Social security question for working couple

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Topic Author
itsmeagain
Posts: 59
Joined: Sat Jan 09, 2016 7:24 pm

Social security question for working couple

Post by itsmeagain »

Situation:
1) Husband and wife are both 65.
2) Both are still happily working, and both are likely to work until about age 70.
3) Husband has worked more years, and at higher salary, than wife.
4) Husband will delay social security payments until he reaches 70.
5) When husband reaches 70, wife’s benefit will be higher if based on 50% of husband’s benefit than on her own work history.

Question:
Does it make sense, therefore, for wife to start receiving SS payments now (based on her own work history), and then refile later (when husband turns 70) to collect higher amount based on husband’s work history?

Tentative conclusion:
Even though wife is stilll working, it seems like there’s no scenario where delaying the start of payments based on her work history makes sense. Otherwise, it seems like we are (and have been) leaving money on the table.

Thank you for your insights.
lazynovice
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Re: Social security question for working couple

Post by lazynovice »

Did you use https://opensocialsecurity.com/ yet?

It will depend on the difference in your PIAs but yes, most likely she should claim her benefit, you allow yours to grow and then she would switch to the spousal benefit once you file.
“I didn’t want my sailboat to be in the driveway when I died.” Nomadland
Wrench
Posts: 303
Joined: Sun Apr 28, 2019 10:21 am

Re: Social security question for working couple

Post by Wrench »

itsmeagain wrote: Thu Jun 10, 2021 3:34 pm Situation:
1) Husband and wife are both 65.
2) Both are still happily working, and both are likely to work until about age 70.
3) Husband has worked more years, and at higher salary, than wife.
4) Husband will delay social security payments until he reaches 70.
5) When husband reaches 70, wife’s benefit will be higher if based on 50% of husband’s benefit than on her own work history.

Question:
Does it make sense, therefore, for wife to start receiving SS payments now (based on her own work history), and then refile later (when husband turns 70) to collect higher amount based on husband’s work history?

Tentative conclusion:
Even though wife is stilll working, it seems like there’s no scenario where delaying the start of payments based on her work history makes sense. Otherwise, it seems like we are (and have been) leaving money on the table.

Thank you for your insights.
As suggested above, use opensocialsecurity.com. A couple comments - the spousal benefit is 50% of your husband's primary insurance amount, NOT 50% of the amount he will receive at 70. You can calculate it here:
https://www.ssa.gov/oact/quickcalc/spouse.html
I would suggest when you use opensocialsecurity.com you use the option to specify how long each of you will live, rather than the default based on life expectancy. If you both live a very long time, e.g. into your late 90s, you may get a very different answer for optimal claiming strategy than if you use life expectancy. Finally, for a male and female both 65, the probability that one of you will live to 90 is ~42% according to standard mortality tables, and the probability that one of you will live to 95 is still 16%. And, that does not include any improvements in medicine that may increase lifetimes over the next 20-30 years. If you are both healthy and/or have reason to believe one or both of you will live a long time, it may make sense to consider a longer time window that "life expectancy".

Wrench
Topic Author
itsmeagain
Posts: 59
Joined: Sat Jan 09, 2016 7:24 pm

Re: Social security question for working couple

Post by itsmeagain »

lazynovice wrote: Thu Jun 10, 2021 3:51 pm Did you use https://opensocialsecurity.com/ yet?

It will depend on the difference in your PIAs but yes, most likely she should claim her benefit, you allow yours to grow and then she would switch to the spousal benefit once you file.
Fantastic! Thanks very much. I had tried a couple of other online calculators that weren't nearly so helpful. This does indeed confirm my thinking.
Topic Author
itsmeagain
Posts: 59
Joined: Sat Jan 09, 2016 7:24 pm

Re: Social security question for working couple

Post by itsmeagain »

