Wednesday, June 28, 2017

Social Security Question for Spouses

I had a question/comment recently from a reader named Sherri.  I'm going to share this as a blog post as I think it might be enlightening to others approaching retirement age like me.

Sherri wrote.....
"Hi, I have a comment, that probably should go into your blog about retirement income,, but figured I would post it here.  I have been following you for awhile, but not commenting.  I wanted to ask you about spousal social security benefits.

Did you mention that potential income in your retirement finance post?  I had never heard of it until a few years ago, and do not know anyone of "age" yet who has utilized it.  Apparently, if you are a spouse who never worked outside of home, or did but never was a high earner, you are entitled to 1/2 of your spouse's retirement benefit if it is more than what you would get yourself.

But I think you have to wait until both you and your spouse are full retirement age, and the working spouse begins to collect...not sure if I understand it correctly.  But sounds like it could be a decent amount of "extra" income, especially if your spouse was a high earner.
Thank you for posting your finances with so much transparency." --Sherri

Sherri is correct that even if a spouse did not work/earn an income outside the home they can still received Social Security payments.
This is the situation Hubs and I are in.  While I did work outside the home for a few years, I didn't work enough to earn my own Social Security benefit once I "retire".  I am eligible for a "Spousal Social Security Benefit" based on Hubs earning so I will be claiming Social Security on my Hubs work record.

Here is the poop on Spousal SS Benefits.

Even if a spouse never earned an income they are eligible for the amount equal to half of what their wage earning spouse receives in Social Security payments.
Even if you divorced(but didn't remarry)and were married for at least 10 years to your spouse and did not remarry before age 60, you can still collect 1/2 of that spouse's benefit.

Example-Mary divorced John after 11 years of marriage but never earned an income herself and is now old enough to collect SS benefits.  Mary also never remarried.  Mary can collect 50% of whatever John's SS payment is.
If Mary did remarry before age 60 then she would be eligible to receive 50% of the new spouses SS benefit.

If Mary did work but didn't earn much or work very long AND 50% of her husband's SS benefit would be more than her own benefit then Mary can receive the higher of the two SS benefits.

If you know how Social Security benefits work, you can begin to collect at age 62 for a reduced benefit of your full benefit amount, collect a full benefit at your full retirement age(calculated by your birth year)or you can delay collecting your benefit anywhere between just past your full retirement date to age 70 for a benefit that is a % larger than your full retirement age benefit. Depending on how long you wait to collect past your full retirement age your benefit will be correspondingly larger.

My Hubs, for example, if he collects at age 62 his full SS benefit will be reduced to 72.08% of what his full amount would have been(had he waited until FRA)for life.  If he collects at age 66 & 8 months his SS benefit is the full amount he is due.  If he waits 1 month after his full benefit age he'll get his full amount + 2.67% more in his check and if he waits until age 70 he'll get his full amount + 26.67% more each month. Between age 66 & 10 months and age 70 the additional amount he can receive goes up a small percentage each month.

A couple of things though--
* As a spouse claiming spousal SS benefits you can not take SS benefits until your spouse(the wage earner)claims their benefits.  Say you the spouse, wants to claim early SS at age 62, you can only do so if your spouse(the wage earner)is already claiming and collecting their SS benefit when you go to apply.

You use to be able to do what was called a "File and Suspend".  This is where the wage earner applied for SS benefits at age 62 but suspended their claim until full retirement age or beyond so that the spouse could start receiving their SS benefit early without the wage earning spouse reducing their SS benefit.  This strategy is no longer allowed by the SSA however so we won't go into that.
The exemption to the wage earning spouse has to be collecting for you to apply for early SS benefits rule is this-- If you are divorced and are claiming SS benefits on your ex's work record then you can claim before your ex-spouse claims their SS benefit if the ex-spouse is at least 62 years old.

* If after you and your spouse begin collecting SS benefits and your wage earner spouse dies, you, as the non-working spouse, can take his/her SS benefit amount instead of the spousal amount.  So if Hubs dies before me after we are both on SS I would stop getting my 50% of his SS benefit amount and receive his whole SS benefit for myself(the amount depending on if he filed/collected early, at his full retirement date or later up to age 70).

The Social Security Administration is a wealth of information on all things Social Security and you can access that information HERE.

They will not however tell you exactly how your benefits can be affected by claiming at different time frames and when the best time for you and your spouse to claim would be.  You need to find a benefits calculator and run different scenarios to figure this out for yourselves.

There are some online SS Collecting Calculators to see how your SS benefits are affected by when you and your spouse claim your benefits but most cost money to use.  You can also seek the help of a financial planner, most of whom have Benefit Calculator programs they can use to see what plan is most advantageous for your situation.

I did find this one online Benefit Calculator HERE that is free to use to run some scenarios for your situation to help you find the best plan for your and your spouse's situation on when to claim your Social Security benefits.

As for Hubs and I, I believe I did mention in my Retirement Finances post that we will both be waiting until our Full Retirement Ages to claim Social Security benefits.  Once we both start collecting SS our benefit will be just over $50K a year(if the government doesn't start means testing or reduce the benefit for everyone before then).  Of course this $50K is before deducting payments to pay for Medicare and any Supplement and/or Advantage plans we elect to have.
Added to our Annuity payments(which will be reduced once we are on SS as that is how it's structured)this SS benefit will make up our passive income streams in retirement and increase our income and standard of living.

