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social security benefits

The Do It Yourself Do Over For Social Security

Sep 16th, 2011
by jblankenship.
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Do it yourself
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Late last year the Social Security Administration made a change to the rules that took a powerful option off the books – the payback and Do-Over.

Back in the olden days (prior to December, 2010), there was an option available that allowed a person to file for Social Security retirement benefits at any age, and then later pay back all of the benefits received and re-file at a later age, effectively cleaning the slate and starting over at your later age.

When the rule was changed, the payback and re-file now has to be done within 12 months.  But all is not lost – there is still a way to reset things if you find yourself having filed earlier than you really needed to and you wound up working longer than you thought.

The Do It Yourself Do Over

If you’re still under Full Retirement Age (FRA) and working, you’ve probably noticed how earning more than a certain amount will result in forfeiture of part of your benefits.  (More on the specifics on the earnings test at the link.)  The thing about forfeiting some of your Social Security benefit is that – once you reach FRA, you’ll get credit back for the benefits that you forfeited.

In a way, by earning more than the limits, you’re effectively paying back the amounts that are being forfeited, and at FRA your benefit will be recalculated, which is the Do Over in disguise.

Granted, this isn’t exactly as  powerful as the original Do Over, but it’s a way that you could re-set when you’ve started receiving benefits earlier than you needed and would like to get that credit back and file at a later age, without as much (or with no) reductions in your benefit.

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What Can Be Done to Save Social Security?

Sep 9th, 2011
by jblankenship.
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lifering
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This is, of course, one of the most volatile questions on the political landscape these days.  We have some constituencies claiming that the whole plan is a Ponzi scheme and we should get rid of it altogether – and many others aiming to make radical tax increases in the system to improve solvency, or pushing back the age(s) for receiving benefits to reduce drag on the system.

True, the system is in dire straits – not bankrupt, but needing attention.  Current projections indicate that at current pace, funds allocated to the system will run out sometime around 2036 unless something changes.

Increasing taxes is never popular, and current political winds have shown just how far the dream of no increases in taxes will be pushed.  In addition, extending the age limits during a time when unemployment is at record highs only exacerbates that issue – with older workers hanging on longer, younger workers can’t fill those jobs.

And eliminating the system altogether just isn’t workable.  Roughly 55 million Americans are currently receiving benefits – many with little else to live on in retirement.  A great many more are coming on the rolls every day, as the Baby-Boom generation hits the magic age(s).

Privatization, although once very popular, has lost its luster in recent years due to the market’s fluctuations.  The fact is that the majority of folks are just not very good at managing their own money – and the stakes are too high to give them a shot at what could be their only sustenance in retirement.  401(k) plans are great, but the facts are scary:  the Employee Benefit Research Institute’s (EBRI) March 2011 report showed that nearly half (46%) of all surveyed Americans who have saved anything at all have less than $10,000 saved (not including homes or defined benefit pension plans).  What’s worse is that over a third (36%) of those surveyed figured that if they saved up $250,000, that should be enough to retire comfortably, when in actuality that figure might cover the individual’s healthcare needs only.  And further, EBRI has indicated in countless reports year after year that when a 401(k) plan is in place, the actual returns achieved are dismal compared to the market average, due mostly to reactionary moves by investors operating without proper guidance.

So what can be done?  Means testing, for one thing.  Donald Trump doesn’t need Social Security, and neither do his young children – but they’re eligible (and are likely receiving it).  That’s not to say that eliminating the Donald and his peers from the recipient rolls will balance out the system; many more Americans will likely have to forego at least a part of the benefit that they’ve been expecting.

We’ve had a form of means testing in place since 1983 – via the taxability of Social Security benefits.  And since the limits haven’t been adjusted since that legislation was put into place (actually since the 1993 legislation), this means test is becoming more and more “taxing” to folks with any additional income on top of Social Security every year.  But it probably doesn’t go far enough.

