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This week’s question is from Rick:
My wife turned 61 in August and I turned 60 in December. Our plan is to start Social Security when I turn 66 and 8 months (my full retirement age). Should my wife start Social Security under her account prior to me starting mine? My wife worked just part time, so her Social Security will be much less than half of mine. And if she does start claiming prior to me, what would be the age for her to do so and then still be able to get half of mine when I start my benefits?
Wait for full retirement age
Rick, if your wife claims her own benefits prior to her full retirement age (FRA) of 66.5, she will never receive half of your FRA amount.
If she claims prior to her FRA, she is hit with an early claiming penalty as high as 27.5 percent (at age 62). Any early claiming penalty will stick with her when she starts spousal benefits. So, the only way to get an amount equal to half of your benefit is for her to claim her own benefits at her FRA, and then start spousal benefits as soon as you claim your benefits.
There’s no ‘switching’
Many of my clients think that a person switches from his or her own retirement benefits to spousal benefits when eligible. There is no switching of benefits.
The Social Security Administration always pays a person’s retirement benefit first, and then “tops off” that benefit with a supplemental spousal benefit when appropriate. That’s the reason your wife cannot dodge any early claiming penalty on her retirement benefits. She keeps those benefits and gets a supplemental spousal benefit when you start your own Social Security benefits.
For more detail on the interaction between retirement benefits and spousal benefits, check out my blog post here.
If you die before your wife, she becomes eligible for widow’s benefits, which are generally equal to whatever you were receiving when you died. In the case of widow’s benefits, there is switching from her retirement benefits to widow’s benefits. So, any early claiming penalty does not extend to her widow’s benefits.
What should you do?
I don’t have enough information to fully analyze your case with my firm’s software. So, in order to get some rough idea what claiming strategy might maximize your lifetime Social Security benefits, I assumed that your wife’s FRA benefit is 25 percent of your FRA benefit.
For a normal life expectancy, your plan to claim at your FRA is consistent with what our computer analysis suggests. However, our analysis also suggests that your wife could claim earlier than her FRA and still be consistent with an optimal claiming strategy. So, whether or not she eventually gets fully half of your benefit may be less important than you think.
Another point suggested by my computer analysis is the following: If your wife has a relatively long life expectancy, it probably makes sense for you to delay claiming past your FRA, so your wife gets the higher benefit over an extended life span.
Of course, my assumptions may not be representative of your situation. Even so, the above discussion may give you something to think further about as you plan your claiming strategy.
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I hold a doctorate in economics from the University of Wisconsin and taught economics at the University of Delaware for many years. In 2009, I co-founded SocialSecurityChoices.com, an internet company that provides advice on Social Security claiming decisions. You can learn more about that by clicking here.
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Disclaimer: We strive to provide accurate information with regard to the subject matter covered. It is offered with the understanding that we are not offering legal, accounting, investment or other professional advice or services, and that the SSA alone makes all final determinations on your eligibility for benefits and the benefit amounts. Our advice on claiming strategies does not comprise a comprehensive financial plan. You should consult with your financial adviser regarding your individual situation.
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