Tips on 2 Social Security restricted application scenarios
Q: My wife were both born in 1951 and are both 64 years old. She is collecting Social Security benefits from her deceased husband — and has been doing so since before we were married. When I turn 66 I need to make a decision on collecting spousal benefits. My own benefit will be the maximum based on what I have paid into the system. Her previous husband would also have collected the maximum. My question is how to determine my spousal benefits when my wife is collecting benefits from her deceased husband. Is it based on what she earned or her deceased husband? — Charlie Wasem, Red Bud, Ill.
A: A spousal benefit is always based on your spouse’s full retirement age (FRA) benefit amount of which you’re entitled to 50% if you claim this spousal benefit at your FRA, says Matthew Allen, the co-founder and co-CEO of Social Security Advisors.
So, for example, if your wife’s benefit at her FRA is $2,000 per month, you’d be able to claim $1,000 if you do so at your FRA.
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“But if you claim the spousal benefit early, the benefit would be reduced as a result of claiming it early, and claiming under your FRA would also subject you to Social Security’s deemed filing rule, meaning that they would look at both records — yours and the spousal benefit you’re eligible for — and Social Security would pay you the higher of the two,” says Allen.
If you were to wait until your FRA to claim the spousal benefit, Allen says you could then restrict your application to an application for spousal benefits only and let your own benefit continue to accrue delayed retirement credits until you claim your own benefit at a later time. Note, however, the benefit increase no longer applies when you reach age 70, even if you continue to delay taking benefits.
Read Retirement Planner: Delayed Retirement Credits and Benefits for Spouses.
Q: My wife recently turned 66 and suspended her benefits until age 70. She is now collecting one-half of my benefit. If her annual work income changes during the next four years, will her benefit at 70 change or remain 32% higher? — Stephen Pollack, Wayne, N.J.
A: First a point of terminology clarification. Your wife did not "file and suspend" her benefit but rather filed a "restricted application" for spousal benefits only, says Mike Piper, author of Oblivious Investor blog and eight personal finance books, including Social Security Made Simple: Social Security Retirement Benefits and Related Planning Topics Explained in 100 Pages or Less. “If she had filed for her own benefit and suspended it, she wouldn't be able to receive the full spousal benefit of 50% of your primary insurance amount or PIA,” he says.
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As for your question, Piper says your wife’s benefit at age 70 will always be 132% of her PIA. “Her PIA is ultimately based on her 35 highest years of earnings, after adjusting earnings that occurred prior to age 60 for wage inflation,” he says. “So, if her earnings between age 66 and 70 are high enough that they bump lower-earning years out of the calculation, her retirement benefit at age 70 will be higher than 132% of what it would have been at age 66.”
Conversely, says Piper, if her earnings between age 66 and 70 are not high enough to bump out any prior years from the calculation, then her benefit at 70 will be 132% of what it would have been at age 66, adjusted for inflation.
Robert Powell is editor of Retirement Weekly, contributes regularly to USA TODAY, The Wall Street Journal and MarketWatch. Got questions about money? Emailrpowell@allthingsretirement.com.