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Social Security spousal benefit

File and Suspend in the Crosshairs?

Image courtesy of chanpipat at FreeDigitalPhotos.net

Image courtesy of chanpipat at FreeDigitalPhotos.net

Apparently in the President’s recent budget documentation there is a brief mention of a desire to curtail the availability of File and Suspend as an option for Social Security benefit filing.

The reason, it appears, is that the Obama administration views this option as one used only by high income folks to take advantage of the government with this valuable option.

The problem with that viewpoint is that it is used by folks of all income levels, and in fact if it is taken away this could cause some big problems for folks who can least afford to lose benefits. As if anyone can afford to lose benefits, right?

Here’s what happens with File and Suspend: a Social Security benefit recipient has a spouse and/or children that would be eligible for benefits based on his or her record when he or she files for benefits.  If he or she happens to be at or older than Full Retirement Age (FRA, age 66 for folks born before 1955, up to age 67 for folks born in 1960), he or she can file and immediately suspend his or her own benefits, allowing his or her spouse or young children to receive benefits immediately.  By suspending his or her own benefit, he or she will earn delayed retirement credits of 8% per year, which will later provide him or her with an enhanced retirement benefit.

This is exactly the same outcome for the spouse and dependents that would play out if the benefit recipient was to file and *not* suspend benefits – and actuarially the end result should be the same for the primary benefit recipient as well.  Where use of File and Suspend makes a big difference is much later.  In the event of the recipient’s untimely early death, the spouse will receive a much enhanced survivor benefit.  And if the recipient lives a long, healthy life, he or she will enjoy the enhanced benefit as well.

I can’t see where this is an issue of higher income versus lower income, as has been reported.  I believe that the File and Suspend option is being unfairly vilified without complete understanding. The fact that folks with higher incomes have been more likely to choose File and Suspend as an option shouldn’t be cause to eliminate the option for everyone.  As I mentioned, actuarially this should have little or no effect.

The likely reason that higher income folks have been more likely to choose this option is because higher income folks are more likely to seek guidance when filing for Social Security benefits – but again, the word is getting out about this option and more folks are choosing it (once they talk the SSA folks into understanding it!).

As well, often folks with lower incomes and future Social Security benefits may not be in a position to delay receipt of benefits, making File and Suspend a good idea but not viable.

I hope that this gets dropped.  Doing away with File and Suspend will have no beneficial impact on the future viability of the Social Security system, in my opinion.  All this is likely to do is make a lot of software developers rewrite their software to remove this option.  If looking for provisions to remove in order to make the system a bit more cost-effective, perhaps the restricted application should be considered.  This one may actually cost the system a bit extra, but so few people even know about it that it’s unlikely.

The real answer is to either re-do the overall calculations, put in place more effective means testing, and/or change the tax structure, perhaps to include all earned income instead of the capped income as the system works now.  Until we face these factors and make real changes, we’re likely to continue on the path to unsustainability within the Social Security system.

The Unmarried Penalty With Social Security (and the Divorce Advantage)

Okay, penalty probably is the wrong term for it – maybe the better term would be short-change.

You’ve undoubtedly heard of the marriage penalty for income taxes – this is where it can be beneficial tax-wise for two people to remain single than to be married and be forced to file either jointly or separately.  The tax code contains several ways that this is true.  But did you know that there is a way that married folks might level the field versus singles in the Social Security law-scape?  Plus, divorced folks may also have an advantage over singles AND married folks who were never divorced (or who divorced after marriage of less than ten years)?

The Marriage Advantage

When a worker remains single over his or her working life, there is an inequality in benefits paid out based on his or her record when you compare it to that of a married person.  Here’s what happens:

Let’s say Dave and Eddie are the same age, with the same earnings record over their lifetimes (in fact they worked side-by-side for most of their careers).  Dave has been single his whole life, but Eddie married Valerie 30 years ago and they remain married.  Both Dave and Eddie are 66 this year, and they both file for their Social Security benefits, at a rate of $2,000 per month.

At the same time, Valerie didn’t work very much outside the home (not enough to be eligible for Social Security benefits on her own record – she only worked one day at a time). However, since she’s also 66 this year, she can file for a spousal benefit based on Eddie’s Social Security record, in the amount of 50% of Eddie’s age 66 benefit, or $1,000.

So, for the exact same amount paid into the Social Security system over the years, Eddie’s earnings have generated benefits 50% greater than Dave’s.

