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 […]
spousal benefit
Important Ages for Social Security
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 […]
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The Real Breakeven Point for Delaying Your Own Social Security Benefit and Taking the Spousal Benefit
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 […]
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Restricted Application is Available via the Online Application
I learn something new almost every day. Today (well, not today but recently), I learned something about the online application for Social Security that I didn’t know: the restricted application for Spousal Benefits is available as a choice when you apply using the online application system! (If you want more information on why a restricted application is important, see this article about Leaving Money on the Table.) For quite a while now I’ve been telling folks that the best way to apply for the restricted application is to go to your local office. When you get there and explain that you want to submit a restricted application for Spousal Benefits only, the first person that you talk to will likely tell you that you can’t do this, because your own retirement benefit is greater than half of your spouse’s PIA, or something like that. Then my advice has been to […]
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Earnings Tests Apply to Spousal and Survivor Social Security Benefits As Well
If you’re receiving Spousal or Survivor Social Security benefits and you’re under Full Retirement Age, you need to know that any earnings that you have can have an impact on the benefits that you’re receiving. These are the same limits that apply to regular retirement Social Security benefits, and they apply in the same manner. For 2013, if you will not reach Full Retirement Age during this calendar year, the earnings limit is $15,120, or $1,260 per month. For every $2 over that limit that you earn for the year, your Social Security benefit will be reduced by $1. For example, if you earned $20,000 for the year, you are over the limit by $4,880, and you’ll lose $2,440 of your benefit. If you will reach Full Retirement Age in 2013, the earnings limit is $40,080, or $3,340 per month – and the treatment is different. In this case, for […]
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Are You Leaving Social Security Money on the Table? You Might Be, If You Don’t Understand and Use This One Rule
Note: with the passage of the Bipartisan Budget Bill 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. Many couples that have done some planning with regard to filing for Social Security retirement benefits have figured out how to coordinate between the higher wage earner’s benefit and the lower wage earner’s benefit. Often it makes the most sense to file for the lower wage earner’s benefit early, at or sometime near age 62, while delaying the higher wage earner’s benefit out to as late as age 70. This method allows for a maximization of those two benefits. If you’re really astute, you probably picked up on […]
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Can I Switch to My Spouse’s Benefit At FRA?
This is a question that comes up pretty frequently, in several different flavors. Basically, here’s the full question: I started benefits at age 62, and now I’m 66 (Full Retirement Age) – can I switch over to my spouse’s benefit now that I’m age 66? And will it be based on his benefit when he was 66, or his benefit now. (He’s 70 now, and has been collecting benefits since he turned 66.) There are a couple of questions being asked here, and I’ll cover them one-by-one. Can I switch to my spouse’s benefit? The wording here is troubling, because the asker specifically wishes to “switch” to another benefit. If an individual is already receiving retirement benefits, the spousal benefit is not a “switch”, but rather an “addition” to the retirement benefit. The second issue is implied, and maybe not troublesome to the question at hand. The Spousal Benefit at […]
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How Social Security Earnings Limits Impact Total Family Benefits
As we’ve discussed in the past, there are limits on the amount of earnings that a person can receive while also receiving Social Security benefits, if the person on whose record the benefits are being received is under Full Retirement Age. But those earnings limits don’t only impact the benefit of the primary receiver of benefits – anyone else who is also receiving benefits based on his or her record will also be impacted by the earnings limits. How Does This Work? As you know from the previous article, in 2012 if an individual is receiving wage income in excess of $14,640, for every $2 of earnings over that amount, benefits received are reduced by $1. If there is no one else receiving benefits on his or her record, the individual would lose benefits by $1 for each $2 over the limit. However, if someone else is receiving benefits on […]
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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 […]
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The Restricted Application for Social Security 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. One provision of Social Security benefits that is relatively unknown is the restricted application for Spousal Benefits. This provision allows a person to apply for benefits based upon his or her spouse’s record while delaying receipt of benefits based upon his or her own record. The restricted application is only available when three factors have been met: 1 – the individual filing the restricted application has reached Full Retirement Age (FRA); and 2 – the individual has not filed for his or her own Retirement Benefit; and 3 […]
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Important Factors When Planning Social Security for Couples
Planning for Social Security benefits for a couple can be complicated. There are many factors to consider, including the amount of benefits each member of the couple is entitled to at various ages, as well as the relative ages of the spouses to one another. Other factors include whether or not one member of the couple (or both) will earn wages past age 62, as well as longevity: the potential of the couple (at least one member) living past normal life expectancy. Longevity is one of the most important factors to consider – and for a couple this isn’t as straightforward as it is for one person. According to the National Association of Insurance Commissioners’ Annuity 2000 table, a couple who are both age 50 stand a 50% chance of one member living to at least 91 years of age. For another example, if the husband is 62 and the […]
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Social Security Spousal Benefit Calculation Before FRA
Jane’s Double Twisted 3D stars2_rev (Photo credit: mimickr) How is the Spousal Benefit calculated? I’ve covered this topic in several prior posts, but thought I’d give it another shot, to hopefully close this chapter for now. I’ve heard conflicting answers from various corners of the SSA world – both personally and from reader communications. Too often there is a pat answer that the Spousal Benefit, if taken at FRA (Full Retirement Age) is always 50% of the other spouse’s PIA (Primary Insurance Amount). This is not always the case, if the individual has begun receiving retirement benefits based on his or her own record before FRA and then later begins receiving the Spousal Benefit. When an individual begins receiving retirement benefits based upon his or her own record has a lasting effect on the amount of all retirement benefits that this individual will receive, including Spousal Benefits. This is due […]
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Example Using Spousal Benefits and Delayed Retirement Credits for Social Security
(Photo credit: jodigreen) 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. This particular situation was presented to me by a reader. Since the facts represent a fairly common situation that we haven’t addressed here in the past, I thought I’d present it here for discussion. Here’s the original question (altered a bit for clarity): My wife and I are age 65 & 67 respectively. We’re both still working part-time, and my wife has now 20 years of earnings on her Social Security record. At this point her PIA is approximately 45% of my PIA, and increasing […]
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