Even experts can make mistakes when mapping Social Security
options.
Russell Settle • September 12, 2019
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Welcome
to the Social Security Q&A. You ask a Social Security question, our expert
provides the answer.
You can
learn how to ask a question of your own below. And if you would like a
personalized report detailing your optimal Social Security claiming strategy, click here. Check it out: It could result
in receiving thousands of dollars more in benefits over your lifetime.
Today’s
question comes from Dom:
“I am
59 years old, and my wife is 58. My estimated Social Security benefit at my
full retirement age of 67 is $2,450 a month. My wife’s estimated benefit at her
FRA is $1,050.
When
the time comes and I decide to claim half of my spouse’s Social Security
benefits — so I can let mine grow till I’m 70 years old — what happens to hers
when it’s time for her to claim her own? In other words, will she still get the
full amount, or will it be cut due to me having taken half of hers all that
time?”
Picking up incorrect information
Dom,
the Social Security claiming rules are complicated. Even Social Security agents
are often confused about some of the more obscure rules.
So, it
comes as no surprise to me that you seem to have picked up some wrong
information about the claiming options facing you and your wife. The plan you
describe in your question simply will not work out for you.
First,
all people born after 1953 (including you and your wife) are affected by Social
Security’s “deeming rules.” Under these rules, if you are
eligible for multiple benefits (say, retirement and spousal benefits), you must
claim them at the same time. (Note that different rules apply to widow’s
benefits.)
Therefore,
even if you were eligible for a spousal benefit (which you are not, as
discussed below), you could not claim it and let your retirement benefit go
untouched.
You
also won’t qualify for any spousal benefits because your retirement benefit is
too high in relation to your wife’s benefit. The maximum potential spousal
benefit you might receive is one-half of your wife’s FRA retirement benefit, or
$525. Since your FRA retirement benefit exceeds that amount, you qualify for no
spousal supplement.
In
contrast, your wife does qualify for a spousal supplement. Half of your FRA
benefit is $1,225. Given her FRA benefit of $1,050, she can get $175 as a
spousal supplement to boost her FRA total benefit to $1,225. Of course, all of
these amounts are subject to early claiming penalties.
Since I
just blew up Dom’s claiming plan, let me offer some suggestions for an alternative.
I ran Dom’s information through my firm’s software, which is designed to find
optimal claiming strategies.
For
normal life expectancies (82 for Dom and 86 for his wife), our analysis
indicates Dom’s optimal choice is to claim his retirement benefit at age 68.
As for
Dom’s wife, based on our analysis, between the ages of 62 to 67, it does not
matter when she claims. One year is essentially the same as another over that
range. If she claims before Dom claims his benefit, then her spousal supplement
is delayed until he claims and makes her eligible.
Clearly,
Dom’s plans needed some inexpensive professional help.
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So, it’s better not to ask for super-specific advice that applies only to you.
About me
I hold
a doctorate in economics from the University of Wisconsin and taught economics
at the University of Delaware for many years.
In
2009, I co-founded SocialSecurityChoices.com, an internet company
that provides advice on Social Security claiming decisions. You can learn more
about that by clicking here.
Got any
words of wisdom you can offer on today’s question? Share your knowledge and
experiences on our Facebook page.
Disclaimer: We
strive to provide accurate information with regard to the subject matter
covered. It is offered with the understanding that we are not offering legal,
accounting, investment or other professional advice or services, and that the
SSA alone makes all final determinations on your eligibility for benefits and
the benefit amounts. Our advice on claiming strategies does not comprise a
comprehensive financial plan. You should consult with your financial adviser
regarding your individual situation.
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