Marge applied for spousal benefits when she was 62 and her spouse was 64. At the time, she had worked only 11 years. Her spousal benefits were very low but they were greater than her retirement benefits. After starting her benefits, she worked another 8 years replacing the zero years in her PIA calculation. If her recalculated PIA exceeds one half of her spouse's PIA will she be transitioned to retirement benefits only with the subsequent increase in benefits? If so, would the spousal benefit age reduction or the retirement age reduction apply? I'm trying to determine whether the amount she is receiving is correct.
Hi,
If Marge was insured (i.e. had at least 40 quarters of Social Security coverage) at the time she became entitled to spousal benefits, she'd be deemed to have filed for both benefits. Here's an example of how her benefits would be calculated if her full retirement age benefit (PIA) was $500, and her husband's PIA was $1200:
Reduced retirement benefit at age 62 = $375 (i.e. $500 x .75)
Reduced excess spousal benefit at age 62 = $70 (i.e. ($1200/2 - $500) x .70)
Marge's total combined benefit = $445.
Note that the current reduction factor for retirement benefits at age 62 is 25%, while spousal benefits at age 62 are reduced by 30%.
Continuing this example, if Marge continued working and eventually raised her PIA to $600 or more, her excess spousal benefits would end. The 25% reduction for age would continue to apply to her reduced retirement benefit, so if her PIA was $600, her reduced retirement benefit amount would be $450.
The only way that Marge could become entitled to benefits on her own record after starting reduced spousal benefits is if she was not insured at the time she started the reduced spousal benefits. If she continued working and subsequently became insured, her retirement benefit would be calculated independently from the spousal benefit, and any reduction for age would be based on her age at the time she became entitled to the retirement benefit. If her spousal benefit was higher than the retirement benefit, her excess spousal benefit would be reduced to the difference between the retirement benefit amount and the reduced spousal benefit amount (https://secure.ssa.gov/apps10/poms.nsf/lnx/0300615240). In other words, there would be no change in the total amount payable.
Best, Jerry