And it doesn’t stop there – if Dave and Eddie both live to age 80, but then Valerie lives another five years after Eddie’s death, she will receive a survivor benefit equal to Eddie’s benefit for those additional five years.  There is no survivor benefit paid on Dave’s record since he was never married.

The Un-Divorced Penalty

When a worker is married for more than 10 years, gets divorced and then remarries, each spouse that he is either currently married to or was married to for more than ten years is eligible for spousal benefits based upon the worker’s record.  In this way, the Social Security record of someone who has been married more than once (if the marriage(s) lasted at least 10 years before divorce) will bear even more fruit than the record of Eddie above and definitely more than Dave.  For example:

Tom was married to Jane for 22 years and then they divorced.  Not long after, he married Dana and remains married to her to this day.  Jane never remarried, and she never worked outside the home – and neither did Dana.  All three, Tom, Jane and Dana are 66 this year.  Tom decides to file for his own Social Security retirement benefits at $2,000 per month, and Dana files for the spousal benefit based on Tom’s record, for $1,000 per month.  Jane also decides to file for Spousal Benefits based on Tom’s record as well (Jane didn’t remarry after her divorce from Tom), and her benefit is $1,000 per month as well (50% of Tom’s age 66 benefit).

So, with the exact same earnings record as Dave and Eddie (from our first example), benefits paid on Tom’s record amount to $4,000 per month – double the benefits paid on Dave’s record, and 33% more than the benefits paid on Eddie’s record.

The Inequity of Spousal Social Security Benefits

Cover of "Sid and Nancy: The Criterion Co...

Cover of Sid and Nancy: The Criterion Collection

We’ve covered a lot of ground talking about Spousal Benefits and strategies for filing, and other facts to know about Spousal Benefits.  But did you realize that there is a flaw in the process that shortchanges some couples when it comes to Spousal Benefits?

Here’s a pair of example couples to illustrate the inequity:

The first couple: Jane has worked her entire life and has earned a Social Security benefit of $2,600 per month when she retires.  Her husband Sam has been a struggling artist his whole life, as well as a stay-at-home Dad to their three kids when they were young.  As a result, Sam has never generated enough income on his own to receive the requisite 40 quarter-credits to have a Social Security benefit of his own.

The second couple: Sid and Nancy have both worked and had earnings within the Social Security system over their lifetimes.  Sid had a higher level of earnings, generating a Social Security retirement benefit of $2,600 when he’s ready to retire.  Nancy operated a home-based business part-time while the kids were young, and worked outside the home for several years after they were all finished with high school.  As a result, Nancy has a retirement benefit of $1,000 built up for when she’s ready to retire.

The result is this: Both couples, if they file at Full Retirement Age (FRA), will be eligible for the exact same benefit amounts. For the sake of my illustration and to keep things simple, all four individuals reach FRA at the same time.

Jane files for her own retirement benefit of $2,600.  Sam, without an earnings record, can now file for the Spousal Benefit in the amount of $1,300.  Altogether they will receive $3,900 per month.

Sid also files for his own retirement benefit of $2,600.  Nancy then files for her own benefit of $1,000, and since she’s eligible to file for the Spousal Benefit, she will receive a Spousal Benefit offset amount of $300 – bringing her total benefit to $1,300.  Altogether they will receive $3,900 per month.

Exactly the same benefit amount.  Nancy receives nothing extra from Social Security for her earnings record.

One Difference

There is one difference in the options available to these two couples.  Having read my columns on the subject, Sid and Nancy decide that Nancy should file a restricted application for Spousal Benefits only, which would result in the same $1,300 per month benefit.  Nancy can then later, at age 70, file for her own benefit which has been increased due to Delayed Retirement Credits.  This amounts to a 32% increase, which would bring her total benefit to $1,320 per month at that time.

So for her work record, Nancy can increase her overall benefit by $240 per year.  Doesn’t seem fair, does it?  Don’t get me wrong, I don’t think a stay-at-home parent should be penalized and receive nothing for his or her time in that critical occupation, nor do I think that spouses with low or no income should suffer either.  But it does seem that there should be *some* additional benefit for the lower-earning spouse who has generated a benefit on his or her own record.

