PBS’s Larry Kotlikoff recently gave advice to a man named John about his Social Security benefits. John had called Kotlikoff asking if Social Security had given him the right advice, and upon checking it out, Kotlikoff concluded that Social Security had not only given him the wrong advice, but had given him the worst possible advice.
John, who is 66, is married, with his wife being 62. They are both fairly well off, and John is still working, so they aren’t taking Social Security right away. John called Social Security and asked if he could file for his retirement benefit and suspend its collection so that his wife could get an immediate spousal benefit. After John told the Social Security rep that he’d been the high earner, the rep told him that he could and should file and suspend, since they both surmised that John’s wife’s own Social Security retirement benefit would be very low.
Kotlikoff disagreed. Since Social Security’s retirement benefit is highly progressive, he figured that they would have similar full retirement benefits.
Under this assumption, if John filed for his retirement benefits, and his wife for her spousal benefits, she’d end up getting reduced retirement benefits plus X, which is not her full spousal benefits reduced, but her excess spousal benefits reduced. Her excess spousal benefit is the difference between half of John’s full retirement benefits and 100% of her full retirement benefits. The difference between the two would be negative because of the progressivity of the benefit formula. His wife would end up with no spousal benefit whatsoever, and would receive a permanently reduced benefit.
The prime strategy would be for John to file for his spousal benefit immediately, and his wife to file just for her retirement benefits, or for John to do nothing until 70 and his wife to file only for her spousal benefit at 66.
To read more about how a call can ruin your social security future visit PBS.
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Kenneth G. Marks has been practicing personal injury law since he was admitted to the California Bar in 1981.