Another item that could be dealt with is the payroll tax ceiling – currently at $106,800 – that could be liberalized a bit without too much ruckus.  Granted, this does mean a new, or rather increased, tax, but when you weigh that against the alternatives, it’s not a bad option to consider.

All in all, the Social Security system has its problems, to be sure. It is, after all, a form of social insurance – meaning that some folks will get far less from the system than they put into it, and others will get far more from it than they put in.  But we’ve got it in place and it’s working (pretty well anyway), so we just need to make some adjustments to make sure that the system can make it through the rough patches.

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When Can Social Security Benefits Begin?

Sep 2nd, 2011
by jblankenship.
2 comments
birthday cake
Image by freakgirl via Flickr

As you’re nearing the point when you are planning to receive your Social Security benefits, it may occur to you to question just when do these milestones take effect?  Just when are you considered first eligible for benefits, when are you at Full Retirement Age, and when have you reached the maximum age?

For Social Security age purposes, the month of your birthdate is important – but that’s not the date at which you reach the milestone.  It’s actually the month after your birthday, the month when you are that particular age for the entire month.

For example, if your birthdate is January 15, 1950, you will actually reach age 62 on January 15, 2012 – but you’ll be eligible for benefits beginning with February of 2012.  Likewise, since your Full Retirement Age is 66, you will reach Full Retirement Age by Social Security’s records as of February, 2016.  You’ll also reach the maximum benefit age of 70 (for Social Security’s purposes) as of February, 2020.

The only time that this doesn’t follow is when your birthdate is the first of the month.  For Social Security purposes, when you have the first of the month as your birthdate, you are considered as having the month prior as your birth month.  See When Your Birthday Isn’t Your Birthday for more information.

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How PIA Relates to Your Benefit

Aug 26th, 2011
by jblankenship.
1 comment
Related
Image by petit1ze via Flickr

If you’ve been looking into your Social Security projected benefits for long, you’ve probably run across the term Primary Insurance Amount, or PIA.  Click on the link to see how the PIA is calculated if you need more background information on the PIA.

What’s important to know is that the PIA is essentially the amount of your retirement benefit if you file for it exactly on your Full Retirement Age (FRA) month.  But hardly anyone files for retirement benefits in exactly the month that you reach FRA.  If you file for your retirement benefit before or after FRA, even by a month, there is a difference between your PIA what your benefit will be.

Before FRA

If you file for benefits before the month when you reach FRA, there are two factors that apply to your benefit, reducing it from the PIA amount.  The reason there are two factors is because the more recent 36 months (closest to your FRA) are valued at a rate of 5/9 of a percent, or roughly .5556%.  For up to 24 months prior to the more recent 36 months, the value is 5/12 of a percent, or .4167%.

Wow, that’s not complicated at all, is it?  Geez.  Here’s a formula that you can use to help you calculate the reduction for your benefit before FRA:

1.  Enter your Full Retirement Age, years and months:
2.  Enter the age you plan to file for benefits, years and months:
3.  Subtract line 2 from line 1 in months only
4.  Subtract 36 from line 3 (if less than zero, enter zero)
5.  If line 4 is zero, skip to line 7; otherwise, multiply line 4 by .004167
6.  If line 4 is zero, multiply line 3 by .005556; otherwise, enter .2
7.  Add line 6 to line 5
8.  Subtract line 7 from 1.0000
9.  Multiply line 8 by your PIA.  This is your reduced benefit amount.

Let’s run an example.  An individual born in 1955, so his FRA is 66 years and 2 months.  His PIA is $2,000, and he intends to file for benefits at age 64 years and 6 months.

1.  Enter your Full Retirement Age, years and months:

66y 2m
2.  Enter the age you plan to file for benefits, years and months:

64y 6m
3.  Subtract line 2 from line 1 in months only

20
4.  Subtract 36 from line 3 (if less than zero, enter zero)

0
5.  If line 4 is zero, skip to line 7; otherwise, multiply line 4 by .004167

6.  If line 4 is zero, multiply line 3 by .005556; otherwise, enter .2

.11112
7.  Add line 6 to line 5

.11112
8.  Subtract line 7 from 1.0000

.88888
9.  Multiply line 8 by your PIA.  This is your reduced benefit amount.

