Wednesday, November 05, 2014 |
Joe Alfonso, GoLocalPDX Contributor
I received lots of good reader questions related to my recent article discussing the file and suspend strategy for maximizing Social Security benefits. Here are a few, with my answers.
“Read your article on file and suspend. My wife is 60 and I am 68. I began collecting SS at 62. My wife earned considerably more than me during her working years, and her benefit amount would be much higher than mine. How does the spousal benefit work in that case, and at her FRA of 66 should she delay until 70? Of course, everything could be different in 6 years!”
Thanks for reading my article.
Given that your wife is the higher earner, at full retirement age (FRA) she should make what is known as a “restricted application” for a spousal benefit based on your record. She would instruct the SSA to only pay her the lower spousal benefit while she delays taking her own retirement benefit. She could collect the spousal benefit (50% of your FRA benefit, known as the PIA) until she reaches age 70 and at that time switch to her now maximized retirement benefit (32% increase over age 66 benefit).
A restricted application is required because your wife is entitled to both her own benefit on her record and a spousal benefit on yours. Because her projected spousal benefit is less than her own, she needs to specify that she wants to receive the lower benefit, otherwise the SSA will pay her the higher one, depriving her of the credits for delaying (DRC).
This is slightly different than file and suspend because you are already taking your own benefit and your wife is therefore entitled to claim a spousal benefit. The result is similar, however, in that your wife is able to collect the spousal benefit while letting her own higher benefit earn DRCs.
Remember, the ability to file a restricted application, like suspension, is only available at FRA. Applying sooner defeats this strategy completely and results in a reduction in benefits to boot.
As you mention, a lot can change in 6 years and the above reflects the rules in effect today. There has been mention of doing away with some of these strategies but it remains to be seen what will happen.
From W. F.:
“I am a 56 year old woman. My husband of nine years died in 2007. When will I be eligible to receive survivor benefits. Will I be eligible for survivor benefits if I remarry?”
Thanks for your note.
The earliest you will be entitled to a survivor benefit is age 60, but it will be reduced for claiming before FRA. If your own SS benefit is lower than your deceased husband’s, it is important to try to delay claiming a survivor benefit until your FRA. You can begin taking your own lower retirement benefit starting at age 62. Even though your retirement benefit would be reduced for early claiming, since you will switch to the higher survivor benefit in a little over 4 years, the breakeven is relatively short. The key is to take the higher benefit last because this is the benefit that you will collect for the rest of your life.
Note that if you remarry before age 60, you are no longer entitled to survivor benefits on your deceased spouse but of course you will qualify for potential survivor benefits with a new spouse. Remarriage any time after age 60 is fine.
You should contact the SSA and ask them for an estimate of what your survivor benefit would be at age 60 and at FRA. This should be helpful to you in decision making.
1. “If you file and suspend and then die in a car crash do the suspended payments become part of your estate or are they lost?”
2. “If you get the news you are going to die in 2 months and you file for retroactive suspended payments but then die before you collect them, do they become part of your estate?”
Thanks for your questions. Let me respond in order:
1. Suspended benefits would not be refunded to a survivor in the event of the suspender’s death; only the worker who suspended his own benefit can get a lump sum reimbursement. But note that the survivor benefit for a lower earning spouse will have increased because the suspended benefit earned delayed credits.
2: You are entitled to benefits up until the month before you die (benefits are not paid for partial months). If you unsuspended while living, the lump sum would be paid out even if you died before actually receiving the money. This is no different than the case of benefits due to a deceased beneficiary who had been currently receiving benefits and dies before their latest check arrives (assuming the check covered a month during which the decedent was alive for the entire month). In both cases, the heir would be entitled to the money and would have to pay income taxes as recipient.
I hope this helps.
Thanks everyone for your questions. Please keep them coming.
A version of this article originally appeared in the
Business Section of GoLocalPDX