I hope this helps anyone else out there with questions.
And thanks for asking Sherri and reading! ;-)

Sluggy






22 comments:

  1. Very interesting. We are not at the point of seriously considering this, but my mind is working. I did not know they government had stopped the "file and suspend" - good to know. Thank you for the post!

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    1. The law went into effect late 2015 and the grace period ended April 2016 I believe. More info here....http://www.aarp.org/retirement/social-security/info-2016/social-security-final-word-on-file-and-suspend.html

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  2. Thank you. My DH knew this, and said I did too...but perhaps it didn't register or I really understand it back when I left work oh, 25 years ago. Maybe I didn't listen either. I read your post to DH and DH said "Absolutely."

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  3. Good info Sluggy, you are a so helpful to many of us dummies out there.

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  4. I was going to mention the divorce thing, but see that you also included the information. I was married for 11 years and have not remarried, so I'm counting on my exdh's ss benefit since I have made a lot less than him over the years. It's the least he could do for me. LOL

    This is a great blog post.

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  5. Thanks for shedding more light on this. I knew some of it, but still find it confusing. I know when we get closer to that time (still over 10 years away) we will need to put a lot of research into it to make a fully informed decision. There is so much to consider!

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  6. I have an acquaintance who divorced her doctor husband many years ago. I know her daughter better and told her about the filing for 1/2 his ss income. Later, the daughter said her mother did not know that and had filed and gotten her share. By the way, I was told 60 years + 1 day.

    I was dating a guy who wanted to marry me, but I told him not until I was 60 yrs+ 1 day. He accused of loving money more than him. Well, you can imagine how well this went down with me. Ummm, yeah. He only wanted a place to live so he could leave his mother's home. He found someone to marry and dumped me. Oh, well. Now, his in-laws support them. Beware, ladies, of men and love...lol. Go for the ss benefits.

    I would never have married him one I turned 60!

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  7. An employee at the ss office told me of this benefit.

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  8. Thanks for the review! I have researched it but it's always good to have it fed into my brain again! My DH can claim his own SS for the all the years he did work, but it's appearing that my 50% is going to be the higher amount, so we will most likey use that option.

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  9. Good info. I can't believe that SS can't tell you how much your benefits will be. What the heck?

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    1. There are just way too many options and choices. No wonder the SS rule book is THOUSANDS of pages long!

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  10. I'm not sure if anyone has mentioned this in the comments, but....I worked long enough to collect SS. I started collecting at age 62, but my husband waited till he was 64 to collect. Because I started collecting at 62 and not my full benefit age, I was only entitled to a percentage of my husbands SS. I think it worked out to be between 25 and 30% of his, which ended up adding only $75.00 to my SS check. So be very careful when you start to collect.

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    1. It may be best for anyone considering collecting to see an expert who can run the calculations and scenarios for you to see what is the optimum time to file.

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  11. My financial adviser told me about getting half of my ex-spouse's Social Security benefits because what he will receive is greater than what I will receive, but it won't affect my ex-spouse. If I decide for some reason to start taking his Social Security when he's 62, he won't even know anything about it.

    Love,
    Janie

    ReplyDelete
    Replies
    1. You are correct that divorced filers going off their ex-spouses work earnings won't affect(as in decrease)what the ex receives, nor will it affect what their new spouse receives if ex remarried....not like most ex's care anyway if they affect(negatively)that ex's benefit. ;-)

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  12. Not a spousal benefit, and it doesn't happen often, but if you retire with dependent children under the age of 18 you're also eligible for additional benefits, until the child turns 18 or graduates from high school, which ever happens last. You are required to keep records of how the money is used; the SS administration can request proof at any time that the money is actually being used for the dependent's care (i.e. they don't want to see that you're just putting it into a savings account for them to use later).

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    1. Yes, not many folks go into their 60's with underage children, but that will be changing as women wait so long to have kids now.
      There are so many caveats and exemptions and other rules for divorced, disabled and widowed filers too. Now wonder it's like a maze to figure this out!

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  13. You said: "My Hubs, for example, if he collects at age 62 his full SS benefit will be reduced by 72.08% for life."
    I'm concerned about this math. If your hubs collects his SS at age 62, he will only receive 27.92% of his Social Security benefit? I don't think so. I think his 100% benefit will be reduced by 27.92% and he will receive 72.08% of his SS.

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    1. I used the wrong word above....it should be "reduced TO 72.08%", not "reduced BY 72.08%".
      I have corrected that.

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  14. I'm so untrusting that SS will be around when I retire I'm not even using in my planning.I'll be pleasantly surprised if we get what the estimates say.

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    1. I seriously doubt that SS will change significantly(other than getting rid of a COLA)anytime soon. There are just way too many Seniors(and AARP lobbyists)around for Congress to make many changes to it. Now once the bulk of the Baby Boomers die and their outcry is lessened, all bets are off IMHO.
      With that said, best to NOT bet on getting it and as you say, be pleasantly surprised. ;-)

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