How is the Social Security spousal benefit calculated at full retirement age and at age 70?
My wife is older than me by several years and is already getting her FRA amount paid to her ($1,200) from Social Security. When I reach my FRA age, she will be entitled to the 50 percent amount of my FRA benefit (let's say I will get $2,800 at my FRA), so she will now be eligible for $1,400 (the larger amount). My highest 35 years is mostly above the yearly taxes paid. Her benefit of $1,200 plus the difference of the spousal benefit of $200 brings her new total to $1,400.
If I wait until age 70 and take the larger amount (additional 32 percent over the $2,800), does her 50 percent spousal benefit also go up (50 percent of my higher amount at age 70)? Or is her 50 percent spousal benefit capped at my FRA benefit ($2,800) and the most she would ever receive is $1,400?
No, your wife's 50% spousal benefit will never be more than 50% of your FRA benefit. Using your numbers, her spousal benefit would be capped at $1,400. Spouses do not receive delayed credits. However, in terms of maximizing your household benefits, if you were born before January 1, 1954, and thereby grandfathered under the old claiming rules, at your FRA you may be able to place a restricted claim against your wife's earnings and receive 50% of her FRA benefit while you let your own grow to age 70. At that time you would switch from your restricted claim to your own benefit with delayed credits.
You seem to have this pegged. Her benefit will NOT go up if you wait until 70. And this fact can influence your claiming strategy. This is why I do not like when media outlets suggest that it is ALWAYS best to wait until 70 to collect. In the case where the higher earning spouse is younger, maybe not.
Now, the optimal solution for YOU, as one of the other advisors pointed out, may be to file a restricted claim for spousal benefits only at your FRA then switch to your own benefit at 70. But for other readers who are younger than you (and born after 1954) this loophole will not be available. In this case, waiting until 70 would see your benefit grow the same as everyone else's, BUT it would cost you $200/month more to wait, since your wife will be stuck with a lower benefit during the waiting period.
Remember that while you wait, you will be spending down your assets - so the additional income needs to be balanced with the depletion of your resources. When you really consider both sides of the equation - depleting assets on the one hand balanced against higher lifetime income on the other hand - the decision to wait until 70 is not best in every situation. In your case, the extra $200/month could be enough to swing the balance to claim at FRA.
I really like to make this decision using our powerful financial planning software becaue it is able to look at the decision from all angles. It is NOT all about "getting the most income out of Social Security" - it is also about minimizing the chance of running out of money, and maybe (depending on your situation) leaving money for your kids, etc.
Sounds like you have planned this out well. The spousal benefit will be based on your FRA amount, which is the $1400 now receiving subject to COLAs. If she were younger and you had delayed collecting your benefits til age 70, then her amount would have been 50% of the higher number. Now, she is effectively collecting as if you had been receving, thereby reducing the total pot available.
That is one of the most confusing questions in social security planning, so thanks to bring it up.
Many of you have heard the delayed benefit—if you wait for later time (at the age 70), your benefit goes up 32%. However, that delayed benefit only applies to the survivor benefit, not the spousal one.
In other words, at your FRA, SSA will compare a half of yours with your wife’s and automatically adjust for the higher amount for hers. Therefore, you’re correct that she will get $1,400/mo. ($200 more than on her own.) However, when you delay to 70 (assuming no COLA adjustment), your $2,800/mo. will become $3,696/mo., but your wife will not get $1,848/mo. benefit. She will, eventually, get the full $3,696/mo. survivor benefit when you pass.
Meanwhile, if the inflation heats up and COLA adjustments being made, she may get a higher than $1,400/mo. for spousal benefit. Best!
Look here! https://www.ssa.gov/pubs/EN-05-10070.pdf
Make sure you do a social security optimizer, you want to get the most, and not the least. Once you file, your done! There is no mulligan.
Get an advisor that can help.