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Social Security and the Non-Citizen Spouse

Citizenship ceremony, 1960

Citizenship ceremony, 1960 (Photo credit: Oregon Nikkei Legacy Center)

With our increasingly global society today, many married couples are made up of a US citizen and a non-citizen.  In some cases, the non-citizen spouse has never been covered by the US Social Security system – he or she may have been covered by another system in his or her home country.  In other cases, the non-citizen spouse may have worked in a Social Security-covered job while living in the US, and so may have generated a Social Security earnings record of his or her own.

At any rate, it is important to know that your lawful spouse who is a non-citizen may be eligible for Social Security benefits based on your earnings.

As long as other qualifications are met (length of marriage, age of the spouse, and your filing status with Social Security), your non-citizen spouse may qualify for Spousal Benefits based upon your record.  By the same token, your non-citizen spouse will also be eligible for Survivor Benefits upon your passing, as long as all other qualifications are met.

The good news is that if the non-citizen spouse is receiving a pension from another system (such as in his or her home country), this will not trigger GPO (Government Pension Offset) treatment of the Spousal or Survivor Benefits.  These foreign pensions only trigger WEP (Windfall Elimination Provision) impact, and then only to the individual receiving the pension’s own retirement benefit, not the Spousal or Survivor Benefit.

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Can Both Spouses File a Restricted Application for Spousal Benefits Only?

Couple married in a shinto ceremony in Takayam...

Couple married in a shinto ceremony in Takayama, Gifu prefecture (Photo credit: Wikipedia)

In the wake of my post last week, Can Both Spouses File and Suspend?, I received multiple iterations of the same question, which is the topic of today’s post: Can Both Spouses File a Restricted Application for Spousal Benefits Only?

Unlike the original situation where technically it is possible to undertake but the results would not be optimal, in this situation it’s not technically possible. (The one exception is in the case of a divorced couple. For the details on how it works for divorcees, see this article: A Social Security Option Strictly for Divorced Folks.)

The way the restricted application for spousal benefits works is that there are three rules that must be met:

  1. You must be at or older than Full Retirement Age (FRA)
  2. Your spouse must have filed for his or her own retirement benefit – does not have to be actively receiving benefits, he or she could have filed and suspended
  3. You must not have filed for your own retirement benefit

As you can see, #2 & #3 cannot both be done by the same person in the couple.  It is not possible to (#2) file for your own benefit, enabling your spouse to file a restricted application and (#3) not file for your own benefit, enabling you to file a restricted application.

Therefore, only one of the members of a currently-married couple can file a restricted application for spousal benefits.

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Can Both Spouses File and Suspend?

portrait of C. A. Rosetti

portrait of C. A. Rosetti (Photo credit: Wikipedia)

This question continues to come up in my interactions with readers, so I thought I’d run through some more examples to illustrate the options and issues.  The question is:

Can both spouses file and suspend upon reaching Full Retirement Age, and collect the Spousal Benefit on the other spouse’s record, allowing our own benefit(s) to increase to age 70?

Regarding file & suspend and taking spousal benefits, although technically both of you could file and suspend at the same time, only one of you *might* receive spousal benefits at that point. The reason is that once you file (regardless of whether you suspend) the spousal benefit is then limited to the amount over and above your own Primary Insurance Amount (PIA), up to 50% of your spouse’s PIA. (Remember, PIA is the amount of benefit that you would receive at exactly Full Retirement Age.)

For example, if you and your wife have PIAs of $2000 and $800 respectively and you both file and suspend, your wife could file for spousal benefits of $200 (half of your PIA minus her PIA equals $200). However, you would not be eligible for a spousal benefit since half of your wife’s PIA minus your PIA is a negative number.

Now, if we change the numbers so that you have a PIA of $2,000 and your wife’s PIA is $1,200 and both of you file and suspend, neither of you would be eligible for a spousal benefit. Half of either of your PIA’s is less than the PIA of the other, so no spousal benefit is available if both file and suspend at the same time.

Typically this works out best if only one spouse files and suspends, usually the one with the greater PIA, and the other spouse files a restricted application for spousal benefits only. Using my first example numbers, if you filed and suspended and your wife filed a restricted application for spousal benefits only, she would be eligible for a $1,000 spousal benefit, and both of your own benefits would accrue Delayed Retirement Credits (DRCs) up to age 70. At that point, again, using the first example numbers, you would be eligible for a benefit of $2,640, and she would be eligible for a benefit of $1,056.

