Ask Larry: How Will My Wife’s Benefits Be Calculated If We Both File At 70?

Today’s column addresses questions about how spousal benefits are calculated when filing after FRA, how the Parisi case can affect benefit amounts when the family maximum that can be claimed on a single record is involved and filing with two exes. Larry Kotlikoff is a Professor of Economics at Boston University and the founder and president of Economic Security Planning, Inc, which markets Maximize My Social Security and MaxiFi Planner.

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How Will My Wife’s Benefits Be Calculated If We Both File At 70?

Hi Larry, I am 65, turning 66 in October. My wife is 65, turning 66 next May. My Social Security retirement benefits will be the maximum. Her Social Security retirement benefits will be minimal. I plan to wait until 70 to collect since I can’t get 8% anywhere else. If I file at 70 and then she files at 70, will her benefits be based on 50% of my benefit amount? Or is it based on her own history, which will be minimal? Is there a different strategy to maximize benefits, e.g. have her file before me, collect whatever benefits she can until 70 and then when she is 70, her benefits go up to 50% of mine? Thanks, Joseph

Hi Joseph, first note that spousal benefits are 50% of the record holder’s PIA, not 50% of increased benefits taken after full retirement age (FRA). A person’s PIA is equal to their Social Security retirement benefit rate if they start drawing at FRA.

If you and your wife both file at 70, your benefit rate would be 32% higher than your PIA due to delayed retirement credits (DRCs). However, your wife couldn’t be paid any more than the higher of her own retirement benefit rate or 50% of your PIA, so it wouldn’t be advantageous for your wife to wait until 70 to file for benefits unless her own benefit rate with DRCs would exceed 50% of your PIA.

If your wife’s own benefit rate would be less than 50% of your PIA even if she waited until 70 to file, she wouldn’t want to wait past her FRA to claim her own retirement benefits. She could then apply for additional spousal benefits from your record when you start drawing your benefits.

It would still likely be a good plan for you to wait until 70 to file for your benefits because that would not only provide you with your highest possible monthly benefit rate, it would also provide your wife with her highest possible survivor rate if you die before her. A widow can be paid up to 100% of her deceased spouse’s benefit rate, inclusive of any DRCs that the deceased spouse earned by waiting past FRA to claim their benefits.

You and your wife may want to use my company’s software — Maximize My Social Security or MaxiFi Planner — to understand all of your various options and help discover the best strategy to maximize your benefits. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry

Can You Explain The Parisi Case And It’s Effect?

Hi Larry, Can you explain the Parisi Case and its effect? Our daughter is dually entitled to her own SSDI and CBDs on my husband’s record. SSA is using this case as justification for determining her total benefit to be less than 50% of her dad’s PIA. I also collect child-in-care benefits, which is 50% of his PIA. However, my benefit at 50% and her CBD benefit are well below our calculated family maximum. We have been unable to get an answer except “Parisi Case.” Thanks, Casey

Hi Casey, That’s a tall order — I’ll try, The important thing to know about the Parisi ruling is that it was favorable for families. No Social Security beneficiary receives less benefits due to the Parisi ruling, and many people are paid more.

It might help you to understand the ruling if I give you an example. Let’s say Bob is drawing Social Security retirement benefits with a primary insurance amount (PIA), which is equal to his full retirement age (FRA) retirement benefit amount, of $2,000. The family maximum benefit (FMB)

FMB
limit on Bob’s record is $3,500, meaning that after Bob’s PIA is deducted, up to $1,500 is available to be paid to eligible family members. Bob has a son who is eligible for childhood disability benefits (CDBs), and a wife eligible for child-in-care spousal benefits. Bob’s wife and son could normally be paid up to $1,000 each (i.e. 50% of Bob’s PIA), but their benefit rate is reduced to $750 each because of the FMB.

