Strategy For Widowed Spouses
Widows and widowers may receive full benefits at their full retirement age or reduced benefits as early as age 60, as explained in the sections above. Remarrying after age 60 will not affect your eligibility for survivors benefits. However, it may be more convenient for you to forego your widow or widower spousal benefits depending on your circumstances.
If your current spouse is also eligible for Social Security benefits and earns more than your former spouse, you may wish to apply for spousal benefits based on your new spouseâs record instead.
If you are collecting a survivor benefit, but also qualify for a benefit on your own, you may wish to collect a survivor benefit in the early years of retirement and leave your own Social Security benefits to accrue delayed retirement credits. Then, you can switch to your own retirement benefit as late as age 70.
Spousal Social Security Benefits From Ex
If you are divorced, spousal social security benefits work differently.
You are entitled to receive spousal benefits from your ex-spouse if:
- You are age 62 or older
- You were married 10 years of longer
- You have been divorced for 2 years
- You are unmarried
- Big Difference Your ex-spouse does not have to be taking their benefits for you to claim spousal benefits on their record.
Delaying Vs Beginning At Full Retirement Age
Now, this scenario is a little more complex because there is technically a breakeven where the spouse delaying does end up benefiting them in the very long run. In this case it doesnt happen until their late 80s. For most, at that breakeven its worth getting more money early in retirement. But again. It will depend on their specific plan a little more than the previous 2 examples.
Big takeaway is just to understand how delaying will impact spousal benefits.
If Anne had no benefit of her own and relied on only spousal benefits, these numbers would be very different and it would greatly favor the higher earning spouse claiming before age 70.
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Collecting Social Security Spousal Benefits
Spousal benefits are Social Security benefits that are based on your spouses work record instead of your own. In some circumstances, youre eligible for spousal benefits even if youve divorced.
Your Social Security retirement benefit is typically based on your 35 highest-earning years of work. But, if your spouse earned significantly more or your work history is limited, you may get more money from spousal benefits. Read on to learn when you qualify for spousal benefits and how Social Security calculates your payments.
How To Calculate Your Social Security Benefit
Calculating your estimated Social Security benefit is no easy task. Your best bet may be to request a Social Security benefits estimate from the SSA. This will contain an estimate of your benefit at age 62, at your FRA, and at age 70, based on your current work history.
In addition to these estimates, the SSA also has a series of Social Security benefits calculators that can help you plan for retirement. You can also use this calculator from AARP to estimate the best age to start claiming your benefits.
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Other Pensions Might Reduce Your Social Security Benefits
Your benefits will be affected if you have a pension from a job that didnt have Social Security taxes taken out of your paycheck. Common examples include people who worked for a public education system, railroad workers and Federal government employees hired before 1984 who are covered by the Civil Service Retirement System .
Two complicated provisions will affect your claiming strategy: the Windfall Elimination Provision and the Government Pension Offset . The WEP reduces your own benefits by a discounted factor based on how many years you worked in jobs that did not withhold Social Security taxes. The GPO reduces your spousal and survivor benefits by two-thirds of the amount of your noncovered pension.
Calculate Your Bend Points
This step allows you to calculate your primary insurance amount . Social Security is set up so that lower income workers have a higher percentage of their wages replaced upon retirement. The more you earn, the lower the percentage of your working wages that you will receive. These different tiers, or bend points, are set by law. Here is how they work. Your PIA is calculated by finding the sum of 90% of your AIME up to $926, 32% of AIME between $926 and $5,583, and 15% of AIME above $5,583. For example, if you have an AIME of $800, then your PIA would be $720 per month. Now it is time to make any necessary adjustments to your PIA.
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The Concept Of Dual Entitlement In Social Security Benefits
The simplest way to understand the concept of spousal benefits is to think of them as an assurance that if the lower-earning spouse files for Social Security at full retirement age, they will not receive less than half of the higher-earning spouses full retirement age benefit.
We can look at an example to see how spousal payments could work in the real world.
Lets assume we have a couple where the husband worked outside the home and paid into Social Security over his career. The wife managed the home and thus did not pay into Social Security.
At full retirement age, the husband has a monthly Social Security benefit of $2,000. Because the wife did not work in a role that allowed her to earn the required 40 credits, she wont have a benefit of her own.
However, as an eligible spouse, shed be eligible for a benefit of $1,000 per month as a spousal payment at her full retirement age.
But what if the wife did earn the required 40 credits for her own benefit, and earned less than the husband? This is where dual entitlement rules come into play.
If the husband in our example has a full retirement age benefit of $2,000 per month and the wife has her own benefit of $800 per month, dual entitlement says the wife is still eligible for a total benefit of $1,000.
