suspect they didn't notice the numbers that show the spousal benefit is only 50% of her PIA.
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David Jay
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Re: Can Spousal SS Benefit EVER be greater that 50% of Spouses PIA??

Post by David Jay » Thu Jul 11, 2019 7:26 pm

Simple answer: NO

Strictly speaking, the spousal benefit is the difference between the personal PIA of the lower-earning spouse and 50% of the higher earning spouse’s PIA, less any early filing reduction by the lower earning spouse. This is often simplified (for explanation) to be “50% of higher earning spouse’s PIA”. For example (for simplicity, everyone claims at FRA and spouses are the same age): High Earner: 2000 PIA, Low Earner: 800 PIA, Spousal Benefit: 200 (800+200 = 1000).

Delaying will increase the lower earner’s personal benefit, but the spousal benefit decreases in equal amount. If 12 months (8%), personal benefit will be 864 but spousal benefit will drop to 136. So there is no gain from delaying past FRA.

Of course all this gets more complex if one spouse is older than the other. What he should have done is filed for his personal benefit at FRA, then added spousal 11 months later. NOTE: The SS office may allow him to retroactively file as of his FRA and get those (11) months of back payments.
Last edited by David Jay on Thu Jul 11, 2019 7:33 pm, edited 2 times in total.
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Re: Can Spousal SS Benefit EVER be greater that 50% of Spouses PIA??

Post by Silk McCue » Thu Jul 11, 2019 7:29 pm

Tell them to plug their numbers into opensocialsecurity.com and they will know instantly.

Cheers

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David Jay
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Re: Can Spousal SS Benefit EVER be greater that 50% of Spouses PIA??

Post by David Jay » Thu Jul 11, 2019 7:38 pm

For clarification (I think you may have switched spousal genders on us in the course of your post):

1. “He” is age FRA plus some months and is the lower earner (will receive the spousal benefit)
2. “She” will be age 62 in (Sept/Oct) and is the higher earner

I used this configuration in my recommendation above. If I have this backwards and the lower earner files at age 62 (before FRA) there will be a permanent reduction in benefit.
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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Re: Can Spousal SS Benefit EVER be greater that 50% of Spouses PIA??

Post by kardan » Thu Jul 11, 2019 7:50 pm

I have a slightly different question. Spouse is the same age as I am and has the lower income.

I've looked at the various calculators and it appears we maximize SS benefits if I wait until age 70 to file and spouse files at 62. Testing a few different discount rates, it appears that for relatively low discount rates (which appears to be the recommended approach), there would not be any reason (from a present value of benefits standpoint and assuming spouses are the same age) for the spouse to ever delay taking benefits much beyond age 62.

Am I missing anything?

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Re: Can Spousal SS Benefit EVER be greater that 50% of Spouses PIA??

Post by JoeRetire » Thu Jul 11, 2019 8:01 pm

One Ping wrote:
Thu Jul 11, 2019 7:11 pm
Someone whose opinion I usually respect said at lunch today that since they were waiting to claim their spousal benefit until FRA + 11 months (starting in August or September 2019), they would be getting more than 50% of their spouses FRA benefit.
Your friend is confused.

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Re: Can Spousal SS Benefit EVER be greater that 50% of Spouses PIA??

Post by Silk McCue » Thu Jul 11, 2019 8:11 pm

kardan wrote:
Thu Jul 11, 2019 7:50 pm
I have a slightly different question. Spouse is the same age as I am and has the lower income.

I've looked at the various calculators and it appears we maximize SS benefits if I wait until age 70 to file and spouse files at 62. Testing a few different discount rates, it appears that for relatively low discount rates (which appears to be the recommended approach), there would not be any reason (from a present value of benefits standpoint and assuming spouses are the same age) for the spouse to ever delay taking benefits much beyond age 62.

Am I missing anything?
Yes. There are numerous folks that would benefit from Roth Conversions in the early years of retirement so that large and growing tax deferred accounts don’t grow to the point of throwing of excess forced RMDs at ages 70.5 and pushing you into a higher marginal bracket. It is very much a tax efficiency analysis while you are living (one or both of you) and for some a path to a superior inheritance for children and grandchildren down the road.