There is no guarantee, by the way, that the full FMB will be paid. For example, let’s say Bob in our example above started getting his benefits at age 62 and received a reduced rate of $1,500 instead of his full PIA. That would not change the amount payable to Bob’s wife and son. His full PIA would still be deducted from the FMB in order to determine the amount due to his family members. So as a family they would only be getting $3,000 (i.e. $1,500 + $750 + $750), not the full $3,500 FMB.

Now let’s go back to our example and say that Bob’s son is getting $500 per month in Social Security disability (SSDI) benefits on his own account. Bob’s son would then be paid his own SSDI benefits plus a partial DAC of $250, or a total of the same $750 that he would be due if he was eligible only for CDBs. Prior to the Parisi ruling, the fact that Bob’s son’s CDBs were reduced to $250 wouldn’t have affected the amount payable to Bob’s wife. She would have still only received $750, or half of the $1,500 available from the FMB. The Parisi ruling allowed that the $500 not paid to Bob’s son from Bob’s record due to his dual entitlement to SSDI benefits could be redistributed to other non-dually entitled family members. As a result, Bob’s wife could then be paid her full 50% of Bob’s PIA, or $1,000, instead of $750. However, Parisi did not change the amount payable to dually entitled family members like Bob’s son, so he’d still only get a total benefit of $750 (i.e. $500 SSDI + $250 CDBs).

The bottom line is that your son isn’t getting a lower total benefit amount because of the Parisi ruling, but you’re likely getting a higher spousal benefit than you would have gotten prior to the Parisi ruling. Best, Larry

Can I Collect My Deceased Husband’s Benefits At Age 60?

Hi Larry, I’ve tried to navigate Social Security’s website and I’ve read your very good responses to questions but have not found a situation similar to mine. I am currently working full time and will be 60 in a couple of months. I plan to work until I’m 65 or retire sooner if possible and wait until I’m 67 to collect my Social Security benefits. In my first marriage, I was a stay at home mom in a 20-year marriage that ended in divorce. I remarried 10 years later and my second husband passed away two years ago at 63. We were married five years. He was on disability the last year and a half of our marriage, getting $1,800 a month.

My first husband has made about a six figure income annually the last 15 years. I have not remarried and have no plans to. I wasn’t sure if I could collect a widow’s benefit based on my deceased husband’s earnings when I turn 60, or when I’m 62 if I can collect a benefit based on the record of my ex-husband,who is still living. Would collecting one of them negate ever being able to collect the other? Thanks, Lauren

Hi Lauren, I’m sorry for your loss.

You could potentially file for widow’s benefits on your deceased husband’s record as early as age 60, but if you continue working and you earn too much then your benefits may need to be fully or partially withheld due to Social Security’s earnings test.

If your first husband is at least 62 or drawing his Social Security benefits, you could file for divorced spousal benefits as early as 62. However, you can’t file for divorced spousal benefits without also being required to file for your own benefits at the same time. And your own benefits and your divorced spousal benefits could also be withheld until you reach full retirement age (FRA) due to the earnings test.

You can’t be paid more than one full benefit at the same time. If you file for more than one type of benefit, you could only be paid up to the higher of the benefit rates. And your benefit rate(s) would be reduced for age if you start drawing them prior to your FRA.

Depending on how much you’ll be earning and the relative amounts of your various benefits, it sounds like your best strategy would likely be one of the following:

1) File for reduced widow’s benefits at 60 or as soon as your earnings will permit at least some benefits to be paid, then switch to your own record and/or divorced spousal benefits at FRA; or,

2) File for reduced widow’s benefits at age 60 or as soon as your earnings will permit at least some benefits to be paid, then switch to your own record at age 70; or,

3) File for your own reduced retirement benefits and divorced spousal benefits at age 62 or as soon as your earnings will permit at least some benefits to be paid, then file for unreduced widow’s benefits at full retirement age (FRA).

Normally, you would want to start out drawing the lower benefit first and then switch to the higher record when it reaches its highest potential rate. My company’s software — Maximize My Social Security or MaxiFi Planner — could sort all of this out for you and help you determine your optimal filing strategy. As I noted above, Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry