Social Security Benefits Strategy

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willyd123
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Social Security Benefits Strategy

Post by willyd123 » Mon Apr 22, 2019 8:55 am

Hello BHs -

This is a worn out topic I know but just wanted to get your thoughts on SS benefits and when to commence.

According to the Open Social Security Model, I should:

- Have my spouse file her retirement benefit to begin 2/2027 at age 62 and 1 month
- File for my retirement benefit to begin 1/2032 at age 70 and 0 months
- Have my spouse should file for her spousal benefit to begin 1/2032 at age 67 and 0 months

According to MaxiFi, I should:

- File for my retirement benefit to begin 1/2032 at age 70 and 0 months
- Have my spouse file for her retirement benefit to begin 1/2032 at age 67 and 0 months
- Have my spouse file for her Spousal benefit to begin 1/2032 at age 67 and 0 months

According to Nationwide, I should do the same thing MaxiFi recommends.

Do you think I should go with the most frequent recommendation?

Silk McCue
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Re: Social Security Benefits Strategy

Post by Silk McCue » Mon Apr 22, 2019 9:03 am

I think you are 57 and your wife is 54. There is no decision to be made now.

When you make the decision you will need to do so in conjunction with your full financial picture in mind.

Cheers

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willyd123
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Re: Social Security Benefits Strategy

Post by willyd123 » Mon Apr 22, 2019 9:11 am

Silk -

That's actually what I am doing, trying to complete my financial plan as I am planning to retire soon. One of the inputs is the cash flow from Social Security which is why I am trying to figure this out.

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Re: Social Security Benefits Strategy

Post by Silk McCue » Mon Apr 22, 2019 9:35 am

willyd123 wrote:
Mon Apr 22, 2019 9:11 am
Silk -

That's actually what I am doing, trying to complete my financial plan as I am planning to retire soon. One of the inputs is the cash flow from Social Security which is why I am trying to figure this out.
I am 58 and my wife is 60 and I have a spreadsheet that allows me to analyze various scenarios including SS claiming dates for both of us along with Roth Conversions, funding a DAF within 2 years to cover charitable for following 8 years, QCD's once we reach 70.5, term life insurance, inflation rate, rate of investment returns for each account between now and age 70 and then 70+, tax estimations including Social Security taxation, promotion dates (death) for either of us etc.

So I get that you want to model this. However, you should not be looking to choose which approach to take in the future but look to see how each option plays out in your overall plan, how the various options impact other sources of retirement income and review it as time passes. You may see a clear path and the may hold or it may change over time based upon factors such a your real life market returns.

Just because a tool tells you something is optimal it may not be based upon a number of other considerations. I have certainly realized that.

Good luck.

Cheers

Bacchus01
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Re: Social Security Benefits Strategy

Post by Bacchus01 » Mon Apr 22, 2019 9:50 am

willyd123 wrote:
Mon Apr 22, 2019 8:55 am
Hello BHs -

This is a worn out topic I know but just wanted to get your thoughts on SS benefits and when to commence.

According to the Open Social Security Model, I should:

- Have my spouse file her retirement benefit to begin 2/2027 at age 62 and 1 month
- File for my retirement benefit to begin 1/2032 at age 70 and 0 months
- Have my spouse should file for her spousal benefit to begin 1/2032 at age 67 and 0 months

According to MaxiFi, I should:

- File for my retirement benefit to begin 1/2032 at age 70 and 0 months
- Have my spouse file for her retirement benefit to begin 1/2032 at age 67 and 0 months
- Have my spouse file for her Spousal benefit to begin 1/2032 at age 67 and 0 months

According to Nationwide, I should do the same thing MaxiFi recommends.

Do you think I should go with the most frequent recommendation?
If you run both scenarios through Open, how do they compare?

Silk is right to some degree. Understanding the tax implications, particularly at RMD, May provide an incentive to take earlier as, even at a reduced rate, you might avoid taxation loss on the SS.

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Svensk Anga
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Re: Social Security Benefits Strategy

Post by Svensk Anga » Mon Apr 22, 2019 10:00 am

You can run the Open SS tool with a different claiming date for your spouse. It will spit out a present value for your lifetime benefits based on your life expectancies. Compare this to your optimal case present value. The difference is likely to be trivial compared to your benefits and total retirement income. IOW, when the lower earning spouse claims is usually unimportant.