Lots of threads on this topic.

For many this does not apply. It does apply to us.

Cheers

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Re: Can Spousal SS Benefit EVER be greater that 50% of Spouses PIA??

Post by JoeRetire » Thu Jul 11, 2019 8:14 pm

kardan wrote:
Thu Jul 11, 2019 7:50 pm
I have a slightly different question. Spouse is the same age as I am and has the lower income.

I've looked at the various calculators and it appears we maximize SS benefits if I wait until age 70 to file and spouse files at 62. Testing a few different discount rates, it appears that for relatively low discount rates (which appears to be the recommended approach), there would not be any reason (from a present value of benefits standpoint and assuming spouses are the same age) for the spouse to ever delay taking benefits much beyond age 62.

Am I missing anything?
It depends on which calculator you used, and the specifics of your case.

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Re: Can Spousal SS Benefit EVER be greater that 50% of Spouses PIA??

Post by One Ping » Thu Jul 11, 2019 8:22 pm

David Jay wrote:
Thu Jul 11, 2019 7:38 pm
For clarification (I think you may have switched spousal genders on us in the course of your post):

1. “He” is age FRA plus some months and is the lower earner (will receive the spousal benefit)
2. “She” will be age 62 in (Sept/Oct) and is the higher earner

I used this configuration in my recommendation above. If I have this backwards and the lower earner files at age 62 (before FRA) there will be a permanent reduction in benefit.
Pretty sure I didn't. He is the situation 'gender-ized'.

Lower Earning Spouse (LES) PIA = $1,000/mo (SHE)
LES born in 6/1957
LES FRA = 66 y 6 m (12/2023)
LES files for own retirement benefit @ 62 yo (born 6/1957)
LES own benefit = $729.20/mo.

Higher Earning Spouse (HES) PIA $2,500/mo (HE)
HES born 9/1951
HES FRA = 66 y 0 m (9/2017)
HES files for spousal benefit (restricted application) in 7/2019

Question is what is HIS total SS benefit after filing for his restricted application?
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Re: Can Spousal SS Benefit EVER be greater that 50% of Spouses PIA??

Post by One Ping » Thu Jul 11, 2019 8:44 pm

David Jay wrote:
Thu Jul 11, 2019 7:26 pm
NOTE: The SS office may allow him to retroactively file as of his FRA and get those (11) months of back payments.
This would be a good idea, but i dont think you can go back to before the spouse filed (6/2019)

Also, dont know if you can do the retroactive "thing" on a restricted application.
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Re: Can Spousal SS Benefit EVER be greater that 50% of Spouses PIA??

Post by Ace1 » Thu Jul 11, 2019 8:57 pm

One Ping
HES spousal benefit will be $500 which is 50% of LES PIA of $1000.
Cannot get any more than that as spousal.
Further, when HES files for HES own benefit at 70, LES should then
be eligible to file for LES spousal benefit.That should be calculated as 50% x 2500 - 1000,
or an additional $250 added on to LES benefit of $729.
Ace

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Re: Can Spousal SS Benefit EVER be greater that 50% of Spouses PIA??

Post by David Jay » Thu Jul 11, 2019 9:10 pm

The restricted changes things, few are still eligible for that.

Ace is right on both counts:
$500 a month on the restricted application.
When HES files (presumably @ age 70), LES will get $729 personal + 250 spousal = $979.
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Re: Can Spousal SS Benefit EVER be greater that 50% of Spouses PIA??

Post by One Ping » Thu Jul 11, 2019 9:37 pm

Ace1 and David Jay,

Yes, this is what i was pretty sure was the case for the spousal restricted application.

One interesting thing i noticed when i ran this through opensocialsecurity was that when he files at 70, her total benefit comes out as $932, not $979. I think this is because she is only 64y 3m when he turns 70 and thus she takes a hit for filing for spousal before her FRA.
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Re: Can Spousal SS Benefit EVER be greater that 50% of Spouses PIA??

