So, Who Is Right?

Category: 
May 26 2018 - 9:41am

I have a question about Social Security 'Deeming'.
A little background first; I will be 62 in October of 2018 and was planning to take SS early. Reason being is that I have a pension that covers my expenses and an IRA that I could leave untouched until 70 1/2 when RMD kicks in. Taking my SS at 62 gives me extra play money that would have drawn down my IRA and in the long run, net me a smaller lifetime net worth.
My wife will be 62 in February of 2019.
I have paid max into SS for over 30 years. My wife only worked part time and not at all while raising our family and so doesn't have much in her SS. She will get a much larger SS by claiming the 50% spousal option.
I understand that IF I start my SS before she does, then she will automatically be 'deemed' to take the largest benefit she is eligible for, which would be the spousal benefit over her own earned benefit. But I also understand, after reading on a Kiplinger web page, that I could delay taking my SS until after my wife turns 62 and starts her SS, which would then be based on her largest benefit she is eligible for, her own earned benefit and not based on my SS since I am not drawing SS yet. I also read on the Keplinger web page that I could start my SS after my wife has started hers and that she will not automatically be 'deemed' with the larger spousal eligibility, but would have to actually apply for the spousal.
My plan is to have my wife apply for SS at 62 in February of 2019, getting SS payment established based on her earnings, then I apply for my SS shortly after, about 6 months past my earliest date I could have applied back in October of the previous year. Then I will keep my wife's SS at this established rate based on her earnings until she reaches FRA. At that time she will apply for the larger spousal benefit, bumping her SS payment to the 50% spousal based on my PIA (Primary Insurance Amount, which is what I would have been getting had I waited until FRA to start my own SS draws)

My hesitation is that I've been reading similar Q/A's here on the topic and it sounds like you believe that SS will automatically bump my wife's SS to the larger spousal benefit once I apply for my own SS.

So who is right, you or Kiplinger? Here is a link to their web page stipulating the scenario;
https://www.kiplinger.com/article/retirement/T051-C000-S004-maximize-the...

And here is the text in the link that leads me to my understanding that my timing for my and my wife's SS will net us the most SS for her that is possible, while drawing my own SS at the earliest date that will allow her to do so;

Unintended Claiming Consequences

But beware the "deeming" provision. Say John applies for his benefit first. Then Mary applies for her own benefit before her full retirement age, intending to delay taking the higher spousal benefit. Not possible, says the Social Security Administration. It automatically "deems" her as taking the highest benefit she's eligible for -- in this case, the spousal benefit.

To get around the deeming provision, the lower earner should apply for her retirement benefit before the higher earner applies for his. The Social Security Administration will not automatically switch her to the spousal benefit once she is eligible; the wife will have to file an application for the spousal benefit, Blair says.

Hi,

Both, depending on the person's birthdate. People born prior to January 2 1954 are not deemed to have filed for spousal benefits if their spouse isn't yet entitled to their benefits in the first month of the person's entitlement to retirement benefits on their own record. As a result, such an individual would have the option of choosing a month of spousal benefit entitlement that's later than when their spouse chooses to start their benefits.

On the other hand, someone born after January 1 1954 (like your wife) has no such option. Whenever they file for their retirement benefits they are also deemed to have filed for spousal benefits as soon as they become eligible for such benefits, and their spousal rate would be reduced for age if they become eligible for spousal benefits prior to their full retirement age (https://www.ssa.gov/planners/retire/claiming.html?intcmp=AE-RET-PLRT-REL...).

So, it sounds like your plan as described in your question won't accomplish what you have in mind. Furthermore, it sounds like you may not have considered the effect that filing for your benefits early would have on your wife's potential survivor benefit rate should you die before her. If you file for your benefits at age 62, your wife's widow's rate would be forever limited to a maximum of no more than 82.5% of your full retirement age rate (PIA). On the other hand if you waited until age 70 to start drawing your benefits, both your monthly benefit rate and your wife's maximum potential widow's rate would amount to roughly 129.33% of your PIA.

Before filing, you and your wife should strongly consider using one of our software options to explore and compare your various filing options in order to determine your best overall strategy.

Best, Jerry