Monte – Montana: My question has two parts.
My wife (Liz) is turning 62 this month and has worked at lesser jobs her whole life. If she claims her SS retirement in December she would make around $8,100 per year. I am 68½ and worked for a major pipeline system for 39 years. I have not yet claimed my SS retirement and don’t intend to until age 70. (Thanks to your book) At that time my SS would be around 47,500 per year. I was under the impression that Liz could collect her retirement now and wait to claim spousal benefits at 66 years and 10 months without being “deemed”. I believed at her FRA she would stop her retirement benefit and start spousal benefits which would entitle her to half of mine. SS says that since she would file for retirement early, she would not receive the full amount.
To complicate things a bit more, I found out a few months ago that I’m terminal, without lung transplants. (No guarantee there and they don’t know how long I’ll live without new lungs) I want the very best for Liz and don’t know what would be best. To clarify, we have enough money to make it until I turn 70 or perish. She is 6 and a half years younger than I. I don’t want to hamstring Liz‘s future by claiming hers early. If I die without her filing before FRA, will she need to wait until her FRA in order to receive all of what I would at age 70 or my death? In other words, would she be penalized if she takes survivor benefits before her FRA? Also, If she files for retirement now (62 years), will it minimize her survivor benefit?
Phil Moeller: I’m so sorry to hear about your health challenge and hope you’re with us for many more years. However, as they say (and I agree), “Hope for the best but plan for the worst.”
If Liz files for her own retirement in December, and you are with us at age 70 and file then for your retirement, she can then file for a spousal benefit based on your earnings record. However, her award would be sharply reduced because she filed so early for her own benefit. If she is turning 62 next month, that would mean she was born in 1959 and that her full retirement age is 66 and 10 months.
Spousal benefits are NOT half of your actual benefit but half of what you would have received had you filed for benefits when you reached your own FRA. Instead of qualifying for half of your FRA benefit entitlement, Liz would qualify for just about 34 percent. I don’t know what your FRA benefit eligibility would be. But for example’s sake, let’s say it was 2,500 a month. Instead of getting $1,250 as her spousal benefit — which she would get if she waited until her FRA to file — she would receive only $854.25 a month.
Given your own prognosis, however, I think it makes sense for her to begin collecting that $675 as soon as possible, and then switching to the higher spousal benefit when you turn 70 and file.
The important thing here is that you maximize your own retirement benefit, because this is the benefit that Liz will receive when you die. A surviving spouse cannot keep claiming both spouses’ benefits but just the larger of the two. She would receive your entire benefit, REGARDLESS of when she filed for her own benefits. With apologies for what seems to me a macabre Social Security rule, if you die before you turn 70 and thus never file for your own benefit, Social Security would assume you had filed on the date of your death, and would base Liz’s survivor benefit on that amount.
If you don’t have many years left, planning for Liz to maximize her own spousal benefit doesn’t make sense, because she wouldn’t be collecting it very long before your death, when she’d automatically qualify for your benefit. It would be better to get the $675 for as long as possible.
Again, I’m sorry you have to deal with such daunting health news, and it’s to your credit that you are thinking of your wife in this situation.
I hope this information helps out a bit. Please let me know if you have any additional questions.