For us, delayed claiming for the lower earner makes more room in our logical bracket space for Roth conversions, while drawing down taxable. Individual circumstances may override what some tool spits out as optimal.

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Re: Social Security Benefits Strategy

Post by Jack FFR1846 » Mon Apr 22, 2019 10:02 am

Do any of these calculations take into account the expected drop of 25% in benefits expected in 2034?
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willyd123
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Re: Social Security Benefits Strategy

Post by willyd123 » Mon Apr 22, 2019 10:17 am

Bacchus, Svensk and Jack all make great points. Thanks.

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Re: Social Security Benefits Strategy

Post by Silk McCue » Mon Apr 22, 2019 10:39 am

Bacchus01 wrote:
Mon Apr 22, 2019 9:50 am
Silk is right to some degree. Understanding the tax implications, particularly at RMD, May provide an incentive to take earlier as, even at a reduced rate, you might avoid taxation loss on the SS.
To be clear, I absolutely was not talking about taking SS earlier to avoid greater taxation of SS benefits. That would be the dog wagging the tail. My focus was the total financial picture, not just SS in a vacuum.

Cheers

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runner26
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Re: Social Security Benefits Strategy

Post by runner26 » Mon Apr 22, 2019 10:42 am

Jack FFR1846 wrote:
Mon Apr 22, 2019 10:02 am
Do any of these calculations take into account the expected drop of 25% in benefits expected in 2034?
CNBC just reported that the Gov has announced a change in it's estimate from 2034 to 2035 when the trust fund will be depleted.

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willyd123
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Re: Social Security Benefits Strategy

Post by willyd123 » Mon Apr 22, 2019 10:50 am

Have any of you seen any data from any organization of any repute that might suggest an age beyond which you would likely not be impacted by future reductions to benefits that may be legislated?

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ObliviousInvestor
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Re: Social Security Benefits Strategy

Post by ObliviousInvestor » Mon Apr 22, 2019 11:15 am

Open Social Security often recommends having the lower-earning spouse file earlier than what is recommended by other calculators.

The primary reason for this difference is that Open Social Security does year-by-year "probability of being alive" calculations for each person based on the user's selected mortality table(s), whereas many (all?) other calculators use a simpler but less realistic mortality model in which each person is assumed to die on a given date (usually their life expectancy, but often the user can enter an assumed age at death). The effect of assuming that each person dies at their life expectancy is that:
a) the expected value of having the higher earner wait will be understated (though this often makes no difference, as even when this is understated, a calculator will still generally recommend waiting until 70), and
b) the expected value of having the lower earner wait will be overstated.

That said, the lower earner's decision is not usually especially impactful.
Mike Piper, author/blogger

JW-Retired
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Re: Social Security Benefits Strategy

Post by JW-Retired » Mon Apr 22, 2019 11:21 am

willyd123 wrote:
Mon Apr 22, 2019 8:55 am
According to the Open Social Security Model, I should:

- Have my spouse file her retirement benefit to begin 2/2027 at age 62 and 1 month
- File for my retirement benefit to begin 1/2032 at age 70 and 0 months
- Have my spouse should file for her spousal benefit to begin 1/2032 at age 67 and 0 months

According to MaxiFi, I should:

- File for my retirement benefit to begin 1/2032 at age 70 and 0 months
- Have my spouse file for her retirement benefit to begin 1/2032 at age 67 and 0 months
- Have my spouse file for her Spousal benefit to begin 1/2032 at age 67 and 0 months

According to Nationwide, I should do the same thing MaxiFi recommends.

Do you think I should go with the most frequent recommendation?
Do any of these models consider your federal+state after-tax dollars? Usually they don't because it's much more complicated to do, but what's left that you can spend is all that really matters.

My own RMD & pension retirement dollars are marginal taxed at a rate 1.5X the tax on my SS dollars. This is with SS tax being fully phased in. During the phase-in period the difference in marginal tax rate can be multiples.