Another way this could be done would be for your wife (again, working with the first numbers) to file for her own benefit at Full Retirement Age, receiving $800 per month.  Then you could file a restricted application for spousal benefits only, and receive half of her PIA, or $400 per month.  You’d continue to receive this for four years until you reach age 70, at which point you would file for your own benefit, enhanced by the DRCs to $2,640.  At this point your wife could file for spousal benefits, increasing her own benefit to half of your PIA, or $1,000.  This second option actually gives you more money over the four-year span from FRA to age 70, but your wife’s benefit would be limited to a maximum of $1,000 (rather than $1,056) for her lifetime or yours, whichever is shorter.

At any rate, hopefully this resolves the question once and for all – while technically both spouses can file and suspend at the same time, there’s not a lot of reason to do so as the spousal benefits would only be available to one of them, at most.

If you have other situations that you’d like to review, leave a comment below and I’ll do my best to answer promptly.

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Social Security Spousal Benefit at or After FRA

Actress Alice Terry

Actress Alice Terry (Photo credit: Wikipedia)

Some time ago I wrote an article on the Social Security Spousal Benefit Before FRA, and an astute reader (thanks, SD!) pointed out the obvious to me: I hadn’t written the complementary piece on calculating the spousal benefit at or after FRA.  So let’s get right to it!

When you wait until Full Retirement Age to file for spousal benefits, there is no reduction of that portion of your benefits.  In other words, the spousal benefit will be based on 50% of your spouse’s PIA minus your own PIA, and then this amount will be added to whatever retirement benefit that you’re receiving on your own record.  This additional benefit can’t increase your total benefit to a point greater than 50% of your spouse’s PIA.

Here are some examples:

Started own benefits early

Alice and Terry are both age 66.  Alice started her own benefit early, at age 62.  Her PIA is $800, and Terry’s PIA is $2,000.  Since she filed early, Alice’s monthly benefit is reduced to $600, 75%, of her PIA.  Now at age 66 (FRA for both of them) Terry files and suspends, allowing Alice to file for spousal benefits.  The calculation is as follows:

50% of Terry’s PIA ($1,000) minus Alice’s PIA ($800) equals $200

Therefore, when Alice files for spousal benefits, she will receive an additional $200 on her monthly check, for a total of $800.

Started own benefits at FRA

If Alice had delayed filing for her own benefit until she was at FRA, her own benefit would be $800.  If Terry has filed for his own benefit or filed and suspended, Alice can now file for the spousal benefit.  The calculation is as follows:

50% of Terry’s PIA ($1,000) minus Alice’s PIA ($800) equals $200

This $200 is then added to Alice’s own retirement benefit, so her total benefit amount is now $1,000.  This is equal to 50% of Terry’s benefit, so there is no further reduction.

Started own benefits after FRA

If Alice was two years older than Terry, for example, Alice could have delayed starting her own benefit to an age later than FRA, and therefore her benefit would be increased by Delayed Retirement Credits of 8% per year.  If she filed for her own benefit at age 68, her own benefit would now be $928, an increase of 16%.  When Terry reaches FRA and files for his own benefit (or files and suspends), she is now eligible for the spousal benefit.  The calculation is as follows:

50% of Terry’s PIA ($1,000) minus Alice’s PIA ($800) equals $200

Since adding the spousal offset to Alice’s own benefit would result in a total monthly benefit greater than 50% of Terry’s PIA, the overall increase for the spousal benefit would be reduced to $72, so that Alice’s total monthly benefit would not be greater than half of Terry’s PIA, the maximum benefit due to spousal increase.

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A Good Reason to File and Suspend: Back Benefits

Man wearaing suspenders

Man wearaing suspenders (Photo credit: Wikipedia)

We’ve discussed the file and suspend option in the past as it relates to enabling your spouse or dependents to begin receiving benefits based on your record while you delay filing to accrue the delay credits.  But there’s another reason that you might want to file and suspend at Full Retirement Age (FRA) – and this one has little to do with a spouse, even single folks can take advantage of this.

When you file and suspend, what you have done is to establish a filing date notation on your record. By establishing a filing date notation, as mentioned before, your spouse and dependents can file for benefits based upon your record.  In addition, since there is a filing date on your record, you are eligible to change your mind about delaying your filing to a later date and receive your benefits retroactively from that point to the point when you “unsuspend” your filing.  Then from that point forward you will receive your benefits monthly as if you had filed (and not suspended) on the original date.

An important point is that you cannot file and suspend until you have reached Full Retirement Age.  This option is not allowed prior to FRA.

