Q: Will my benefit as a spouse be smaller because my wife took Social Security early? She started receiving Social Security when she turned 62. I don't plan to claim my spousal benefit until I'm 66, which is my full retirement age. Will I get 50% of my wife's reduced benefit, or will I qualify for 50% of her full retirement benefit?--FM
A: Your spousal benefit isn't reduced because your wife applied for Social Security early. If you apply for it when you're 66, you'll receive 50% of her full retirement benefit.
Her age when she filed for Social Security is irrelevant. Your spousal benefit is based on how old you are when you apply for it. Apply at 66, and you get 50% of her full benefit. If you apply when you're 62, you only get 35% of her full benefit.
Her full benefit is what's known in Social Security jargon as her Primary Insurance Amount, or PIA. It's the amount she would currently be receiving if she had started Social Security at her full retirement age.
Your spousal benefit is always a percentage of your husband or wife's PIA, no matter how early or late he or she started collecting Social Security says Linda Lauria, a Social Security Administration spokeswoman in New York City.
Take that hypothetical couple, Dan and Rosanne. Let's say Rosanne's PIA -- the amount she'd receive at age 66 -- is $1,000 a month. But she retires at 62, so she gets 25% less. Her reduced benefit: a monthly check for $750.
For the next four years, Social Security benefits get a 3% annual cost of living increase. Thanks to these four inflation adjustments, Rosanne's $750 monthly check has grown to $844.16
Her husband Dan, now 66 years old, decides to postpone taking his own benefit. He restricts his Social Security application to his spousal benefit. (See my previous post.)
Since he has reached full retirement age, his spousal benefit is 50% of Rosanne's PIA. Her PIA -- the amount she'd be getting had she retired at 66, remember -- is now $1,125.50, thanks to those four years of inflation adjustments. Dan's spousal benefit is therefore 50% of $1,125.50, or $562.75 a month.
But what if Rosanne had made a different decision and retired after her full retirement age? In that case, her monthly benefit would be boosted by Delayed Retirement Credits -- an extra 8% credit for each year she delayed taking it between age 66 and age 70.
Again, let's assume four years of 3% annual inflation adjustments, which boost her PIA to $1,125.50 a month. The four years of Delayed Retirement Credits are worth an extra $320 a month. The upshot: when Rosanne starts collecting Social Security at 70, she'll get a monthly check for $1,445.50.
But Dan's spousal benefit isn't bigger because she postponed her own Social Security application. At 66, he'll still $562.75 a month -- 50% of her $1,125.50 inflation-adjusted PIA.
However, his widower's benefit will be bigger if Rosanne predeceases him. As a surviving spouse, he'll be entitled to 100% of whatever amount she was collecting, which includes her Delayed Retirement Credits.
Please send your questions to Lynn@LynnBrennersFamilyFinance.com. I'm sorry I can't respond personally to every email. Questions are only addressed online.
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