I did realized this in plenty of time (thanks to Bogleheads like sscritic), so wife and I delayed SS as much as possible. This makes my high tax state, that taxes everything except SS, somewhat bearable. :beer
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Re: Social Security Benefits Strategy

Post by ObliviousInvestor » Mon Apr 22, 2019 11:26 am

JW-Retired wrote:
Mon Apr 22, 2019 11:21 am
Do any of these models consider your federal+state after-tax dollars? Usually they don't because it's much more complicated to do, but what's left that you can spend is all that really matters.
I have yet to see a calculator that accounts for tax implications in any meaningful way (i.e., with a realistic tax model).

IMO the only way for most individuals to do a worthwhile analysis is to actually use tax prep software to model the tax costs of various strategies, and include those in a PV analysis.

For what it's worth, one of two reasons I made OSS open source (i.e., the reason it's Open Social Security) is that I would love to see other parties incorporating Social Security functionality into broader financial planning tools. I don't have anywhere near the resources for such a task myself, but there are plenty of companies that would.
Mike Piper, author/blogger

afan
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Re: Social Security Benefits Strategy

Post by afan » Mon Apr 22, 2019 11:55 am

Open Social Security is transparent about the assumptions it is making.

It lets the user decide whether to include the expected benefit cut.
OSS does a net present value calculation taking into account the probability of surviving at each age. It gives the user choices about the life expectancy distribution to use, or the option to model for death a specified ages. Users can also alter the OSS default discount rate.

Maxifi is not nearly so transparent about what it is doing. All one can tell is that it is doing something different than OSS. I don't think it uses life expectancy tables to discount the values of future cash flows, but I am not sure about that. Maxifi does let one choose whether to model the benefit reduction.

I don't know whether either one adjusts the proportion of benefits that are taxable.
I don't know how they handle benefits claimed before full retirement age for people who are still working.

As best I can tell, neither accounts for differences in income tax rates through the period in question. I think both effectively assume tax rates will be constant across time. For people who are still working the current tax bracket can be much higher than it will be in retirement. This would reduce the value of benefits claimed while working. Maxifi has collects the information needed to account for this, but I don't know whether it does. You could ask them.



The good news, from OSS, is that claiming strategy differences often have a minor effect on the NPV of benefits, within the limits of the OSS approach. I have found that the putative optimal strategy often gives results quite close to other strategies, like a simple "wait until 70".

YMMV.
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Re: Social Security Benefits Strategy

Post by ENT Doc » Mon Apr 22, 2019 12:22 pm

runner26 wrote:
Mon Apr 22, 2019 10:42 am
Jack FFR1846 wrote:
Mon Apr 22, 2019 10:02 am
Do any of these calculations take into account the expected drop of 25% in benefits expected in 2034?
CNBC just reported that the Gov has announced a change in it's estimate from 2034 to 2035 when the trust fund will be depleted.
Phew! :D

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Re: Social Security Benefits Strategy

Post by Bacchus01 » Mon Apr 22, 2019 12:23 pm

Silk McCue wrote:
Mon Apr 22, 2019 10:39 am
Bacchus01 wrote:
Mon Apr 22, 2019 9:50 am
Silk is right to some degree. Understanding the tax implications, particularly at RMD, May provide an incentive to take earlier as, even at a reduced rate, you might avoid taxation loss on the SS.
To be clear, I absolutely was not talking about taking SS earlier to avoid greater taxation of SS benefits. That would be the dog wagging the tail. My focus was the total financial picture, not just SS in a vacuum.

Cheers
To be clear, I was.

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onthecusp
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Re: Social Security Benefits Strategy

Post by onthecusp » Mon Apr 22, 2019 2:27 pm

willyd123 wrote:
Mon Apr 22, 2019 8:55 am
Hello BHs -

This is a worn out topic I know but just wanted to get your thoughts on SS benefits and when to commence.

According to the Open Social Security Model, I should:

- Have my spouse file her retirement benefit to begin 2/2027 at age 62 and 1 month
- File for my retirement benefit to begin 1/2032 at age 70 and 0 months
- Have my spouse should file for her spousal benefit to begin 1/2032 at age 67 and 0 months

According to MaxiFi, I should:

- File for my retirement benefit to begin 1/2032 at age 70 and 0 months
- Have my spouse file for her retirement benefit to begin 1/2032 at age 67 and 0 months
- Have my spouse file for her Spousal benefit to begin 1/2032 at age 67 and 0 months

According to Nationwide, I should do the same thing MaxiFi recommends.

Do you think I should go with the most frequent recommendation?
Maybe I am missing something. Both recommendations include this statement:
"- Have my spouse file for her Spousal benefit to begin 1/2032 at age 67 and 0 months"
After this date your spouse should be receiving a total of half of your benefit. As I understand it, that is no matter what she receives on her own benefit before that date. (The previous two sentences are wrong. See ObliviousInvestor's excellent explanation below.) The Open SS model therefore provides additional benefits that are foregone in the other analysis.

It seems that the option which might be analyzed from a tax standpoint involve your spouse filing as soon as possible (2/2027) or at some intermediate time before eligibility for the Spousal benefit (1/2032). If she is working at that time, that probably affects the decision as well.
Last edited by onthecusp on Mon Apr 22, 2019 7:02 pm, edited 1 time in total.

TBillT
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Re: Social Security Benefits Strategy

Post by TBillT » Mon Apr 22, 2019 2:40 pm

runner26 wrote:
Mon Apr 22, 2019 10:42 am
Jack FFR1846 wrote:
Mon Apr 22, 2019 10:02 am
Do any of these calculations take into account the expected drop of 25% in benefits expected in 2034?
CNBC just reported that the Gov has announced a change in it's estimate from 2034 to 2035 when the trust fund will be depleted.
One good thing DC Bogleheads learned from a recent presentaton by SS, is that the SS disability claims are going way down, for reasons that are not totally clear. Just a few years ago, that part of the Trust fund (which is really just a part of the total SS fund) was thought to be exhausted around 2027. But the unexpected favorable lack of disability claims, which continues to show downward trend line, helps to extend funding and of course eveyone was worried that the SS disability claims might sky-rocket. But exactly the opposite has happened, happily.

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Re: Social Security Benefits Strategy

Post by ObliviousInvestor » Mon Apr 22, 2019 2:47 pm

onthecusp wrote:
Mon Apr 22, 2019 2:27 pm
Maybe I am missing something. Both recommendations include this statement:
"- Have my spouse file for her Spousal benefit to begin 1/2032 at age 67 and 0 months"
After this date your spouse should be receiving a total of half of your benefit. As I understand it, that is no matter what she receives on her own benefit before that date. The Open SS model therefore provides additional benefits that are foregone in the other analysis.
Your understanding here is incorrect.

If a person files for their own retirement benefit early, that reduction will continue to be applicable even if they file for spousal benefits later (even if the application for spousal benefits occurs after FRA).

Example:

Husband has $2,200 PIA
Wife has $800 PIA

Each has an FRA of 67.

Wife files at age 63 for her retirement benefit. She gets $600 per month (i.e., 75% of PIA due to filing 48 months early).

Later, after she reaches her FRA, she also becomes entitled to a spousal benefit. Her spousal benefit would be 50% of the husband's PIA, minus her own PIA (so, $300). Her total monthly benefit is $900 per month, which not coincidentally is $200 less than the $1,100 total benefit she would have received if she waited until her FRA.

That is, her retirement benefit is reduced by $200 due to early filing. That's still relevant after her spousal benefit kicks in. (It will no longer be relevant after her survivor benefit kicks in, if such becomes applicable.)
Mike Piper, author/blogger

azianbob
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Re: Social Security Benefits Strategy

Post by azianbob » Mon Apr 22, 2019 6:39 pm

I think the law has change so the lower earning spouse can no longer file early for theirs and then get spousal benefits later. I believe if she files at 62 for her own, then the spousal beneift is filed at the same time and she can only get the larger of the two.

As such you need to calculate what makes the most sense, generally they suggest the higher earning sopuse wait to 70 and the lower earning spouse caluclatle what their benefit at 67 and 70 is and if it is lower than half of the spouse's benefit, then to take the spousal benefit at 67 or if it is higher then they have the option to take their own at 67 or 70.

