spousal or survivor benefit?
Not sure I am using the right terms.
My understanding (corrections welcomed) is that for SS you are eligible to take the larger of
- the benefit amount based on your own earnings history
OR - 50% of spouseâs benefit (which increases to 100% if spouse dies first)
In my motherâs generation, almost all wives had low earnings history and used the second scenario. EXAMPLE: One of our retirement planning instructors said he planned to take SS age 70 because his wife had never worked. He expected her to live a lot longer and benefit from the higher amount.
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But when could I start taking it? Half of dhâs SS at age 70 is slightly more than my benefit at 62. Could I take half of his at 62?
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If youâre drawing based on your Hâs earnings, the max you can get as a spousal benefit is half of his FRA benefit. You wonât get half his age 70 benefit. If he waited until 70 to take SS and dies first, your survivor benefit would be the full age 70 benefit. I donât believe you can collect based on his earnings record before he begins collecting SS. I believe that if you collect before your FRA, the amount received will be reduced based on your age, whether you collect on his record or on your own.
This is a pretty good explanation, but keep in mind that there are spousal benefits and survivor benefits - they donât work the same way: Collecting Social Security Benefits As A Spouse.
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I had a âsunset careerâ for almost 5 years after 18 years as SAHM and also as an aggressive Stage III cancer survivor. So it turns out taking SS out with my own earnings was slightly higher than 1/2 of DHâs. I took SS right at age 65 - the small incremental increase over time was just not worth waiting.
We waited to start drawing SS on DH once we actually were starting to spend down what we had in our checking account. So DH started SS at age 65 and 8 months (full SS for him would have been 66 and 4 months). His full SS (identified in 2022) was $3,015, and at age 70, $3,921. However with the 8.7% COL increase for 2023, he actually is now drawing $3,181/month (after Medicare B deduction of $164.90). In 2022, he was receiving $2,908/month (after Medicare B deduction of $164.90).
At 65 (full SS benefits for me would also be at 66 years 4 month) my SS benefit started at $1,474 (after deduction of Medicare B of $164.90). In 2023, with COL increase, I am receiving $1,623 (after deduction of Medicare B or $164.90)
We have other cash flow money from our annuities. For us, not spending more down on 401k (and paying taxes on that) was not worth it. One does get a bit of a tax break with not getting all of SS income taxed.
It all depends on your situation and how the numbers work for you.
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Run the numbers, as @kelsmom says. Also call your local SS/Medicare office and ask them to do the calculations - so you make sure you understand what the picture is. The various options you have.
I do know that if you are on SS, and your DH dies - and he has the higher SS benefit (and even if he hasnât started drawing yet), you can get the higher benefit as a surviving spouse. When my dad died, my mom got a larger amount for her SS.
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There are some calculators out there, but youâd first need to have estimated benefit (available via sss.gov - requires some setup with id/pw but very worthwhile)
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In a similar vein, if ROTH conversions are under consideration, hereâs another factor to add to the equation:
âI will point out that in 2026, the 22% tax bracket will go up to 25%, unless Congress intervenes to extend the 2017 rate reductions. So there might even be an argument that you should withdraw more from the IRA now, or do a Roth conversion, to pay 22% now instead of 25% or more in the future (depending on your long term view of political and tax trends). But this is just a comment, not adviceâ
[This is from a tax blog I follow.]
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Unless you are subject to the offset and windfall provisions. I amâŠso if my husband dies, I cannot collect on his SS amountâŠeverâŠat all.
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RE: Social Security. We both retired at age 64 and started drawing then per the advice of our financial planner. There is no ârightâ way to do this, just a best way for your own situation.
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Yes, I didnât put that âcaveat inâ as those that are in your boat - others like you should be aware of those provisions. I feel for you with the limitations you are under. It is like the reduction in benefits I had with my private policy disability insurance, which would only pay out if I was 100% disabled when I had my cancer treatments (actually they go with 80% is 100%), as they look at one earning an income (so it was considered âincome replacingâ) and would not pay out partial disability benefits - I paid the same premiums yet got the lessor benefits. Tough that as a spouse, you are limited to having the benefits that you pay for and everyone else gets (as a spouse) with Social Security.
I only get 1/3 of what my benefit would be. It would be about $620 a month. Itâs about $250.
But thatâs the way it isâŠbecause MY state chose not to have some public employees contribute to SS. And even though I worked SS contributing jobs for a long while (a long time ago, or part time), my benefit is reduced.
I will sayâŠif you are subject to the offset and windfall provisionsâŠcheck your first SS deposit very carefully. A former colleague just retired this year, and SS did not reduce her benefit. She contacted them immediatelyâŠand owes them a pay back of over $2000 because of their error.
Thanks everyone. It is interesting to know what others are doing.
I am not yet 62, but I plan to wait at least a couple of years after that. Husband is 63, and he is waiting also. Both of us currently have (very) part time jobs and donât want to lose social security payments bc we make too much.
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Iâve got a ways to go but Iâve looked into a few scenarios regarding SS.
It appears if there is a big difference between earnings of spouses, the higher earning spouse should wait longer to claim so that the other spouse could benefit if the higher earner passes away first.
If able to delay claiming SS, each year delayed gives an individual about an 8% additional return on investment in higher payments. So, if one can pull money from say a 401k or elsewhere to fund their early retirement they can get a good return on their eventual SS income. Now, if they are making a larger return in other investments maybe this approach doesnât make sense.
As stated above, delaying may be appropriate if someone wants to continue in another job before full retirement age so as not to have SS benefits reduced. Also might be prudent if trying to limit income for Roth conversions or to avoid paying more for Medicare.
As I get closer I intend to look more closely at my options. Currently I am looking at taking.mine as soon as possible (62) while hoping to get my spouse to delay which I believe in the long run would give us, as a couple, the best outcome.
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Here is another opinion (WSJ) on when to take SS:
https://www.msn.com/en-us/money/retirement/three-reasons-to-take-social-security-early/ar-AA1jULDZ
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We are considering the same thing. We are self employed. I take most of the salary, my wife has a token salary plus works a tax job during tax season. Iâm 3 years older than she is. Our current plan is to wait as long as possible (Iâll be 70 in 5 years) and have her take her SS soon and bank the money. I am wondering about the tax implications. Are the tax implication for taking early SS based soley on her income or our family income?
My question also - we get $$ from an LLC, not paid as income to me or my husband as income. Does that count against the threshold for max earnings vis a vis SS before full retirement age?
Deciding when to take SS is basically a math problem with one variable being when you are going to die.
One factor I think many people donât take into account in this large question is the fact that your non-401K/IRA holdings pass through to heirs with step up basis. Those funds should be the last funds spent in retirement to minimize taxes for your heirs. So if taking SS earlier than 70 accomplishes that then you might want to do that.
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Not sure that math always works. Taking funds from a taxable account or taking funds from SS are both taxable income. But the former is subject to cap gains rate while the latter is regular income (or at least 85% is). And for many, the 0 cap gains rate (or even 12%) is extremely attractive.
Of course, then you assume that the stepped-up basis law wonât be changed. (Biden ran on eliminating it, so it will likely come up again.)
Social Security being taxed is based on your joint 1040 (specially calculated) AGI. The calculation includes 1/2 of the SS income, non taxable interest, and your joint AGI (less SS income). Plus a few other income items. Those three are the major factors. There are 3 âbracketsâ: 0%, 50%, and 85% of the SS income. MFS defaults to 85% in most cases.
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