I’ve written probably over 100 columns about older adults’ obsession with “maximizing” their Social Security retirement benefits. I am not going into that issue today. I personally don’t think this is always the right move. But if you’re determined to employ these purported strategies (which almost always mean delaying your gains from starting for as long as possible), then go ahead and do it. And then let’s hope you survive long enough to defeat the system!
But today I am going to tackle the other side of the max coin. It is related to the benefits of husband and wife. This is based on an email I received from a woman whose husband is trying to persuade her to go on his max bandwagon. And I’m going to give her some food for thought to help her decide if that’s really what she wants to do. To see what I’m talking about, let’s start with email.
NS: My husband is absolutely determined to maximize our Social Security benefits. So he’s going to have to wait until age 70 to file for his Social Security. His name is Frank, and he is currently 62 years old. My name is Ann, and I am 62 years old too. I have far less leverage than Frank. I want to file for my benefits now and switch to my record high benefits when I start at age 70. But he’s telling me that to get the highest possible benefit and maximize my Social Security payments, I should wait until my full retirement age. To start our own and then when we turn 70. Would you please help me decide what to do?
a: The best way to help you figure this out is by looking at the numbers. Your husband gave me profit estimates in a later email. Frank’s full retirement benefit is $3,010. His profit at age 70 would be $3,973. He told me that your full retirement rate would be $1,390. If you take profit at 62, you would get $1,002.
And before I move on, here’s an apology. Most of this column is going to be filled with lots of numbers and a lot of math. I hate too many numbers and too much math. I think this confuses most readers. But I have to juggle all these numbers to make the points I want to make. If your eyes start to twinkle with math anxiety, just skip to the last paragraph or two to see my bottom-line message. OK, here comes the math!
Frank wants you to wait until your full retirement age, which is between 66 and 10 months for you, and start collecting $1,390. Then a little more than three years after that, when he turns 70, he wants you to file for spousal benefits on his record. At that point, you would be paid an amount equal to 50 percent of his age at the rate of 66, not at the rate of 70 for his age. Fifty percent of $3,010 is $1,505. So, you’ll continue to receive your $1,390 retirement benefit and then get a $115 spouse benefit, taking you up to the $1,505 rate.
Now let’s see what happens if you do what you want to do – file for reduced retirement benefits now. This means you will already start getting $1,002. Then you’ll continue to receive those reduced retirement benefits until Frank turns 70. At that point, here’s how they’ll figure out your spousal benefits. They’ll take your full retirement rate, or $1,390, and subtract it from half of his full retirement rate, or $1,505. The difference, or $115, will be added to your reduced retirement benefit. So, from that point on, you’ll start getting $1,117.
If you follow Frank’s advice and wait 10 more months to file, you’ll get $388 less per month. But remember, in Frank’s option, you won’t get a nickel in Social Security benefits until you’re about 67 years old. In your option, you will start getting the benefits now.
So, let’s compare the two scenarios. What will you get in total profit between now and that point when Franck turns 70? In your option, you will get $1,002 for 8 years (96 months) for a total of $96,192. In the Franck option, you will get $1,390 for 3 years and 2 months (38 months) for a total of $52,820.
So, you’ll get $43,372 more in benefits between now and age 70 in your option. But then, starting at age 70, your spouse’s rate will be as low as $388 per month. In other words, it would take you 112 months, or more than 9 years, to get ahead of the game using Frank’s “maximizing” strategy.
So, if you’re pretty sure you’re going to live well beyond age 80, you’re probably next to follow Frank’s advice. But if you’re not so sure about your life expectancy, or if you’re the “live for today” type of person, call Social Security tomorrow and tell them you want to file for your retirement benefits now. Huh.
Oh, I forgot to mention a potentially important point. And it is related to the benefits of future widows. Assuming that Frank dies before you die, your widow’s rate will be exactly the same in either scenario. When he dies, you’ll start receiving his age 70 rate, or $3,970, as a widow’s benefit.
So, for example, if you take profit at 62 and then start receiving $1,002 per month, and then start receiving $1,117 per month at 70, that would take you to the $3,970 level after he dies. will start receiving an additional $2,853 per month.
Or if you waited 66 and 10 months to file and ended up getting $1,390 a month and then $1,505 a month at 70, taking you to the $3,970 level after he died. will start receiving an additional $2,465 per month for
What I’m saying here is that if you take less retirement benefits on your own now, you won’t see any reduction in your future widow’s benefits.
So what should you do? Your husband wants you to jump on his max bandwagon and wait about five more years to file for Social Security. I suggest you jump off that wagon tomorrow and file for benefits. But before you take my advice, remember this: You have to stick with Frank. I’m just an old goat, see you in the newspaper once a week!
This News Originally From – The Epoch Times