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Re: Social Security Benefits Strategy

Post by onthecusp » Mon Apr 22, 2019 6:58 pm

ObliviousInvestor wrote:
Mon Apr 22, 2019 2:47 pm
onthecusp wrote:
Mon Apr 22, 2019 2:27 pm
Maybe I am missing something. Both recommendations include this statement:
"- Have my spouse file for her Spousal benefit to begin 1/2032 at age 67 and 0 months"
After this date your spouse should be receiving a total of half of your benefit. As I understand it, that is no matter what she receives on her own benefit before that date. The Open SS model therefore provides additional benefits that are foregone in the other analysis.
Your understanding here is incorrect.

If a person files for their own retirement benefit early, that reduction will continue to be applicable even if they file for spousal benefits later (even if the application for spousal benefits occurs after FRA).

Example:

Husband has $2,200 PIA
Wife has $800 PIA

Each has an FRA of 67.

Wife files at age 63 for her retirement benefit. She gets $600 per month (i.e., 75% of PIA due to filing 48 months early).

Later, after she reaches her FRA, she also becomes entitled to a spousal benefit. Her spousal benefit would be 50% of the husband's PIA, minus her own PIA (so, $300). Her total monthly benefit is $900 per month, which not coincidentally is $200 less than the $1,100 total benefit she would have received if she waited until her FRA.

That is, her retirement benefit is reduced by $200 due to early filing. That's still relevant after her spousal benefit kicks in. (It will no longer be relevant after her survivor benefit kicks in, if such becomes applicable.)
Thank you for the correction ObliviousInvestor! I was confused between her PIA and her early 75% benefit. So it is not as clear cut as I was making it out to be, but your Open SS calculator still recommends early filing based on the actuarial math. I'll edit my original post to highlight the mistaken statement.

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Re: Social Security Benefits Strategy

Post by vtMaps » Mon Apr 22, 2019 7:54 pm

azianbob wrote:
Mon Apr 22, 2019 6:39 pm
I think the law has change so the lower earning spouse can no longer file early for theirs and then get spousal benefits later. I believe if she files at 62 for her own, then the spousal beneift is filed at the same time and she can only get the larger of the two.
If she files for spousal, she is deemed to have filed for her own benefits also. She can file for her own benefits and then later file for spousal.

--vtMaps
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Re: Social Security Benefits Strategy

Post by ObliviousInvestor » Mon Apr 22, 2019 7:59 pm

azianbob wrote:
Mon Apr 22, 2019 6:39 pm
I think the law has change so the lower earning spouse can no longer file early for theirs and then get spousal benefits later. I believe if she files at 62 for her own, then the spousal beneift is filed at the same time and she can only get the larger of the two.
This is true if the lower earning spouse is eligible for a spousal benefit. In the strategy being discussed above (wife files for retirement at 62 and 1 month, husband files for retirement at 70), she is not initially eligible for a spousal benefit, because the husband has not yet filed. When he does file though, she will be automatically deemed to have filed at that time for her spousal benefit.
Mike Piper, author/blogger

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Re: Social Security Benefits Strategy

Post by vtMaps » Tue Apr 23, 2019 5:29 am

ObliviousInvestor wrote:
Mon Apr 22, 2019 7:59 pm
When he does file though, she will be automatically deemed to have filed at that time for her spousal benefit.
Are you saying that if she files for her own benefits and does not ever file for spousal benefits, she will automatically receive spousal benefits when her husband files for his own benefits?

--vtMaps
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Re: Social Security Benefits Strategy

Post by RickBoglehead » Tue Apr 23, 2019 5:33 am

vtMaps wrote:
Tue Apr 23, 2019 5:29 am
ObliviousInvestor wrote:
Mon Apr 22, 2019 7:59 pm
When he does file though, she will be automatically deemed to have filed at that time for her spousal benefit.
Are you saying that if she files for her own benefits and does not ever file for spousal benefits, she will automatically receive spousal benefits when her husband files for his own benefits?

--vtMaps
Yes. Whichever is greater.
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Re: Social Security Benefits Strategy

Post by vtMaps » Tue Apr 23, 2019 5:52 am

RickBoglehead wrote:
Tue Apr 23, 2019 5:33 am
vtMaps wrote:
Tue Apr 23, 2019 5:29 am
ObliviousInvestor wrote:
Mon Apr 22, 2019 7:59 pm
When he does file though, she will be automatically deemed to have filed at that time for her spousal benefit.
Are you saying that if she files for her own benefits and does not ever file for spousal benefits, she will automatically receive spousal benefits when her husband files for his own benefits?