Why would you want to do this?

There may be more reasons, but the one that immediately comes to mind is if you have a reason to believe that your lifespan will be much shorter than the crossover age, typically around age 80.  After the crossover point, your lifetime benefits from delaying your retirement become more than if you had filed earlier.

Commonly when the decision is made to delay benefits past FRA, you are assuming that it will be beneficial for you in the long run – in other words, you anticipate that you’ll live beyond the crossover age.

For example, you could file and suspend at age 66 (FRA) and then later, at age 68 you are diagnosed with a significant health problem that will likely shorten your life.  Instead of waiting until age 70 to file for your benefits, or unsuspending your benefits at your current age, you could ask to unsuspend your benefits as of the date that you originally filed at FRA (age 66).  You would then be eligible to receive back-benefits from the point of the original filing in a lump sum, and then you’d receive benefits each month going forward at the rate you would have received at age 66 (plus COLAs).

If you’re single and delaying your benefits past Full Retirement Age, I can’t think of any reason why you wouldn’t want to do this.  There’s always the possibility that you will have a change in your outlook (heaven forbid).  If that were the case, the back-benefits could come in really handy, not to mention that you could receive ongoing benefits from that point on.

On the other hand, if you’re married you need to consider if there’s a possibility that it might be beneficial to receive spousal benefits based on your spouse’s record.  If so, then you wouldn’t want to file and suspend, because this would substantially reduce or eliminate any spousal benefit that you would be eligible for.  Keep in mind as well that if you unsuspend your benefit, your surviving spouse and dependents’ benefits will be based on the lower benefit level (when you originally filed).

For example, Tom and Joy are age 66 and 62 respectively.  Tom’s expected age 66 benefit is $1,800 per month, and Joy’s is $800.  Joy intends to begin receiving her own benefits right away at age 62, and as such her benefit will be reduced to $600, or 75%.  Tom has a choice now: he could file and suspend, or he could file a restricted application for spousal benefits only.

If Tom files and suspends, Joy will be eligible for reduced spousal benefits of an additional $70 on top of her reduced retirement benefit, for a total of $670 per month.  However, if Tom were to file a restricted application for spousal benefits only, he would be eligible for $400 per month.  So this way, Tom and Joy are receiving a total of $1,000 per month.  In this case Tom would not want to file and suspend his benefits at FRA – unless he’s concerned about the possibility of a shortened lifespan.

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Important Ages for Social Security

That Certain Age

That Certain Age (Photo credit: Wikipedia)

There are many specific important ages to know as you’re planning your Social Security filing strategy. The ages can become quite confusing and jumbled together as you plan.  It’s important to know at what age you can take specific actions, as well as what the consequences can be if you take a particular action earlier than it is appropriate.

These ages are pervasive throughout this blog and my book, but I hadn’t compiled all of the important ages into a single place, so listed below are what I have determined to be the most important ages with regard to Social Security, as well as what is important about that age.  Enjoy!

Age Description
22-62 This is the forty years during which your monthly earnings are compiled to develop your initial Average Indexed Monthly Earnings (AIME).  This figure is then used to determine your Primary Insurance Amount (PIA) which is used to calculate your retirement benefit, your spouse’s and dependents’ benefits, survivor benefits for your beneficiaries, and the family maximum benefit amount.
50 The first age at which you can file for survivor’s benefits (also known as widow(er)’s benefits).  In order to file for survivor’s benefits at this age, you must be permanently disabled.  Benefits at this age will be reduced – to the same amount as if the survivor was age 60 and not disabled.
60 The first age at which you can file for survivor’s benefits if you are not disabled. (see 50 above if disabled) Survivor benefits at this age will be reduced to the minimum amount.
62 The earliest age at which you can begin receiving your own retirement benefit and spousal benefit if you are eligible.  Both benefits would be reduced if taken at this age.
62-FRA Between these ages (starting at age 62 and before reaching FRA), if you file for your own benefit and you are eligible for the spousal benefit (meaning your spouse has filed), you are deemed to have filed for both benefits.  Likewise, during this period if you file for the spousal benefit you are deemed to have filed for both benefits.Within the 3 years immediately before FRA, your benefit is reduced by 5/9% each month, or 6.667% per year. If you file more than 3 years before FRA, reduction is 5/12% per month for each month greater than 3 years before FRA, or 5% per year.
66 Full Retirement Age (FRA) for folks who were born during the years 1943 to 1954.  This is the first age when you can file for the full, unreduced retirement benefit.  You can also file a restricted application for spousal benefits only at this age – if your spouse has filed for his or her own benefit.At FRA, spousal benefits are maximized – there is no increase by delaying receipt of spousal benefits after this age.