$1,777.76

Now let’s adjust the example so that it uses the additional factor.  Same individual as above, but now he plans to retire at age 62 years and 8 months.

 

1.  Enter your Full Retirement Age, years and months:

66y 2m
2.  Enter the age you plan to file for benefits, years and months:

62y 8m
3.  Subtract line 2 from line 1 in months only

40
4.  Subtract 36 from line 3 (if less than zero, enter zero)

4
5.  If line 4 is zero, skip to line 7; otherwise, multiply line 4 by .004167

.016668
6.  If line 4 is zero, multiply line 3 by .005556; otherwise, enter .200000

.200000
7.  Add line 6 to line 5

.216668
8.  Subtract line 7 from 1.0000

.783332
9.  Multiply line 8 by your PIA.  This is your reduced benefit amount.

$1,566.66

 

Now let’s look at how applying after FRA works.

After FRA

For every month after FRA that you delay applying, your benefit will grow by a factor.  For folks born in 1943 and later, the factor is 2/3 of a percent, or roughly .6667%.  If you were born in 1941 or 1942 (earlier years don’t matter at this point, you’re already 70), the factor is 15/24 of a percent, or approximately .625%.  These factors equate to 8% per year for those born in 1943 or later, or 7.5% per year for those born earlier.

Here’s a formula to use to help calculate the delay factor and benefit amount for your situation:

 

1.  Enter your Full Retirement Age, years and months:
2.  Enter the age you plan to file for benefits, years and months (if after 70, enter 70y 0m):
3.  Subtract line 1 from line 2 in months only
4.  If your FRA is less than 66, multiply line 3 by .00625; otherwise multiply line 3 by .006667
5.  Add 1.00000 to line 4
6.  Multiply line 5 by your PIA.  This is your increased benefit amount.

 

Let’s run through an example.  The individual from above, with a FRA of 66 years and 2 months, and a PIA of $2,000, decides to file for benefits at the age of 68 years and 6 months.

1.  Enter your Full Retirement Age, years and months:

66y 2m
2.  Enter the age you plan to file for benefits, years and months (if after 70, enter 70y 0m):

68y 6m
3.  Subtract line 1 from line 2 in months only

28
4.  If your FRA is less than 66, multiply line 3 by .00625; otherwise multiply line 3 by .006667

.186676
5.  Add 1.00000 to line 4

1.186676
6.  Multiply line 5 by your PIA.  This is your increased benefit amount.

$2,373.35

 

And that’s it.  Hope this has helped you to better understand how your PIA and your benefit are related.

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Spousal Benefits are for One Spouse at a Time

Aug 12th, 2011
by jblankenship.
1 comment

This post intends to clarify a question that comes up repeatedly:  both spouses cannot collect Spousal Benefits at the same time.

If you stop and think about the mechanics of Spousal Benefits, it should become clear to you that this isn’t possible.  Below is a recap of the rules that are necessary for Spousal Benefits to work.

Modern differential, cut away to show structure
Image via Wikipedia

Rules for Spousal Benefits

1. In order for a spouse to file for Spousal Benefits, the other spouse in the couple must have filed for benefits as well.  It doesn’t matter if the other spouse is actually receiving benefits currently, just that he or she has filed for benefits.  In other words, he or she may file and immediately suspend benefits and the first spouse is still eligible for Spousal Benefits.

2. If the spouse begins receiving Spousal Benefits prior to Full Retirement Age (FRA), he or she must also be currently receiving his or her own retirement benefit at the same time due to deemed filing, and both benefits (retirement and spousal) are therefore permanently reduced.

3. On the other hand, if the spouse begins receiving Spousal Benefits at FRA or later, deemed filing is not in effect, and so he or she is not required to receive retirement benefits at the same time.