How Does The Social Security Administration Calculate Benefits
Benefits also depend on how much money youâve earned in life. The Social Security Administration takes your highest-earning 35 years of covered wages and averages them, indexing for inflation. They give you a big fat âzeroâ for each year you donât have earnings, so people who worked for fewer than 35 years may see lower benefits.
The Social Security Administration also makes annual Cost of Living Adjustments, even as you collect benefits. That means the retirement income you collect from Social Security has built-in protection against inflation. For many people, Social Security is the only form of retirement income they have that is directly linked to inflation. Itâs a big perk that doesnât get a lot of attention.
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What Debts Are Forgiven At Death
What Types of Debt Can Be Discharged Upon Death?
- Secured Debt. If the deceased died with a mortgage on her home, whoever winds up with the house is responsible for the debt. …
- Unsecured Debt. Any unsecured debt, such as a credit card, has to be paid only if there are enough assets in the estate. …
- Student Loans. …
What Pia Is Used In Calculating A Spousal Benefit
What is PIA used in calculating Spousal Benefit?That is Spousal Benefit = Larger of vs
1)Is PIA always SS amount at FRA or2)is it the SS amount when Primary Worker takes Social Security Benefit or3) is it the current SS amount given to Primary worker?
Does PIA increases with COLA adjustment every year?
Hi. The PIA used to calculate spousal benefits is the worker’s PIA at the time the spousal claim is filed. In other words, the PIA adjusted for any applicable COLAs and/or recomputations. If the person filing for spousal benefits is eligible for their own Social Security benefits, then their unreduced spousal rate is calculated by subtracting their own current PIA from 50% of the worker’s current PIA.
A person’s primary insurance amount is the benefit rate they would receive if they elect to begin receiving retirement benefits at their full retirement age . If a person becomes entitled to Social Security disability benefits prior to FRA, their undreduced SSDI benefit rate is also equal to their PIA. Or, if a person dies prior to reaching FRA, their PIA is the base amount from which survivor benefits are calculated.
If a person lives at least until age 62, or if they die or become entitled to SSDI benefits after reaching age 62, then their PIA is calculated based on their highest 35 years of Social Security covered wage-indexed earnings . Fewer earnings years are used to calculate the PIA of someone who dies or qualifies for SSDI benefits prior to the year they reach age 62.
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Mistake #3 Higher Earning Spouse Unnecessarily Delaying
And one more example. I feel like we all know that delaying Social Security gets you an increased benefit. And that very often we find it worth delaying.
But that is not always the case when spousal benefits come into play. Because remember, the lower earning spouse can not get spousal benefits until the higher earning spouse claims.
So, while the higher earning spouse delaying does increase their benefit, it also decreases Annes potential benefit!
And just for example here, if Annes spouse delays until age 70, Annes benefit will only be $800 per month until her spouse turns age 70.
This ends up resulting in $24,200 less in benefits in the early years of retirement compared to if the higher earning spouse would have claimed at age 69.
Factors That Affect How Much You’ll Get In Retirement
Gordon Scott has been an active investor and technical analyst of securities, futures, forex, and penny stocks for 20+ years. He is a member of the Investopedia Financial Review Board and the co-author of Investing to Win. Gordon is a Chartered Market Technician . He is also a member of CMT Association.
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Most retirees rely on Social Security. One in four gets 90% of their retirement income from the program. About half rely on it for 50% of their income.
Although Social Security is only one part of a secure retirement plan, it’s helpful to get a rough idea of how much you can expect. If you’re eligible for Social Security, your monthly benefit is based on two factors:
- How much money you earned during your working career
- The age you choose to start getting payments
Let’s look at how each of these affects your future Social Security income.
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How Social Security Is Calculated
Social Security benefits are based on your lifetime earnings. Your actual earnings are adjusted or indexed to account for changes in average wages since the year the earnings were received. Then Social Security calculates your average indexed monthly earnings during the 35 years in which you earned the most.
Spousal Benefits Are Based On Your Full Retirement Age
And lastly, all the calculations for spousal benefit rely on you and your spouses full retirement age benefit. Depending on when you were born this is probably between age 66 and 67.
And so a good start to knowing if spousal benefits will come into play with you is be sure you find this information for both of you. If you havent looked at a Social Security statement in a while, you can access your most recent statement at this link here. SSA.gov/myaccount
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Mistake #1 With Spousal Benefits
For example, we have heard multiple times, and there is a lot of information on the internet that describes spousal benefits as you will always receive a minimum of your spouses benefit.
And thats not the case, or at least thats not the case since 2015.
The most common variation of this we hear is that the lower earning spouse might as well begin benefits as early as possible since the spousal benefit will bring them up to 50% of the larger benefit later.
