In this week’s column, Phil Moeller, the author of Get What’s Yours for Medicare: Maximize Your Coverage, Minimize Your Costs and co-author of the updated edition of How to Get What’s Yours: The Revised Secrets to Maxing Out Your Social Security, answers a reader question about how couples need to approach Social Security claiming decisions.

Got a question of your own about Medicare or Social Security? Send it to askphil@considerable.com.

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Question

My wife and I were born in 1958, so we both turn 62 this year. My wife is considering starting her Social Security benefits on her 62nd birthday.  She made much less that I did in our respective working careers, so her benefits will be much less than mine. I plan to wait until I at least reach full retirement age (FRA) — 66 and eight months — to start my own benefits. 

If my wife starts her benefits at 62 based on her earnings, I understand that she will receive only about 72% of the amount she would get if she waited until her own full retirement age to file. But her benefit would go up once I file for my own benefit, which will enable her to then file for a spousal benefit based on my earnings.

My question is this: will she receive half of my benefit when she starts taking spousal benefits, or will the fact that she had started retirement benefits at 62 also diminish her spousal benefits when she starts receiving them? 

I called Social Security to ask this, and the opinion they provided on the phone was that she would receive 67.5% of the spousal benefit that she could receive if she waited until her FRA to file for her own benefit. This would amount to only 33.75% of my benefit.  

Thanks for any clarification and advice you can provide.

– Steve

Answer

Steve asks a great question about optimal claiming dates. This is something that many couples confront when deciding on the best timing for their respective Social Security benefits. This discussion can get a complicated, so apologies if what follows is a bit dense.

Steve is correct that his wife will receive a lower retirement benefit if she files at age 62. Because of this early filing, Social Security was correct in telling Steve that her spousal benefit also would be reduced when she later files for it. Here is the table on Social Security’s website that explains the percentage reductions. They differ due to a person’s FRA — which depends on the year of their birth — and on when a particular benefit is claimed. 

As Steve’s note said, and this table confirms, his wife’s spousal benefit would be reduced by a third because of her early retirement filing. Getting two-thirds of half of his benefit at his FRA would mean that her benefit would be 33.75% of his, and not the 50% maximum entitlement she would get if she waited until her own FRA to fill for her retirement. Of course, not everyone plans to file the day they turn 62. The table also provides the incremental, monthly percentage reductions for filing ages between 62 and full retirement. 

The issue here is that Steve’s wife will be receiving her reduced retirement benefit for a long time before she becomes eligible for a spousal benefit that, while reduced, will still be larger than her own retirement benefit. Assuming they are the same age, she would get retirement benefits for at least four years and eight months if he retired at his FRA, and up to eight years if he waited until age 70 to begin claiming his own Social Security.

Her spousal benefit would not grow if he delays his own retirement election past his FRA. But his benefit would grow a lot — at the rate of 8% a year for up to three years and four months, which is the time between his reaching his FRA and when he will turn 70.

Couples can work out these numbers using their My Social Security accounts to find their benefit projections at different claiming ages. As in Steve’s case, the decision about when each spouse should claim depends on the couple’s respective earnings levels during their working careers. Here are four other factors to consider:

  • The couple’s family and personal health histories, which will affect each spouse’s longevity assessment and how long their respective Social Security benefits might continue.
  • Their financial needs and ability to afford delaying benefits. 
  • Their respective ages.
  • If the couple has school-age children, one spouse might consider filing early to permit the kids to claim child benefits. (Parents do administer these benefits but the funds are supposed to be used on behalf of the child.)

Got a question of your own about Medicare or Social Security? Send it to askphil@considerable.com.

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