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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Social Security
Satisfied Customers: 12187
Experience:  Licensed CPA, CMA, CFE M.Accy Also Teach Accounting courses at Master's Level
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I am 67 and I started collecting Social Security at Full Retirement

Resolved Question:

I am 67 and I started collecting Social Security at Full Retirement Age of 66. My wife is 64 and is till working but she is making five times less than me. Her hours at work are getting cut to almost half and her pay is close to the $14,500 limit for no penalty of too much income. If she collects her Social Security now based on her work record (and get only 86% of her FRA benefit) and wait until her Full retirement age of 66 to collect the Spousal benefit (which will be half of my SS pay), will she still be penalized and get only 86% of the Spousal benefit or will she get 100% of it because she waited till FRA to collect the Spousal benefit?
Submitted: 9 months ago.
Category: Social Security
Expert:  Megan C replied 9 months ago.

Megan C :

I realize you have a question about social security. My goal is to provide you with excellent service, and help you better understand your options.

Megan C :

How are you today?

Megan C :

Unfortunately, social security will apply a reduction in your benefit based on the date you started your retirement.

Megan C :

So, your wife's benefit is forever reduced. She would be better served choosing the greater of the two benefits now, if she plans on drawing early.

Megan C :

There is no benefit to drawing a benefit prior to full retirement age, as the other benefit will always be reduced as well.

Megan C :

So if her spousal benefit is greater, she should just take that, if she's going to retire early

Megan C :

And the earnings limit is $15,120 for 2013. That's the level at which she will be penalized for earnings, but only until she reaches full retirement age of 66.

Customer:

If she continues to work but collect the SS early (based on either options), she is considred retired and will get only 86% of the FRA under either her pay or spousal benefit under my plan?

Megan C :

That is correct.

Megan C :

She will get the reduced benefit, regardless if she draws her own benefit or yours.

Megan C :

She can't draw one and let the other grow, either - both are forever reduced, so it's in her best interest to choose the highest benefit now, if she's planning on retiring now.

Megan C :

Do you have any further questions?

Customer:

That's frustrating. If she collects now teh spousal benefit, we get the advantag of getting two extra years of SS payment without income penalty, but from 66 on, she will be getting 14% less payment until she dies. I calculated that the two extra years of payment will equate to about 7 years of more pay. So if she lives past 73, we lose, right?

Megan C :

That would be correct. Unfortunately, the longer you live the more you lose by drawing early.

Megan C :

So would your wife benefit more from the spousal benefit or her own benefit?

Customer:

My wife and I went to a class on Social Security and they mentioned a trick to get one benefit earlier and then switching to the other without losing the reduced pay. Do you know what that trick may be?

Megan C :

Yes, I do. What you do is draw the spousal benefit at Full Retirement age, and then switch to your own benefit at age 70 once it's grown to its max.

Megan C :

Two things: you must wait until full retirement age to use this trick, and another thing your own benefit at age 70 should be greater than your spousal benefit

Customer:

But I have already started taking my SS benefit at 66. That trick does not work then, right?

Megan C :

No, your wife would use that trick. You already drew it. She would have to draw her benefit first

Megan C :

Also, I'm disappointed in your poor service rating. I am penalized personally for anything less than "ok" service

Megan C :

Are you dissatisfied with the answer, or my service?

Megan C :

In order to use the FAASF (File As A Spouse First) option (the trick we are discussing) your spouse would first need to apply for their own benefit, to open up their earnings record to you.

Megan C :

Then, you would draw the spousal benefit based on their record. Wait, until your benefits reach their max, and then draw your benefit at age 70.

Megan C :

If you wanted to go back and file as a spouse, your wife would first need to file for benefits. Then, if its been under 12 months that you have drawn your own benefit (you mention you drew at 66, but are now 67 - it could have been less than 12 months that you have drawn) then you can pay back your benefits and refile as a spouse.

Megan C :

If your wife draws her own benefit, she can't draw a spousal benefit.

Customer:

I am not getting my answers fully. I have been collecting SS for 19 months and so that does not work. Can my wife wait till she is 66 and collect under her SS pay, and wait till 70 to switch to my spousal plan. We she get extra credit of 8% per year that she waited?

Megan C :

Unfortunately, you do not get delayed retirement credits for spousal benefits. So she could not take her lesser benefit at age 66 and then switch to a spousal benefit that is higher. She could, but there's no benefit of additional retirement credit.

Megan C :

So, if she gets a higher spousal benefit, it's in her best interest to draw that at full retirement age. (Or earlier, if you feel that it would be appropriate in your situation).

Customer:

Alright, I guess there is not much we can do but wait till she is 66 to collect the spousal benefit. That seems to be the best option for us.

Megan C :

I'm glad I could help you determine your best option. I'm sorry that I didn't have better news for you.

Megan C :

Is there anything else I can assist you with today? I want to ensure that all your questions are answered.

Megan C :

And once your questions have been adequately addressed, could you please change your rating to "excellent" so that I may receive credit for assisting today

Customer:

Thank you, XXXXX XXXXX

Megan C :

Thanks so much.

Megan C, Certified Public Accountant (CPA)
Category: Social Security
Satisfied Customers: 12187
Experience: Licensed CPA, CMA, CFE M.Accy Also Teach Accounting courses at Master's Level
Megan C and other Social Security Specialists are ready to help you
Expert:  Megan C replied 9 months ago.
Thanks for your positive rating. Please come back and visit me any time you have a question that needs answered. It was a pleasure working with you today.

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