--vtMaps
Yes. Whichever is greater.
If she doesn't apply for spousal benefits, how does SS even know that they are married? When my wife applied for spousal benefits they asked her questions about where/when we were married.

--vtMaps
The optimist proclaims that we live in the best of all possible worlds; and the pessimist fears this is true. --James Branch Cabell

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Re: Social Security Benefits Strategy

Post by ObliviousInvestor » Tue Apr 23, 2019 6:23 am

vtMaps wrote:
Tue Apr 23, 2019 5:52 am
ObliviousInvestor wrote:
Mon Apr 22, 2019 7:59 pm
When he does file though, she will be automatically deemed to have filed at that time for her spousal benefit.
Are you saying that if she files for her own benefits and does not ever file for spousal benefits, she will automatically receive spousal benefits when her husband files for his own benefits?
In the above scenario, yes, that is what should happen.
vtMaps wrote:
Tue Apr 23, 2019 5:52 am
If she doesn't apply for spousal benefits, how does SS even know that they are married?
When each person applies for retirement benefits, the SSA employee is supposed to ask about marital status. So by the time the husband applies, they should be twice informed about the marriage.
Mike Piper, author/blogger

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Re: Social Security Benefits Strategy

Post by azianbob » Fri Sep 06, 2019 1:25 pm

ObliviousInvestor wrote:
Mon Apr 22, 2019 7:59 pm
azianbob wrote:
Mon Apr 22, 2019 6:39 pm
I think the law has change so the lower earning spouse can no longer file early for theirs and then get spousal benefits later. I believe if she files at 62 for her own, then the spousal beneift is filed at the same time and she can only get the larger of the two.
This is true if the lower earning spouse is eligible for a spousal benefit. In the strategy being discussed above (wife files for retirement at 62 and 1 month, husband files for retirement at 70), she is not initially eligible for a spousal benefit, because the husband has not yet filed. When he does file though, she will be automatically deemed to have filed at that time for her spousal benefit.
Okay lets say the wife is 3 years younger than the husband. She files at 62 (when husband is 65).

The husband files at 70 (when wife is 67). If the spousal benefit is higher, is it considered as she took it at 62 (with the penalty) or calculated as taken at 67 (since that was her age when husband filed for his)

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Re: Social Security Benefits Strategy

Post by ObliviousInvestor » Fri Sep 06, 2019 1:50 pm

azianbob wrote:
Fri Sep 06, 2019 1:25 pm
ObliviousInvestor wrote:
Mon Apr 22, 2019 7:59 pm
azianbob wrote:
Mon Apr 22, 2019 6:39 pm
I think the law has change so the lower earning spouse can no longer file early for theirs and then get spousal benefits later. I believe if she files at 62 for her own, then the spousal beneift is filed at the same time and she can only get the larger of the two.
This is true if the lower earning spouse is eligible for a spousal benefit. In the strategy being discussed above (wife files for retirement at 62 and 1 month, husband files for retirement at 70), she is not initially eligible for a spousal benefit, because the husband has not yet filed. When he does file though, she will be automatically deemed to have filed at that time for her spousal benefit.
Okay lets say the wife is 3 years younger than the husband. She files at 62 (when husband is 65).

The husband files at 70 (when wife is 67). If the spousal benefit is higher, is it considered as she took it at 62 (with the penalty) or calculated as taken at 67 (since that was her age when husband filed for his)
Her benefit as a spouse is based on her age when she becomes entitled to that benefit. Her own retirement benefit, however, would still be reduced for early filing.

Example: husband and wife each have FRA of 67. Husband has PIA of $2,000. Wife has PIA of $800.

Wife files for her own retirement benefit at 62. She gets 70% of her PIA due to filing 5 years early. Result: $560 retirement benefit.

Husband later files for his retirement benefit. Wife automatically is deemed to have filed for her spousal benefit at that time. If she is FRA or older, her spousal benefit would be 50% of his PIA, minus her own PIA. Result: $200.

