This article provides several examples of Social Security spousal benefit calculations and coordination to help you understand how it all works.
Deemed Filing
Calculating the Spousal Benefit
The Spousal Benefit is one of the most confusing aspects of the Social Security retirement benefit system. It may be vaguely familiar that the spouse with the lower wage base is eligible for 50% of the higher wage base spouse’s benefit, or something like that… How is the Spousal Benefit actually calculated? Calculating the Spousal Benefit Here’s how the Spousal Benefit is calculated: First of all, the Spousal Benefit is based upon a differential – between 50% of the other spouse’s Primary Insurance Amount (PIA) and his or her own PIA. So what’s the calculation? Let’s look at an example: Let’s say there’s a couple, both the same age with a Full Retirement Age (FRA) of 66, and the wife has a substantially lower wage base (and therefore a lower benefit) than the husband. At age 62, she files for the her own reduced benefit based on her own record, […]
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New Deemed Filing Rules
When the Bipartisan Budget Act of 2015 was passed, there were a few changes made to Social Security rules. One of the rules that changed significantly is the deemed filing rule. The old deemed filing rule The current or old deemed filing rule works as follows: When an individual who is under Full Retirement Age (FRA) is eligible for a spousal benefit in addition to a benefit based upon his or her own record files for either benefit, he or she is deemed to have filed for all benefits that he or she is eligible for at that time. At any other time (other than the time of application for benefits) deemed filing does not apply. For example, Anna and John are both nearing 62 years of age. Anna has a PIA (FRA benefit) of $800, and John has a PIA of $2,000. Anna is planning to file for her […]
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The Death of File & Suspend and Restricted Application
The Bipartisan Budget Act of 2015’s Aftermath Note: the original text had a placeholder date of May 3, 2016 as the final date for File & Suspend. This date has been finalized as April 30, 2016 and the text below corrected. — jb With the passage of the Bipartisan Budget Act of 2015, an era of flexibility in Social Security claiming strategies comes to an end. Long gone is the ability for one spouse to delay benefits while the other collects benefits based on the first spouse’s record. Also gone is the option of collecting spousal benefits while delaying your own benefits to accrue the delay credits. We’ll go over the actual changes below, based upon your date of birth – because some of the provisions will remain for a while, and could be useful if you’re the right age. Born in 1953 or earlier If you were born in […]
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Understand Deemed Filing to Avoid a Surprise in Your SS Strategy
There’s nothing worse than feeling as if you have your Social Security filing strategy all lined out, when a rule like deemed filing rears its ugly head to throw your strategy off track. Here’s an example: Steve and his wife Edie are ages 66 and 61 respectively. The plan is for Steve to file for his Social Security benefit now (at his Full Retirement Age), and for Edie to file for her own benefit when she reaches age 62. Then Edie will wait until she reaches Full Retirement Age of 66 to file for the Spousal Benefit based on Steve’s record, which will increase her benefit by $500 at that time.
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Clarification on Questions About Spousal Benefits
Note: with the passage of the Bipartisan Budget Act of 2015 into law, File & Suspend and Restricted Application have been effectively eliminated for anyone born in 1954 or later. If born before 1954 there are some options still available, but these are limited as well. Please see the article The Death of File & Suspend and Restricted Application for more details. Since I’ve been receiving quite a few inquiries about certain aspects of the Spousal Benefit, I thought I’d put up an article with a few definitive statements about this confusing part of the Social Security system. 1. If you are eligible for a Spousal Benefit and you’re under Full Retirement Age, when you file for your own benefit, you are automatically filing for both your own benefit and the Spousal Benefit at the same time. This is known as the deemed filing rule. By “eligible”, we mean that […]
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Wealth Defense: When Should You Start Social Security Benefits?
The foregoing is a re-post of an article that I wrote which was included in The Motley Fool’s Rule Your Retirement newsletter. Enjoy! Want to double a chunk of your retirement income? It’s easy — just delay taking Social Security by about six years! OK, so it’s not really that simple. The time to apply for Social Security benefits is different for each individual; there is no magical “best age” for everyone. Thus, to maximize your benefit, it’s important to understand the consequences of choosing to apply at different ages. It all starts with the most important age: your full retirement age, or FRA (see table below). If you receive your Social Security retirement benefit before your FRA, the benefit will be reduced. The biggest reduction is at age 62, the earliest you can begin receiving benefits (except for widows and widowers, who can begin survivors’ benefits at 60). Year […]
Sterling Raskie, MSFS, CFP®, ChFC®
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