4. The Spousal Benefit is always a differential between the currently-filed PIA and the factor-applied PIA of the other spouse.  If Spousal Benefits are being applied for at FRA, the factor is 50%; it’s 35% at age 62, and phased for ages in-between.  This differential is then added to the current benefit.  If the spouse in question has not filed for retirement benefits (and of course is at FRA or older, see #3), then the Spousal Benefit differential is 50%, since there is no currently-filed PIA for that person.

Now, if all of that is confusing, don’t feel alone.  It’s a very confusing set of rules.  Let’s run through some examples to sort things out.

Spousal Benefit Examples

John and Priscilla are both age 62.  John has a PIA of $800, while Priscilla has a PIA of $2,000.  If John wants to file for Spousal Benefits now, he must file for his own benefit first, and it will be reduced to $600 since he’s filing early.  The second thing that must happen is that Priscilla must also be collecting her benefit (remember, File and Suspend isn’t available until you reach FRA).  Now John can also file for Spousal Benefits (in fact he must, if he is eligible when he files for his retirement benefit).  John’s Spousal Benefit will be reduced to 35% of Priscilla’s PIA minus his PIA. But wait a minute:  35% of Priscilla’s PIA is only $700, and John’s PIA is $800.  So the reduction means that John gets no Spousal Benefit at all.

How about if they decide to delay Priscilla’s filing until FRA.  So now, John still started his own retirement benefit at 62, so that portion of his benefit is permanently reduced.  Priscilla files for her own benefit now, at FRA.  Since she has done so, John is now eligible for the Spousal Benefit.  The differential is now 50% of Priscilla’s PIA minus John’s PIA ($1,000 – $800), which equates to $200.  This is added to John’s reduced benefit of $600, for a total benefit of $800.  Note that, even though they waited until FRA for John to file for Spousal Benefits, he will never receive 50% of Priscilla’s PIA, since his own benefit has been reduced by filing early.  Had he waited until FRA to file for his own retirement benefit, he could have a total benefit equal to half of Priscilla’s PIA.

So – if you’ve been paying attention you might wonder: Could Priscilla Suspend her benefits at FRA and still leave John eligible for the Spousal Benefit?  This way she could continue to accrue Delayed Retirement Credits (DRCs) on her larger benefit.  The answer is yes, she could.  Suspending Priscilla’s benefits would not change John’s situation at all.

There’s another way this could work out:  What if Priscilla files for her retirement benefit at FRA (and she could suspend, it makes no difference) and John delays filing?  Could John still receive a Spousal Benefit based on Priscilla’s record?  Yes – and if John has delayed filing, he has no currently-filed PIA to factor Priscilla’s PIA against.  So his Spousal Benefit will be 50% of Priscilla’s PIA, just the same as if he had filed for his own benefit at FRA as well.  This being the case, it makes sense for John to delay his own benefit, rather than filing for his own benefit at FRA.  This way his own benefit can increase by DRCs, so that at age 70 he will be eligible for a benefit that is actually greater than half of Priscilla’s PIA.

It could also play out the other way around: John could file for his own benefit at FRA, and Priscilla could then file solely for the Spousal Benefit, equal to half of John’s PIA (since she doesn’t have a currently-filed PIA).  In the example we’re working with here it doesn’t make sense to do this though, because it results in a much lower overall benefit.  But if the couple’s incomes were closer in size, such that John’s own PIA were greater than half of Priscilla’s PIA, and the ages were different, for example, this method could work out better for them.

The same could be true if Priscilla filed early.  Then once they reach FRA, John could file solely for Spousal Benefits and receive a benefit equal to half of Priscilla’s PIA, while still accruing DRCs on his own record.

So now we come to the crux of the matter, the question that started this post off from the beginning:  Can both John and Priscilla file solely for Spousal Benefits at FRA?  If you think about what’s required for Spousal Benefits to be available, you’ll have your answer.

Clearly, John could file solely for Spousal Benefits when he reaches FRA, but in order to be eligible, Priscilla must have filed for her retirement benefit (and could suspend).  On the other hand, Priscilla could file solely for Spousal Benefits when she reaches FRA, again under the condition that John must have filed for his own retirement benefit (and could suspend).