Total monthly benefit: $760

Point being, the $240 reduction to her retirement benefit for early filing is still relevant. Her total monthly benefit is $760, which is, not coincidentally, $240 less than 50% of the husband's PIA.
Mike Piper, author/blogger

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Re: Social Security Benefits Strategy

Post by azianbob » Tue Sep 10, 2019 12:27 pm

ObliviousInvestor wrote:
Fri Sep 06, 2019 1:50 pm
azianbob wrote:
Fri Sep 06, 2019 1:25 pm
ObliviousInvestor wrote:
Mon Apr 22, 2019 7:59 pm
azianbob wrote:
Mon Apr 22, 2019 6:39 pm
I think the law has change so the lower earning spouse can no longer file early for theirs and then get spousal benefits later. I believe if she files at 62 for her own, then the spousal beneift is filed at the same time and she can only get the larger of the two.
This is true if the lower earning spouse is eligible for a spousal benefit. In the strategy being discussed above (wife files for retirement at 62 and 1 month, husband files for retirement at 70), she is not initially eligible for a spousal benefit, because the husband has not yet filed. When he does file though, she will be automatically deemed to have filed at that time for her spousal benefit.
Okay lets say the wife is 3 years younger than the husband. She files at 62 (when husband is 65).

The husband files at 70 (when wife is 67). If the spousal benefit is higher, is it considered as she took it at 62 (with the penalty) or calculated as taken at 67 (since that was her age when husband filed for his)
Her benefit as a spouse is based on her age when she becomes entitled to that benefit. Her own retirement benefit, however, would still be reduced for early filing.

Example: husband and wife each have FRA of 67. Husband has PIA of $2,000. Wife has PIA of $800.

Wife files for her own retirement benefit at 62. She gets 70% of her PIA due to filing 5 years early. Result: $560 retirement benefit.

Husband later files for his retirement benefit. Wife automatically is deemed to have filed for her spousal benefit at that time. If she is FRA or older, her spousal benefit would be 50% of his PIA, minus her own PIA. Result: $200.

Total monthly benefit: $760

Point being, the $240 reduction to her retirement benefit for early filing is still relevant. Her total monthly benefit is $760, which is, not coincidentally, $240 less than 50% of the husband's PIA.
Okay, I had another question. Let's say that a husband and wife are 8 years apart.

If the husband files at 70, and the wife is 62 and files early for spousal benefit at the same time, is her portion only docked the 30% early filing penalty, or is it subject to the income limits as well? Like how for normal social security if it is taken prior to full retirement age, if you make too much additional income the benefit is further reduced.

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Re: Social Security Benefits Strategy

Post by ObliviousInvestor » Tue Sep 10, 2019 12:35 pm

azianbob wrote:
Tue Sep 10, 2019 12:27 pm
Okay, I had another question. Let's say that a husband and wife are 8 years apart.

If the husband files at 70, and the wife is 62 and files early for spousal benefit at the same time, is her portion only docked the 30% early filing penalty, or is it subject to the income limits as well? Like how for normal social security if it is taken prior to full retirement age, if you make too much additional income the benefit is further reduced.
The earnings test applies to spousal benefits (and widow/widower benefits) as well as retirement benefits. So her retirement benefit and spousal benefit would be reduced first for early filing. Then her reduced total monthly benefit would have the earnings test applied, potentially resulting in withholding based on her earnings.
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Re: Social Security Benefits Strategy

Post by azianbob » Tue Sep 10, 2019 2:06 pm

ObliviousInvestor wrote:
Tue Sep 10, 2019 12:35 pm
azianbob wrote:
Tue Sep 10, 2019 12:27 pm
Okay, I had another question. Let's say that a husband and wife are 8 years apart.

If the husband files at 70, and the wife is 62 and files early for spousal benefit at the same time, is her portion only docked the 30% early filing penalty, or is it subject to the income limits as well? Like how for normal social security if it is taken prior to full retirement age, if you make too much additional income the benefit is further reduced.
The earnings test applies to spousal benefits (and widow/widower benefits) as well as retirement benefits. So her retirement benefit and spousal benefit would be reduced first for early filing. Then her reduced total monthly benefit would have the earnings test applied, potentially resulting in withholding based on her earnings.
Okay, so in this case, it would be better for the wife to wait until full retirement age to apply for spousal benefit if they have additional income other than social security (401k withdrawals, interest, divdends, etc)

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Re: Social Security Benefits Strategy

Post by ObliviousInvestor » Tue Sep 10, 2019 3:17 pm

azianbob wrote:
Tue Sep 10, 2019 2:06 pm
ObliviousInvestor wrote:
Tue Sep 10, 2019 12:35 pm
azianbob wrote:
Tue Sep 10, 2019 12:27 pm
Okay, I had another question. Let's say that a husband and wife are 8 years apart.

