Social Security spousal benefits — Kotlikoff answers a complicated one!!
Male 67, working, born 6/7/57; plan on waiting until 70 to file for benefits. Wife, 67 retired, born 4/19/57. My wife has reached full retirement age. After meeting with the soc sec administration last year they advised me to file for her benefits once she reached her full retirement age. They said that as long as we wait until that date (10/19/2023) that she could start receiving her benefit until the time I file at age 70. At that time she will then be able to step up to 50% of my benefits. However, if I had filed before her full retirement age they said that she would not receive the step up advantage once I file and her benefits would stay based on her earnings. Apparently her portion of my benefit doesn’t continue to increase through age 70 like mine does. I’m sure there is more to this but it seems to match what I have read but I’m trying to confirm. Thoughts? Thank you.
Terry Says
OK, that was too much for me! So I sent your entire question to my Social Security Horror Stories co-author Larry Kotlikoff, who created two great programs; MaximizeMySocialSecurity.com and MaxifiPlanner.com. Here is his response:
****************************************************
She will, but the amount will be subject to the GPO — the Government Pension Offset. Her spousal and, if you pass first, widows benefits will be reduced by two-thirds of her non-covered pension.
Hence if her non-covered pension is $1000 per month, her SS spousal and widows benefits will equal whatever their amounts are less $667.
The GPO doesn’t kick in until your wife starts collecting her non-covered pension. So, if it will be higher if she starts it later, it may be best to wait to collect her non-covered pension because as long as she waits, her SS benefit won’t be reduced.
On the other hand, if her non-covered pension grows if she waits to collect it, two-thirds of this higher value will be larger than $667.
If she has a non-covered retirement account (e.g., a 403b), an equivalent non-covered pension will be calculated starting in the first year she withdraws even a penny from the account via a formula based on the dollars in the account at the time she first starts to withdraw.
If her spousal or widows benefit is less than $667 if she takes them early, they may exceed $667 if she takes them later since they won’t be reduced for taking them early. This is particularly the case if her non-covered pension is not adjusted for inflation.
Recall, Social Security benefits are inflation indexed. Indeed, even if she takes, say, her spousal benefit early, it may grow, due to inflation, above $667 through time and, suddenly, she’d start receiving a small Social Security spousal benefit once two-thirds of her non-covered pension is less than the nominal dollar value of her spousal benefit.
In short, this is complicated. If you run maximizemysocialsecurity.com, it will get all this straight.
She can try different start dates for her non-covered pension. For each case, the tool will automatically find the start date for her spousal or widows benefit that maximizes her lifetime SS benefits. It will also calculate this strategy taking account of both of your maximum ages of death. Thus, it will consider her taking her widows benefit subject to the GPO when you die,
MaxiFi.com does all the above, but consider your lifetime spending capacity taking into account when she starts ger non-covered pension or retirement account withdrawals.
