Is There Any Problem With My Logic?

Mar 21 2017 - 7:30am

My wife made significantly less money than I did and is 4 years older than me.
I was thinking that she should start taking her SS benefits now, at age 63.

My thinking is that I will hold off collecting benefits until I am 70 years old which is in about 10.5 years at which point she will start taking spousal benefits.

Her benefits now will be \$950/month for 10.5 years for a total of \$119,700 (before COLA’s) Her FRA benefits would be \$1,132/month for a total of \$108,672 for the 8 years before I turn 70. Her age 70 benefits will be \$1,495/month which would total only \$71,760 before I start my benefits when I turn 70.
My FRA benefits will be \$2,902/month and my age 70 benefits will be \$3,721/month.

During those years before I am 70, she will collect ~\$120k just from her benefits, but when I turn 70, her spousal benefit will increase her monthly benefit to \$1451. ( that’s half of my FRA benefit)

I just want to make sure I am not hurting ourselves by employing this strategy.
I realize that her monthly benefits will be lower by \$44/month compared to the age 70 benefits, but that is small compared to the additional (\$120k-\$71,760= )\$47,940 that we will have received.

Is there any problem with my logic?

Hi,

I think the flaw in your logic is that you appear to believe that your wife will get 50% of your full retirement age (FRA) rate when you file, even if she takes reduced benefits on her own record. That isn't correct.

Your wife's spousal benefits will be calculated by subtracting her full retirement age rate (PIA) from 50% of your PIA. Using your figures, that would give her an excess spousal benefit of \$319 (i.e. \$2902/2 - \$1132). This excess spousal benefit would then be added to the benefit rate payable on her own record. So, if she starts her benefits early and receives a reduced rate of \$950, her combined rate will be \$1269 after she becomes entitled to spousal benefits. Alternatively, if she waits until FRA to start her own benefits, she'd eventually receive a combined rate of \$1451 (i.e. \$1132 + \$319). Again, this is based on your figures, so the actual amounts may vary.

You may want to strongly consider subscribing to the maximization software available on this website. That way you can explore all of your filing options and determine the best strategy for both you and your wife.

Best, Jerry