This is also the FRA for survivor’s benefits if born between the years of 1945 and 1956.  This means you’d have no reduction to survivor benefits if you delay filing for them until this age.

66 & 2 months FRA for retirement benefits if born in 1955 (see 66 for description).  FRA for survivor benefits if born in 1957.
66 & 4 months FRA for retirement benefits if born in 1956, and FRA for survivor benefits if born in 1958.
66 & 6 months FRA for retirement benefits if born in 1957; FRA for survivor benefits if born in 1959.
66 & 8 months FRA for retirement benefits if born in 1958; FRA for survivor benefits if born in 1960.
66 & 10 months FRA for retirement benefits if born in 1959; FRA for survivor benefits if born in 1961.
67 FRA for retirement benefits if born in 1960 or later; FRA for survivor benefits if born in 1962 or later.
FRA-70 Between these ages, if you have not filed for your own benefit (or have suspended), your retirement benefit will increase by 2/3% per month, or 8% per year (12 months).
70 At this age, your delayed benefit is at its maximum level.  There are no increases by delaying receipt of benefits past this age.

If I’ve left out any important ages, let me know so that I can add them to the list.  Just leave a comment below!

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The Real Breakeven Point for Delaying Your Own Social Security Benefit and Taking the Spousal Benefit

Balanza de la Justicia

Balanza de la Justicia (Photo credit: Wikipedia)

Recently there was an article that I was involved with where we were reviewing the strategies of taking a restricted spousal benefit and therefore delaying your own benefit versus taking your own benefit.  An astute reader (Thanks BL!) pointed out that there was a bit of a flaw in the logic on the costs of delaying, and therefore a significant difference in the breakeven period.

Briefly, the example went as follows:

Say the wife, Michelle, has a PIA of $1,300 and Mike has a PIA of $2,500.  They’re both age 66, and Michelle files the restricted app and is eligible to receive $1,250 (half of Mike’s), which is only $50 less than she would receive if she filed for her own benefit. After four years of delay, she has given up $2,400 ($50 times 48 months) but now her benefit is $1,716 – $416 more than she would have received at age 66. At that rate, she makes up the foregone $2,400 in less than six months.

Here’s the problem:

The example assumes that there is a one-time choice to be made between taking the spousal benefit and taking Michelle’s own benefit.  In reality, this choice is made every single month after that first month.  Michelle is choosing to continue receiving the spousal benefit versus her own benefit. Her potential foregone benefit increases with each passing month!  So in other words, the $2,400 that I estimated above was actually very much understated.

After the first month has passed, if Michelle makes the choice to stay with the spousal benefit, the amount of increased benefit that has been foregone is now increased to $58.70 for the current month.  This is because the Delayed Retirement Credit (DRC) is 2/3% per month of delay past her Full Retirement Age.  So, since Michelle is making the choice every month to continue receiving the spousal benefit, the amount of her own foregone benefit increases every month between FRA and age 70.

For the example at hand, if you consider the increase every month, Michelle is actually foregoing a total of $12,176.  This is, as noted, a significant difference from the figure of $2,400 that I used in the original article.  The recommendation is the same though, as it still makes sense for Michelle to delay her own benefit until age 70 and receive the spousal benefit during that four years.

The amount of Michelle’s own benefit that she has foregone during this four year period, $12,176, will be made up by her increased retirement benefit that she can receive upon reaching age 70.  At this stage (not including Cost of Living Adjustments) she will be eligible to receive $1,716, which is an increase of $466 per month.  With this additional benefit amount, Michelle’s breakeven point against the foregone $12,176 is a little less than 30 months, or 2½ years.

Understand that this outcome is specific to the example that I outlined above.  The amount of your own benefit and the amount of the spousal benefit will change the outcome and breakeven point for your own circumstances.  The other point that is not worked out with this example is the overall couple’s benefit – which is important to work out as well.  If Michelle chose to use her own benefit at FRA, Mike could file a restricted application at that point.  This would result in a less-optimal outcome, but these projections should be done as well in working out your plan for Social Security benefits.

I hope the original article didn’t cause too much confusion – this should set the record straight.

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