If the husband files at 70, and the wife is 62 and files early for spousal benefit at the same time, is her portion only docked the 30% early filing penalty, or is it subject to the income limits as well? Like how for normal social security if it is taken prior to full retirement age, if you make too much additional income the benefit is further reduced.
The earnings test applies to spousal benefits (and widow/widower benefits) as well as retirement benefits. So her retirement benefit and spousal benefit would be reduced first for early filing. Then her reduced total monthly benefit would have the earnings test applied, potentially resulting in withholding based on her earnings.
Okay, so in this case, it would be better for the wife to wait until full retirement age to apply for spousal benefit if they have additional income other than social security (401k withdrawals, interest, divdends, etc)
Only earnings count for the earnings test. That is, neither 401(k) distributions, nor interest, nor dividends would count toward the earnings test.

Here are two pages from the Social Security Handbook that list types of income that are counted and types of income that are not counted.
https://www.ssa.gov/OP_Home/handbook/ha ... -1811.html
https://www.ssa.gov/OP_Home/handbook/ha ... -1812.html
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Re: Social Security Benefits Strategy

Post by azianbob » Tue Sep 10, 2019 5:37 pm

ObliviousInvestor wrote:
Tue Sep 10, 2019 3:17 pm
azianbob wrote:
Tue Sep 10, 2019 2:06 pm
ObliviousInvestor wrote:
Tue Sep 10, 2019 12:35 pm
azianbob wrote:
Tue Sep 10, 2019 12:27 pm
Okay, I had another question. Let's say that a husband and wife are 8 years apart.

If the husband files at 70, and the wife is 62 and files early for spousal benefit at the same time, is her portion only docked the 30% early filing penalty, or is it subject to the income limits as well? Like how for normal social security if it is taken prior to full retirement age, if you make too much additional income the benefit is further reduced.
The earnings test applies to spousal benefits (and widow/widower benefits) as well as retirement benefits. So her retirement benefit and spousal benefit would be reduced first for early filing. Then her reduced total monthly benefit would have the earnings test applied, potentially resulting in withholding based on her earnings.
Okay, so in this case, it would be better for the wife to wait until full retirement age to apply for spousal benefit if they have additional income other than social security (401k withdrawals, interest, divdends, etc)
Only earnings count for the earnings test. That is, neither 401(k) distributions, nor interest, nor dividends would count toward the earnings test.

Here are two pages from the Social Security Handbook that list types of income that are counted and types of income that are not counted.
https://www.ssa.gov/OP_Home/handbook/ha ... -1811.html
https://www.ssa.gov/OP_Home/handbook/ha ... -1812.html
Ah thanks for this. So I guess the decision on the lesser earning spouse who is much younger deciding on getting spousal support asap at 62 vs waiting until 67 FRA should be based on how long they expect the older spouse to live after 70. Like if the expectancy is 80 so 10 years, then its better to get at 62 to enjoy the dual income as long as possible before the survivor gets the primary spouses amount at death, but if expectation is to live to 100 it is probably better to wait until FRA since the second spouse will get only thier support part for a longer period of time, the higher amount is worth it.

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Re: Social Security Benefits Strategy

Post by ObliviousInvestor » Tue Sep 10, 2019 5:49 pm

azianbob wrote:
Tue Sep 10, 2019 5:37 pm
So I guess the decision on the lesser earning spouse who is much younger deciding on getting spousal support asap at 62 vs waiting until 67 FRA should be based on how long they expect the older spouse to live after 70.
The decision for the lower earner should be based on the joint first-to-die life expectancy, which is by definition shorter than the shorter of the two individual life expectancies. (Though admittedly this is a relatively minor distinction when there's a large age gap.)
Mike Piper, author/blogger

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