Wrench wrote: Thu Jun 10, 2021 4:21 pm As suggested above, use opensocialsecurity.com. A couple comments - the spousal benefit is 50% of your husband's primary insurance amount, NOT 50% of the amount he will receive at 70. You can calculate it here:
https://www.ssa.gov/oact/quickcalc/spouse.html
I would suggest when you use opensocialsecurity.com you use the option to specify how long each of you will live, rather than the default based on life expectancy. If you both live a very long time, e.g. into your late 90s, you may get a very different answer for optimal claiming strategy than if you use life expectancy. Finally, for a male and female both 65, the probability that one of you will live to 90 is ~42% according to standard mortality tables, and the probability that one of you will live to 95 is still 16%. And, that does not include any improvements in medicine that may increase lifetimes over the next 20-30 years. If you are both healthy and/or have reason to believe one or both of you will live a long time, it may make sense to consider a longer time window that "life expectancy".

Wrench
Thank you. I will play around with those settings as well. I don't think it will change the optimal strategy, but we'll see.
Wrench
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Re: Social security question for working couple

Post by Wrench »

itsmeagain wrote: Thu Jun 10, 2021 4:26 pm
Wrench wrote: Thu Jun 10, 2021 4:21 pm As suggested above, use opensocialsecurity.com. A couple comments - the spousal benefit is 50% of your husband's primary insurance amount, NOT 50% of the amount he will receive at 70. You can calculate it here:
https://www.ssa.gov/oact/quickcalc/spouse.html
I would suggest when you use opensocialsecurity.com you use the option to specify how long each of you will live, rather than the default based on life expectancy. If you both live a very long time, e.g. into your late 90s, you may get a very different answer for optimal claiming strategy than if you use life expectancy. Finally, for a male and female both 65, the probability that one of you will live to 90 is ~42% according to standard mortality tables, and the probability that one of you will live to 95 is still 16%. And, that does not include any improvements in medicine that may increase lifetimes over the next 20-30 years. If you are both healthy and/or have reason to believe one or both of you will live a long time, it may make sense to consider a longer time window that "life expectancy".

Wrench
Thank you. I will play around with those settings as well. I don't think it will change the optimal strategy, but we'll see.
My wife's PIA is about 1/2 mine and if I live past ~90, it pays to have her wait until 70. Since we don't need the income, that's what we're going to do. But if your PIA is way less than 1/2 of your husbands, like 1/4 or something like that, it probably does not pay to wait regardless of how long he lives. It's worth playing around with anyway (and kind of fun, too :happy )

Wrench
Topic Author
itsmeagain
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Re: Social security question for working couple

Post by itsmeagain »

Wrench wrote: Thu Jun 10, 2021 4:35 pm My wife's PIA is about 1/2 mine and if I live past ~90, it pays to have her wait until 70. Since we don't need the income, that's what we're going to do. But if your PIA is way less than 1/2 of your husbands, like 1/4 or something like that, it probably does not pay to wait regardless of how long he lives. It's worth playing around with anyway (and kind of fun, too :happy )

Wrench
A similar situation to ours. And I get results similar to what you describe in that long-life scenario. However, the shortfall of filing sooner is small (a few %) in the grand scheme of things. Also, if I further assume there will be a future cut to benefits (using that option), it reverts to favoring the earlier filing.

We will probably go with the early filing ... a bird in the hand, and all that. However, it's nice to see that the differences are pretty small in most reasonable cases, so we can't go too far wrong.

Thank you again.
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Watty
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Re: Social security question for working couple

Post by Watty »

itsmeagain wrote: Thu Jun 10, 2021 4:24 pm
lazynovice wrote: Thu Jun 10, 2021 3:51 pm Did you use https://opensocialsecurity.com/ yet?

It will depend on the difference in your PIAs but yes, most likely she should claim her benefit, you allow yours to grow and then she would switch to the spousal benefit once you file.
Fantastic! Thanks very much. I had tried a couple of other online calculators that weren't nearly so helpful. This does indeed confirm my thinking.
That is a great web site but it understandably does not try to take taxes into account or how much your Social Security may be reduced if you are below your full retirement age and you earn more than a set amount. I do not understand the details of how this works especially in the year when you reach your full retirement age but you may want to did through the numbers to see how this impacts he choice of when the wife should start Social Security.