Post by Ace1 » Thu Jul 11, 2019 9:52 pm

One Ping,
You are correct...LES spousal does get reduced if spousal is filed for before LES FRA.
And there may even be a deemed filing event for LES triggered once HES files for HES benefit.

Ace

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Re: Can Spousal SS Benefit EVER be greater that 50% of Spouses PIA??

Post by One Ping » Thu Jul 11, 2019 10:28 pm

Ace1 wrote:
Thu Jul 11, 2019 9:52 pm
One Ping,
You are correct...LES spousal does get reduced if spousal is filed for before LES FRA.
And there may even be a deemed filing event for LES triggered once HES files for HES benefit.

Ace
Would not surprise me at all for there to be a deemed filing requirement since she is born after 1954.
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Re: Can Spousal SS Benefit EVER be greater that 50% of Spouses PIA??

Post by One Ping » Thu Jul 11, 2019 11:18 pm

Ace1 wrote:
Thu Jul 11, 2019 9:52 pm
One Ping,
You are correct...LES spousal does get reduced if spousal is filed for before LES FRA.
And there may even be a deemed filing event for LES triggered once HES files for HES benefit.

Ace
Apparently, THERE IS. Just used opensocialsecurity to try to have LES file for spousal benefit at a date later than when HES files for his own retirement benefit @ 70 and got this 'error message':
"Per new deemed filing rules, a person's spousal benefit date must be the later of their own retirement benefit date, or their spouse's retirement benefit date."
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Re: Can Spousal SS Benefit EVER be greater that 50% of Spouses PIA??

Post by ObliviousInvestor » Fri Jul 12, 2019 6:57 am

Here's a reminder summary in case it's helpful.

Deemed filing rules:

Note that these are the rules for a combination of retirement/spousal benefits. Deemed filing does not apply to survivor/retirement benefit combinations. (That is, a filing for retirement benefits will never cause a deemed filing for survivor benefits. And a filing for survivor benefits will never cause a deemed filing for retirement benefits.)

Old rules, for people born Jan 1, 1954 or earlier
If you file for either retirement benefits or spousal benefits, and at the time of that filing:
1) You are younger than full retirement age, and
2) You are eligible for retirement benefits and spousal benefits
...then you will be deemed to have filed for the other benefit as well.

New rules, for people born after Jan 1, 1954
As soon as:
1) You are eligible for retirement and spousal benefits, and
2) You are entitled to either retirement benefits or spousal benefits
...then you will be deemed to have filed for the other benefit as well.
Mike Piper, author/blogger

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Re: Can Spousal SS Benefit EVER be greater that 50% of Spouses PIA??

Post by wolf359 » Fri Jul 12, 2019 8:41 am

kardan wrote:
Thu Jul 11, 2019 7:50 pm
I have a slightly different question. Spouse is the same age as I am and has the lower income.

I've looked at the various calculators and it appears we maximize SS benefits if I wait until age 70 to file and spouse files at 62. Testing a few different discount rates, it appears that for relatively low discount rates (which appears to be the recommended approach), there would not be any reason (from a present value of benefits standpoint and assuming spouses are the same age) for the spouse to ever delay taking benefits much beyond age 62.

Am I missing anything?
This is close to our situation (spouse is 2 years younger), and I reached the same conclusion that you did.

However, this is also hypothetical, because Social Security law may change while we're waiting to become eligible. If you choose to wait, you can always change your mind and claim earlier. But once you claim, you lock in your choices with limited opportunities to change your mind.

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Re: Can Spousal SS Benefit EVER be greater that 50% of Spouses PIA??

Post by TBillT » Fri Jul 12, 2019 8:54 am

I like to point out options are age-dependent with the SS rules changing for those under 65 as of 2-Jan-2019. For those of us with one of more spouse over 65 by then we still have a "double dip" option and I like OpenSocialSecurity.com for the calcs.

Meanwhile I am hoping to hear today that our personal online restricted app was approved.

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