The act of filing for retirement benefits, whether suspended immediately or not, establishes the currently-filed PIA for that individual.  So, while John could still receive a small increase over his PIA in terms of a Spousal Benefit (half of Priscilla’s PIA is $1,000, minus his PIA of $800 equals $200), Priscilla doesn’t have that luxury.  Half of John’s PIA is only $400, and Priscilla’s PIA is $2,000, so there is no differential available for her Spousal Benefit since she’s already filed.

So the answer is: You can’t have receive Spousal Benefits for both spouses at the same time.  I hope this helps to clear things up.

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Deemed Filing

Jul 29th, 2011
by jblankenship.
6 comments

Many times the question comes up – Since my spouse has filed for Social Security retirement benefits, can I file for only the Spousal Benefit?

Files
Image by T a k via Flickr

This is certainly available for the individual that is at or over Full Retirement Age (FRA).  This is a common circumstance that many folks employ.  One spouse files for benefits and the other, hoping to achieve the full Delayed Retirement Credits (DRCs), while still receiving a benefit, files for the Spousal Benefit only.  This is a perfectly allowable method.  See this article for more information on filing for the Spousal Benefit only.

On the other hand, if you’re under FRA, this option is not available to you.  This is because, prior to FRA, if you file for the Spousal Benefit, you are deemed to have filed for your own benefit as well.  This is known as “deemed filing”, and it only applies when you’re under FRA.  The result of this action is that your own benefit will be permanently reduced, as will the Spousal Benefit that you’re filing for early as well.

This is a very important distinction to note, because the outcomes are completely in opposition to one another.  Filing for Spousal Benefit at FRA allows the individual to achieve the maximum DRCs and potentially maximize lifetime benefits; on the other hand, filing for Spousal Benefit at any time before FRA will permanently reduce the benefits you can achieve for your lifetime.

The balance to weigh out between these two options is the length of time that you’d receive the benefits – in other words, how long you’ll live.  If you end up living considerably past your early 80’s, the delay tactic would probably work out best for you.  If you don’t live as long, filing for both benefits earlier could work out better.  Or a possible “split the difference” tactic could be for you to file for your own benefit early and delay filing for the Spousal Benefit until FRA.  This would work best if there is a significant difference between the lower-earning spouse and the higher-earning spouse.

It should be noted that, in any case, for a person to file for Spousal Benefits, the other spouse must have filed for his or her own benefit.  And if that spouse is at or above FRA, he or she could have suspended receiving the benefit, this would not affect the other spouse’s options in filing for Spousal Benefits.

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Proposed Changes to the Inflation Index

Jul 22nd, 2011
by jblankenship.
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Inflation
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One of the many proposed changes that is being considered to help resolve the current budgetary issues is to change the index used to adjust Social Security benefits from the current method, using the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, to a much more conservative index known as the Chained Consumer Price Index for all Urban Consumers (or C-CPI-U).  (See this article on How Social Security COLAs are Calculated for more information.)

Unfortunately, the reason behind making this is change is the fact that it will ultimately save money for the Social Security system, directly at the expense of the beneficiaries of that system.  Here’s what you can expect:

As an example, the CPI-W indicates a year-over-year increase from June 2010 to June 2011 of 4.1%.  Over the same period, the C-CPI-U only shows an increase of 3.4%.

This is due to the factors used in calculating the C-CPI-U, which considers that as inflation increases, spending on certain items will decrease, since consumers will purchase cheaper items or less quantity of items as the prices increase.  The Bureau of Labor Statistics, who tracks these things and comes up with the indexes, suggests that the chained index more accurately reflects the way real-live consumers operate with regard to inflation.

Estimates by the actuaries for the SSA indicate that this change could result in a $1000 per year reduction of benefits (or actually, forgone benefit) by the age of 85.  The estimate is that over any 30-year span, using the C-CPI-U instead of the CPI-W would result in a 10% lower total benefit being paid out.

