Money Matters

Money Matters: Tips for figuring out when to take Social Security spousal benefits

CorrespondentNovember 16, 2013 

Q. My husband has been on Social Security disability for several years, and we have some questions on my ability to receive spousal benefits based on his earnings record. He is 5 years younger, and I’m 62. My Social Security benefits will be higher than his, but someone suggested that I delay mine to either my full retirement age, age 70 or even longer. My plan is to begin taking a spousal benefit when I stop working at the end of this year. Do you know how much of his benefit I will receive and how or if taking a spousal benefit will impact my benefit? If the spousal benefit is really low, would I be better off taking my benefit early, or should we use our retirement savings to help meet expenses?

A. You can receive a spousal Social Security disability benefit at any age if you are caring for your disabled spouse’s child until the child reaches age 16. If you are under full retirement age (FRA) and you qualify on your own earnings record, you receive that amount first. If you also qualify for a higher amount as a spouse, you will get a combination of benefits that equals the higher amount. When you begin either your own or a spousal benefit between age 62 and your FRA, the amount you will receive is permanently reduced by a percentage based on the number of months before your FRA. If your benefits based on your own earnings will be higher than your spousal benefits, taking benefits prior to your FRA will limit you to receiving your own Social Security benefits. Once you reach FRA, you may elect to receive the spousal benefit and delay your own benefit, which currently will increase by 8 percent a year up until age 70. There is no advantage to delay commencement of benefits beyond age 70.

Always look at your primary insurance amount (PIA) when determining the age at which to start receiving social security benefits. The PIA is the benefit amount you would receive if you wait and apply for Social Security at your FRA. FRA for those born in years 1943 to 1954 is 66. If you take your benefit early at age 62, you will receive a benefit 25 percent lower than if you wait to age 66. The actuaries have worked the numbers so if you live until age 82, you will receive the same amount of total benefits as if you had waited until age 66. If you die prior to age 82, you “win” by beginning benefits early. The longer you live, the better off you will be by delaying benefits, even if this means taking distributions from your retirement plans sooner than later. When your husband reaches FRA, you may want to review the benefits of another option. He would continue his disability benefits until his FRA. At FRA, he could withdraw his application and file a restricted application for spousal benefits only. At age 70, he would switch back to benefits based on his earnings record. You’ll need to run the numbers to see if this strategy makes sense. His health at FRA will also be a factor when making this decision.

Holly Nicholson is a certified financial planner in Raleigh. She cannot answer every question. Reach her at askholly.com or P.O. Box 97128, Raleigh, NC 27624

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