What Is Our Best Strategy?

Jan 12 2017 - 5:00am

I'm currently reading your updated version of Get What's Yours. I read your earlier version, but I am unclear as to a few specific questions, so thought I would write. Thank you for providing this vital service!

My husband is a veteran who retired after 30 years active duty Army in September 2015. He is 61 years old and I am 60.
1. He qualifies for the DD214 Increased SS Benefits for Vets based upon his service between March 1986-Dec 2001 (that we don't get unless he asks for it).
2. He signed form 4361 (Application for Exemption from Self-employment tax for use by ministers, members of religious orders and Christian Science practitioners) on 12-29-1983 when we were struggling to make ends meet as youth pastor at a church.
3. He has paid into SS since 1971, except for 1979 (when he did not work at all because he was in school and I worked) and 1983-85 when he was employed at the church and signed that paper. (That's 41 years!)
4. He has recently been diagnosed with a rare degenerative brain disorder called MSA-C. The prognosis of most people with this disease is 9 years after diagnosis. However, he is healthy except for this and the neurologist assures us we can slow the progression with a healthy lifestyle (which we follow).
5. His SS estimated payment if continuing work and waiting until age 70 is $3520/mo. However, he is no longer working--he did try until January 30, 2016, but it was too difficult and tiring for him. We live on his military retirement pension and his VA disability payment (he is 100% P&T disabled according to the VA).
6. We don't need more money right now and have always thought we would not need to claim SS until he turns 70. However, now we are wondering if it would be best to claim SS disability?
7. I know that you have said that it's best to wait as long as possible, and that SS disability is difficult to apply for. According to the SS website, if he becomes disabled right now, his estimated payment is $2528/mo, and that will never go up....At full retirement age (66 and 2 mos), he will be paid approx $2647/mo, higher than the disability payment...
8. Also, will Medicare automatically begin after he's been on SS disability for 24 months? (We really like Tricare Prime and don't want to give that up until we have to!)
9. I have worked, but my income was only enough for a few extras--we lived on his income. At age 70, my retirement payment would be $1128/mo, and I am not disabled, but have resigned as of 11/30/16 in order to be his caregiver. I'm not sure if/when I will be able to work again. I have paid into SS system for 29 years since 1973, however I didn't make much for many of those years, and also I didn't work for many years while raising my children.

My questions are:
1. will signing that form 4361 in 1983 preempt him from receiving SS payments or because he's since paid into the system consistently for the past 31 years (and some years earlier), does he now qualify?
2. Considering his diagnosis, would it be best to apply for disability benefits now or at age 62, or wait for retirement benefits at full retirement age (66.2) or 70?
3. Will Medicare begin if he is approved for disability?
4. And what happens if he doesn't apply before he dies?
5. In light of the notice on the SS statement that *"by 2034, the payroll taxes collected will be enough to pay only about 79% of scheduled benefits," should we be taking our benefits earlier rather than waiting until age 70 as planned?
6. In my case, should I apply for spousal benefits when he turns 70, then my benefits when I turn 70?
Thanks!

Hi,

I'm sorry to hear about your husband's illness.

That's a lot to cover, so I'll try to respond point by point. First off, your husband probably won't need to submit his DD-214 form to get the extra credits for his periods of active military service. Social Security started including deemed military wages automatically in 1968, so proof of service is normally only needed for military service prior to 1968.

It doesn't sound like opting out of Social Security with regard to his ministering will have a substantial impact on your husband's benefit rate. He'll still get credit for all of his work on which he paid Social Security taxes.

It would almost certainly be best for your husband to apply for Social Security disability benefits as soon as possible. If he qualifies, he'll receive essentially his full retirement age benefit early. I don't know why the figures you quoted indicate that his disability rate would be lower than his full retirement age rate, but that isn't correct. In fact, his benefit rate may be a bit higher if he qualifies for disability prior to age 62, since Social Security would use fewer years to calculate his benefit rate. That would result in a somewhat higher per year earnings average, and resulting benefit rate.

Assuming that your husband qualifies for disability benefits, he could still opt to suspend his benefits when they convert to regular retirement benefits at his full retirement age in order to earn delayed retirement credits. So, there is almost certainly no downside to him opting to start disability benefits as soon as he qualifies.

Medicare eligibility begins 2 years after the first month of entitlement to disability benefits, or age 65, whichever is earlier. Part A of Medicare (inpatient hospital coverage) is the only part that starts automatically, and it is free. The other parts of Medicare are optional and require a premium. I don't really know how that would all coordinate with your Tricare coverage.

If your husband was to die before receiving benefits, you would potentially be eligible for his full retirement age benefit rate as a widow, augmented by delayed retirement credits if he was past full retirement age at the time of his death.

As far as your own benefits go, it sounds like you should probably start taking benefits no later than your full retirement age. Based on your figures, you would then receive a combined retirement and spousal benefit that would add up to 50% of your husband's disability or full retirement age rate. It wouldn't be any higher than that if you waited until age 70 unless your own benefit rate was higher than 50% of your husband's, which doesn't appear to be the case. You could start drawing as early as age 62, although your benefit rate will be reduced if you do so. That reduction would not carry over to your potential survivor benefits, though, so filing early may make sense given your husband's diagnosis.

You may want to consider running the maximization software available on this website. That will permit you to run various 'what-if' scenarios in order to explore all of your options, which should clarify your best filing strategy.

Best, Jerry