Each year’s increase, if this new index is put into place, is anticipated to be two- to three-tenths of a percent lower than the increase would have been under the current index.

The change in index is not only proposed for Social Security benefits but also for certain tax provisions as well, such as standard deduction, and tax rate tables.  In both cases, the taxpayer (at all levels, not just the “rich”) will be impacted negatively.

As always, the only way to try to impact this is to contact your representatives in Congress and let them know that you’re not in favor of having your miniscule increases reduced further in the name of budget cutting.  There are plenty of places where pork can be removed from the budget before hitting our seniors with this, in my opinion…

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Coordinating the Survivor Benefit With Your Own Benefit

Jul 1st, 2011
by jblankenship.
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Flowering Feijoa
Image by Tatters:) via Flickr

If you’re a widow or widower and you are eligible for Social Security Survivor’s Benefits based on your late spouse’s record, you have some decisions to make that could affect your overall benefits.

Timing the receipt of benefits is, as with all Social Security benefits, the primary factor that you can control.  If you have worked over your lifetime and you have a retirement benefit based upon your own record coming to you, it becomes even more important how you time receipt of your own benefit versus the Survivor’s Benefit.

If your own benefit will be greater than the Survivor Benefit, it could be useful beneficial to you in the long run to take the Survivor Benefit as early as possible (as early as age 60) even though it will be reduced.  You could then continue receiving this reduced benefit for several years to your FRA and then switch over to your own benefit, which will be higher and unreduced at that point.

On the other hand, if the Survivor Benefit would be higher than your own benefit, you could take your own benefit early (reduced, of course) and then switch over to the Survivor Benefit later, at FRA.

By using one of these methods you are able to receive *some* benefit earlier-on in your life, and then switch over to the higher benefit later.  Just keep in mind that earnings limits and other reductions will apply.  Also, these same options are available for ex-spouse widows and widowers as well, as long as you haven’t remarried.

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How Survivor Benefits are Treated

Jun 10th, 2011
by jblankenship.
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Survivor
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Social Security Survivor Benefits are much different from Spousal Benefits in several ways.  In fact, there’s very little to compare between the two.  Here are the primary things that you need to know about Survivor Benefits:

  • Survivor Benefits can be claimed as early as age 60.  Of course, as with all early claims for benefits, the amount will be reduced if you claim earlier than Full Retirement Age (FRA). At age 60 your Survivor Benefit would be reduced to 71.5% of your late spouse’s benefit amount (or PIA if he or she wasn’t at FRA).
  • Survivor Benefits are based upon 100% of the amount of benefit (at your FRA) that the deceased spouse was or should be receiving, whereas Spousal Benefits are based upon the PIA, and then only at a 50% maximum rate.
  • Survivor Benefits can also be applied for separately from your own retirement benefit – meaning that you can receive Survivor Benefits while delaying receipt of your own retirement benefit (if it’s higher) in order to receive Delayed Retirement Credits up to age 70.
  • Survivor Benefits are only payable if the surviving spouse has not remarried before age 60.  After age 60, the surviving spouse can remarry and still receive Survivor Benefits based upon the deceased spouse’s record.
  • A disabled surviving spouse can collect benefits as early as age 50 – at the same rate as if waiting to age 60 – 71.5% of the deceased spouse’s benefit.
  • If a surviving spouse is caring for a child under the age of 16, Survivor Benefits can be claimed until the child or children are over age 16.  This benefit is equal to 100% of the deceased spouse’s benefit (or PIA if the deceased spouse was not receiving benefits).
  • Survivor Benefits can also be paid to children of the decedent, provided they are under age 19 and a full time student.  If the child is disabled (prior to age 22), Survivor Benefits can still be paid to the child after age 19.  The child’s Survivor Benefit is at a 75% rate of the decedent’s benefit.

These Survivor Benefit rules also apply to ex-spouses who become widows or widowers, as long as the ex-spouse was married to the ex-spouse for at least ten years.