But this is not the case.
Remember, Social Security calculates a maximum spousal benefit based on your full retirement age. Anne is never going to get more than $100 per month in spousal benefits.
So, lets say Anne begins her benefits at age 62. She will receive a sharply reduced Social Security amount because she claims early. In this case her benefit would drop to $563 per month from the $800 full retirement age amount.
Then, remember the spouse has to be claiming benefits for Anne to receive spousal benefits. But even once the spouse begins benefits and Anne is eligible for spousal benefits she will not be bumped up to $800 per month. She will only get the $100 per month added to her reduced benefit for a total of $663.
That means Anne loses out on $237 per month for the rest of her life. Perhaps she receives some added months of a $563 benefit. But the breakeven on this is not very good, in fact it is just that if Anne lives past 71 she would get more total benefits by not claiming at age 62.
Explore How The Age You Start Collecting Social Security Affects Your Retirement Benefits
The calculator bases your benefit estimate on current formulas from the Social Security Administration. Your answers are anonymous. Because we do not access or use your Social Security earnings record, these are rough estimates.
Your estimated benefits:
Select claiming ages on the graph to see how your estimated benefit changes.
Claiming at age Age 67 is your full benefit claiming age.
Compared to claiming at your full benefit claiming age.
Social Security retirement benefits are not designed to be your sole source of retirement income, but waiting even one month will increase your benefits.
Spousal Benefit Reduction Due To Own Retirement Benefit
If you are receiving a retirement benefit of your own, your benefit as a spouse will be reduced by the greater of:
Example: In addition to receiving a benefit as Janes spouse, Bob is also receiving a retirement benefit of his own. Because he is entitled to a retirement benefit of his own, he will not receive the full spousal benefit . Instead, his spousal benefit will be reduced by the greater of a) his own PIA or b) his monthly retirement benefit.
Strategies For Claiming A Spousal Benefit
Social Security offers quite a few options for how to claim your benefits, and while the options are meant to give flexibility to retirees and others, they do create more complexity. Everyone wants to get all the benefits theyre entitled to, and this complexity might obscure an avenue to receiving more money from the program. Spouses have a few ways to proceed here, and the best course of action often depends on your personal financial situation.
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Social Security In The Us
Before Social Security , care for the elderly or disabled in the U.S. wasnt a federal responsibility if they werent cared for by family, it fell into the hands of municipalities or states. This changed in 1935 when the Social Security Act was first established in the U.S. by President Franklin Roosevelt. The first taxes were collected starting in January 1937, which enabled monetary assistance to qualified Americans with inadequate or no income. Originally, SS was just a program that paid out retirement benefits, but a 1939 change added survivors benefits for a retirees spouse and children. In addition, in 1956, disability benefits were added.
Today, SS in the U.S. plays a very important role in keeping a lot of older Americans out of poverty. For most Americans in retirement, it is their major source of income, and for a significant percentage, it is their only source of income, even though SS was never intended to be a full replacement of income. On average, SS pays lower-wage earners higher relative benefits than higher-wage earners. In addition, lower-wage earners tend to pay less tax and are more likely to receive social insurance disability income and survivor benefits. SS is sometimes referred to as Old Age, Survivors, and Disability Insurance .
Social Security Facts
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How Spousal Benefits Are Calculated
Spousal benefits are based on how much the other spouse would receive if that person began collecting benefits at the full or “normal” retirement age.
The Social Security Administration has an online calculator that can show you what percentage of your spouse’s benefits you will be eligible for depending on your own age when you start receiving benefits.
The short answer to the calculation is this: You’re eligible for half of your spouse’s benefit amount as long as you wait until your full retirement age to apply. The earlier you file, the less you’ll get.
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What Happens To Ssdi When You Also Receive Workers Comp Benefits
Workers compensation and other public benefits that you receive must be reported to the Social Security Administration when you apply for or receive SSDI benefits. The reason is that the combined total of the workers comp and state disability benefits along with your monthly SSDI cannot exceed 80% the average current earnings you had when you became disabled and were no longer able to work.
What this means in terms of your monthly SSDI payment is best demonstrated by an example provided by Social Security of a worker with average monthly earnings of $4,000 who becomes disabled and can no longer work. The disabled worker, the workers spouse and their two children qualify for SSDI benefits of $2,200 each month.
However, the worker also receives $2,000 a month through workers compensation, which makes the total state and federal benefits $4,200 or $1,000 more than 80% of the persons average current earnings when employed. The family continues to receive their workers compensation monthly payment, but the SSDI benefit is reduced by $1,000 until the compensation benefits end or the worker reaches full retirement age when SSDI converts to retirement benefits.
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