Kotlikoff On Social Security: Beware Wiping Out The Spousal Benefit

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By Laurence Kotlikoff, MaximizeMySocialSecurity

If I claim Social Security benefits now at 62 and my wife takes benefits three years from now when she’s 62, can she decide to receive half of my benefit? If so, is the amount she’ll receive based on the benefit I’ll actually be receiving when she’s 62, or is calculated from the higher amount I would be receiving if I had waited until age 66 to collect? I find all this very confusing.

—John B., Massachusetts

You’re not the only one who finds spousal benefits confusing. To see what I mean, check out the question and answer that appears immediately below yours.

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But back to your question: If your wife takes her retirement benefit before reaching her full retirement age, she will be deemed to be taking her spousal benefit as well. In this case, Social Security will give her what is essentially the larger of the two benefits. So by filing for her retirement benefit early, she will potentially wipe out her spousal benefit (if it’s less than her retirement benefit) and she’ll be stuck with a reduced retirement benefit forever.

Boston University economics professor Laurence Kotlikoff is an expert on Social Security. His Maximize My Social Security service can help you figure out how when and how to claim benefits to get the highest lifetime benefits, while his ESPLanner tool can help you achieve a stable living standard before and during retirement. He is a co-author of Get What’s Yours: The Secrets To Maxing Out Your Social Security.

I’m confused about the spousal Social Security benefit. Let’s say I start collecting at age 63 and receive $1,500 a month, and my spouse, who’s 65, is eligible for $400 a month on her own. Would she receive $400 plus half my benefit? And if she gets half of my $1,500, does that mean I get only $750?

—Robert, Thurmont, Maryland

Your $1,500 a month (which I presume is your full retirement benefit reduced because you are taking it early) is not affected by what your spouse collects on your record.

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She would collect her $400 (her full retirement benefit reduced because she is taking it early) plus her reduced excess spousal benefit, which she will be forced, due to Social Security’s deeming provision, to take at the same time. Her excess spousal benefit equals 50% of your full retirement benefit less 100% of her full retirement benefit. This amount will be reduced by roughly 7% because she is taking it at 65 and not 66—her full retirement age.

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So we’re probably taking about her collecting roughly $775 per month. If you follow this strategy, be aware that you can suspend your own retirement benefit at 66 and restart it at 70 at a 32% higher level. To see whether this strategy is optimal, however, you would have to consult a Social Security software service, such as the one I own, maximizemysocialsecurity.com. (The cost: $40.)   [5/14/15]

Boston University economics professor Laurence Kotlikoff is an expert on Social Security. His Maximize My Social Security service can help you figure out how when and how to claim benefits to get the highest lifetime benefits, while his ESPLanner tool can help you achieve a stable living standard before and during retirement. He is a co-author of Get What’s Yours: The Secrets To Maxing Out Your Social Security.

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