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A File and Suspend Review

May 20th, 2011
by jblankenship.
3 comments

I get a lot (a LOT) of questions about the File and Suspend tactic for Social Security benefits, so I thought some more review would help.  For the uninitiated, File and Suspend is a tactic that married couples can use to help maximize their total Social Security benefits.  In this post I’ll try to cover some of the more common questions.

File and Suspend works like this: One of the two in the couple can file an application for Social Security benefits and then immediately suspend in order to not receive the benefits. This can allow the other spouse to utilize the first spouse’s record to receive a Spousal Benefit.  Other eligible dependents (such as children under 18) can also receive benefits based upon the filed and suspended record.

PortraitLHvers1870
Image via Wikipedia

There are a few factors to note about File and Suspend:

  • You must be at least at Full Retirement Age (FRA) to File and Suspend.
  • Either spouse can File and Suspend, but not both.  By Suspending, you are not eligible to receive a Spousal Benefit.
  • If the non-Suspending spouse is under FRA and begins receiving Spousal Benefits, he or she will no longer be earning Delayed Retirement Credits (DRCs) on his or her own record.  Plus both the Spousal Benefit and the “own” benefit of the non-suspending spouse will be permanently reduced by filing before FRA.
  • The spouse that has not Filed and Suspended can receive Spousal Benefits based on the other spouse’s record at any age over 62 – but the amount of the benefit will be reduced if the spouse receiving Spousal Benefits is less than FRA.  At FRA, the Spousal Benefit would be 50% of the filed and suspended worker’s Primary Insurance Amount.

Why File and Suspend?

The main reason for File and Suspend is to allow the Suspending spouse to delay receiving benefits, earning up to 8% in Delayed Retirement Credits (DRCs) per year.  This will not only increase the amount of benefit that the Suspending spouse will receive when he or she files for benefits, but it will also increase the amount of Survivor Benefits for the other spouse.  At the same time, the other spouse can be receiving Spousal Benefits based on the first spouse’s record.

Here’s an example: The husband has a PIA amount of $2,300, and his wife has a PIA amount of $1,500.  The couple are both at FRA.  The husband Files and Suspends, and the wife can immediately begin collecting a Spousal Benefit equal to 50% of the husband’s PIA – $1,150.  At the same time, both spouses are accruing DRCs on each of their own records.  Both of them can delay filing for benefits on his and her own record until age 70, at which point they will each have achieved the maximum benefit on their own records.  When she reaches age 70, the wife will file for her own benefit and discontinue receiving the Spousal Benefit.  The husband will also re-file at age 70.

Another example: The wife has a PIA amount of $2,000, and the husband has a PIA of $1,000.  The wife is at FRA, and the husband is a year younger.  When the husband reaches FRA, the wife could File and Suspend, and the husband can begin receiving a Spousal Benefit of 50% of the wife’s PIA, delaying filing for his own benefit in order to receive the DRCs.

The husband in the second example could choose to begin receiving Spousal Benefits before FRA.  In that case though, he would not be eligible for DRCs.  This is due to the rule that requires a “deemed filing” if you file for Spousal Benefits prior to FRA.  A deemed filing is the same has having filed for your own benefit, and as such your benefit and the Spousal Benefit will be reduced, permanently, due to the early filing.

A third example: The husband has a PIA of $2,000 and the wife has a PIA of $500.  The husband is two years younger than the wife, she is 66 (FRA) and he is 64.  The wife has begun receiving her own benefit at FRA.  Since the husband is not yet at FRA, File and Suspend is not available to him.  However, once he reaches FRA, he can File and Suspend, and the wife can begin collecting a Spousal Benefit, increasing her own benefit to 50% of his PIA.

It’s important to note that for all of the examples, the spouse that is described as having Filed and Suspended could just as easily filed for his or her own benefit and begun receiving it immediately, rather than suspending.  This would also enable the other spouse to begin receiving Spousal Benefits.  The spouse that is collecting benefits on his or her own record would just no longer be accruing DRCs for his or her future benefit.

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