https://www.ssa.gov/benefits/retirement ... rking.html

My concern is that if she starts SS a year before her full retirement age then she could be in a catch 22 situation where her benefit will be reduced by say $100 a month because she started it early, but then it could be reduced again if her earnings are about the earnings limit, and 85% of here SS could also be taxed. The problem is that $100 a month reduction would continue after her full retirement age and only end when you die and she then starts getting your Social Security amount without the $100 a month reduction. It would be good to talk with the people at Social Security to talk though how the numbers would work since this could be real complicate.

https://www.ssa.gov/benefits/retirement ... rease.html

Depending on if she was born in 1955 or 1956 then her full retirement age(FRA) would 66 years and 2 or 4 months. She may want to wait until her FRA to avoid the reduction in Social Security because of her earnings, and the reduction in her benefit amount even when you start Social Security.
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ObliviousInvestor
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Re: Social security question for working couple

Post by ObliviousInvestor »

Watty wrote: Thu Jun 10, 2021 6:19 pm
itsmeagain wrote: Thu Jun 10, 2021 4:24 pm
lazynovice wrote: Thu Jun 10, 2021 3:51 pm Did you use https://opensocialsecurity.com/ yet?

It will depend on the difference in your PIAs but yes, most likely she should claim her benefit, you allow yours to grow and then she would switch to the spousal benefit once you file.
Fantastic! Thanks very much. I had tried a couple of other online calculators that weren't nearly so helpful. This does indeed confirm my thinking.
That is a great web site but it understandably does not try to take taxes into account or how much your Social Security may be reduced if you are below your full retirement age and you earn more than a set amount.
FWIW, Open Social Security does account for the earnings test, as long as you provide the applicable inputs about continued earnings. (But you're right that it doesn't account for taxes. And that is admittedly a nontrivial limitation.)

Edited to add:
Watty wrote: Thu Jun 10, 2021 6:19 pm My concern is that if she starts SS a year before her full retirement age then she could be in a catch 22 situation where her benefit will be reduced by say $100 a month because she started it early, but then it could be reduced again if her earnings are about the earnings limit, and 85% of here SS could also be taxed. The problem is that $100 a month reduction would continue after her full retirement age and only end when you die and she then starts getting your Social Security amount without the $100 a month reduction. It would be good to talk with the people at Social Security to talk though how the numbers would work since this could be real complicate.
If her benefit is reduced for early filing, then it is completely withheld due to the earnings test, upon reaching FRA it would no longer be reduced for early filing. (Or if it's just partially withheld, then at least the $100 reduction would no longer be a $100 reduction. It would be a smaller amount.)
Last edited by ObliviousInvestor on Fri Jun 11, 2021 11:39 am, edited 1 time in total.
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Wrench
Posts: 303
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Re: Social security question for working couple

Post by Wrench »

itsmeagain wrote: Thu Jun 10, 2021 5:02 pm
Wrench wrote: Thu Jun 10, 2021 4:35 pm My wife's PIA is about 1/2 mine and if I live past ~90, it pays to have her wait until 70. Since we don't need the income, that's what we're going to do. But if your PIA is way less than 1/2 of your husbands, like 1/4 or something like that, it probably does not pay to wait regardless of how long he lives. It's worth playing around with anyway (and kind of fun, too :happy )

Wrench
A similar situation to ours. And I get results similar to what you describe in that long-life scenario. However, the shortfall of filing sooner is small (a few %) in the grand scheme of things. Also, if I further assume there will be a future cut to benefits (using that option), it reverts to favoring the earlier filing.

We will probably go with the early filing ... a bird in the hand, and all that. However, it's nice to see that the differences are pretty small in most reasonable cases, so we can't go too far wrong.

Thank you again.
Yeah - there are a LOT of unknowns in this decision so as long as you do the math and decide what works best for you in your situation, then there is really no wrong choice. FWIW, I personally believe it unlikely SS will be cut - the senior voting block it too strong. But just in case, I have set up a liability matching TIPS ladder that would replace the projected cut in SS benefits from ~2030 through the early 2050s. Worst case if it is not cut, then I will have some extra money coming in during those years!

Wrench
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