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CGCPA
CGCPA, CPA
Category: Social Security
Satisfied Customers: 3820
Experience:  My experience over the years has involved Social Security,
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FACTS: 1. Husband's date of birth: November 10, 1943. 2.

Customer Question

FACTS:
1. Husband's date of birth: November 10, 1943.
2. Wife's date of birth: June 1, 1949.
3. Husband started receiving pension at age 70 and currently receives $3,057 per month.
4. Wife's current pension at age 66 would be $2,147 per month.
PROPOSED STRATEGY (based on information gathered from newspaper articles)
1. Delay wife's retirement to age 70.
2. In the meantime, from age 66 to age 70, apply to receive one-half of husband's pension benefits.
3. Wife to apply for her own benefits at age 70.
QUESTIONS
1. Is the above strategy possible?
2. If possible, is the one-half of husband's benefits based on current pension benefits or the so-called PIA?
3. If possible, what is the procedure to follow? Wife to apply for her benefits and suspend? Or not apply for her benefits now and simply apply for one-half of husband's benefits?
Submitted: 1 year ago.
Category: Social Security
Expert:  CGCPA replied 1 year ago.

If the husband is receiving $3,057 then the 1/2 to the wife would be less than she currently can collect. I see no value to the strategy proposed. Not only that, the SSA will pay the wife ONLY the greater of her benefit (based solely on her earnings record) or 1/2 the husband's benefit. She cannot receive both.

Customer: replied 1 year ago.
I am sorry, but it looks like you did not understand the question. To help you understand, I suggest you read the following article that appeared in USA Today on December 19, 2013: http://www.usatoday.com/story/money/personalfinance/2013/12/18/social-security-spousal-benefits/3853325/
According to the article, the spouse who turns 66 can delay receiving his/her OWN benefits until age 70, while receiving (from age 66 to age 70) one-half of the other spouse's benefits (who is 70 and retired).
Looking forward to your answer.
Customer: replied 1 year ago.
Did you receive the above reply of mine?
Expert:  CGCPA replied 1 year ago.

Yes, I received your reply.I was away. The problem I see here is that the difference in benefits to be received from age 66 to age 70 would be $29,712. Since the full benefit collected would grow over those 4 years at 4% per year, it would grow by about $344 per month. Thus would take about 86 months to reach a break even point (a bit over 7 years). Thus you would be 77 when you reach a break even point. Only then would you begin to move ahead. If you expect to live significantly beyond age 77 then it starts to logical. However, it would be more logical to collect your own benefit at age 66 and put some or all of the difference away to earn for you. It will also be there in an emergency. $29,000 will grow over those 7 years.

Customer: replied 1 year ago.
I think that we are getting closer to agreeing between us. However, you mention 4% increase of benefits per year. I understand that it is 8%. Which one is right? Below is my calculation based on 4% and 8%. With 8%, the payback period is approximately 3 years, while with 4% it is indeed 7 years as you wrote.Calculation of SS pension benefits if delayed
Current wife's benefits per month 2,147
Current husband's benefit 3,057
One-half of husband's benefits 1,529
Current wife's benefits per month 2,147
Difference -619
Difference over 4 years -29,688
Increase of benefits per year 8% 4%
Wife's benefits if delayed 4 years 2,921 2,512
Difference between delayed and current 774 365
Payback period in months 38 81
Expert:  CGCPA replied 1 year ago.
From what I have seen lately, it is going to be 4%. Congress is being squeezed to get aggressive to save money in the Social Security Trust Fund. If you wish to base your future on the past you are taking a risk that I would not advise.
Customer: replied 1 year ago.
I think that we have a fundamental disconnect here. We did not come to you to get advice on whether the proposed strategy made sense or not. If you read the original message, our questions were clear and concentrated on whether the strategy is possible and on the procedure to implement it. In other words, we started by assuming that you were intimately familiar with such a strategy and would give us practical advice on how to get it implemented. Instead, I am afraid that we are discovering that you are not familiar with such a strategy, and struggle to understand the logic behind it. We appreciate the effort, but it is not what we thought we were going to obtain from you.
Expert:  CGCPA replied 1 year ago.

To implement your strategy you simply go to any local Social Security Administration office and apply for the 1/2 benefit. Then, when age 70 rolls around, go again and apply for your own benefit. That is the easy part. Unfortunately, I see far too many people thinking an article is the cure all without carefully considering their circumstances and life expectancy. That is why I spent time on that.

Customer: replied 1 year ago.
I appreciate your concern and take your advice quite seriously. However, you did not answer one part of the original question, which was "is the one-half of husband's benefits based on current pension benefits or the so-called PIA?".
Expert:  CGCPA replied 1 year ago.
It is based on his current benefit payments.