Social Security and the Spouse Benefit

[tallguy]

Aug 9, 2013 16:12:27 GMT -5 @bonnap said:

Here's my real life example:

DH is 55. According to his  current statement at full retirement age 66 and 8 months (let's just say 67) he will receive $2612/mth

50% spousal benefit is $1306

I turn 52 tomorrow.

Full retirement for me is 67. According to my 2010 statement (I'm having trouble logging in) I will receive $1483 mth.

If I wait until age 70 my benefit will be $1839

So if I live until 87 and file using the spousal benefit for 3 years 36 x 1306 = 47016
plus 17 years (204 mths) @ my benefit 1839 = $375156  is a total of $422,172

vs 20 years @ 1483 = $355,920 wow, that's about a 20% difference.

ETA: Let's try the same equation with early retirement at 62

DH's benefit at 62 is $1856

spousal benefit is 33.54% when I turn 62 (2023). So 8 years (96 months) x 622.50 = 59760
and 17 years (204 mths) 422,172 for a total of $481,932

vs 25 years (300 mths) at my reduced benefit of $1044 = 313,200

Hmmm not sure I did that right. That's a really big difference.

I'm having trouble following you here, but if you claim on your spouse's record at 62 (or any time before FRA) you CANNOT switch to your own benefits later.  It looks like that's what you're trying to do in the bolded part.

Also, you do have a math error in there too.  Want to know where, or would you prefer to look for it yourself?  

[Deleted]

Aug 9, 2013 16:27:15 GMT -5 Sum Dum Gai said:

SS is a pension, you have to work a long time to max it out, just like any other pension.  It's not welfare, or wasn't supposed to be.  If you want to collect you have to work, if you want to collect a lot you have to make a decent amount and work a really long time.  That's not unfair, that's how all pensions work.

It's looking more and more like welfare. First, your SS payment is a decreasing % of your average indexed income, starting with 90% on the first $750, then 32% on the next $2,700 or so, then a measly 15% of the rest. Second,, if you've got any kind of a decent income from anything else, your SS gets taxed. We give $7K of DH's SS back to the gubmint in the form of additional taxes every year. You can see why I'm cynical about getting to keep any of what I've earned on my own record.

[lurkyloo]

Divorce plays a role in determining spousal policy.  It's one thing to tell a long-married couple with a SAHS that they have to live on a single SS check.  It's another to tell a long-married then divorced couple that they have to split the working spouse's SS check.  So they give the divorced non-working spouse a 50% benefit.  You can't then turn around and tell the still-married folks they're SOL.  It's creating a pretty strong incentive for divorce.  You could mandate the check goes half to each, but that gets messy fast and SS doesn't want to be in the role of divorce court judge.

I've always thought that the system strongly favors one high-earning spouse and one SAHS.  The 50% benefit with no additional premiums paid is pretty sweet, especially since the premiums top out. 

[Deleted]

I'm having trouble following you here, but if you claim on your spouse's record at 62 (or any time before FRA) you CANNOT switch to your own benefits later. It looks like that's what you're trying to do in the bolded part.

Also, you do have a math error in there too. Want to know where, or would you prefer to look for it yourself?

tallguy,

Yes I was trying to see the effect of early retirement. I didn't read anywhere on the SS page where that couldn't be done. Do you have a source? And thanks for pointing out the math error. I knew that didn't look right!

[tallguy]

Reply #39 quotes the SSA website.  Note the bolded clause.  And yes, I did actually go and talk to SSA to make sure, and they clarified it.  I am still a number of  WAY too damn many years away, but this is absolutely my plan. 
  

If you have reached full retirement age, and you are:

eligible for a spouse's benefit and your own retirement benefit, you may choose to receive only spouse's benefits.
eligible for an ex-spouse's benefit and your own retirement, you may choose to receive only the ex-spouse's benefit. Your ex-spouse needs to be 62 but he or she does not have to have filed for benefits.
If you do that, you can delay applying for your own retirement benefits until a later date to take advantage of delayed retirement credits.

Note: If both you and your current spouse are full retirement age, only one of you can choose to receive spouse's benefits now and delay receiving your own retirement benefits until a later date.

 

 

[Sum Dum Gai]

It's looking more and more like welfare.

Completely agree, but the plan was originally sold as a pension for the very old.  If you never work, or only work part time for low wages, you weren't supposed to get benefits or get very little.  It's a pension plan for working people that protects you from being destitute if you live much longer than average, or that was the original plan.  Then we added all kinds of benefits for people that don't work, and we all started living much much longer than we used too.  Now it's welfare for old people.

[Deleted]

Actually, I think it was sold as an insurance plan...

[973beachbum]

Aug 9, 2013 9:41:09 GMT -5 teen persuasion said:

Justme, thanks for the link.  Reading it several times, it doesn't seem to be a closed loophole, just normal SSA ungodly complexity.  From your link:

Answer: Thanks for that important clarification. The original letter referenced a technique that some married couples can use to significantly boost their overall benefit. The technique allows people to start spousal benefits — Social Security payments based on the work record of a husband or wife — while letting their own benefit grow, to be claimed later. But the option of switching from the spousal benefit to your own benefit is available only if you start spousal benefits at your own full retirement age (which is currently 66). People who start spousal benefits before full retirement age can’t later switch to their own benefit. - See more at: asklizweston.com/category/qawithliz/retirement/#sthash.qmkGNYjp.dpuf

This is consistent w/ what I found on the SSA site.  You have to be at FRA to collect on spouse's record and switch to yours later.  If either of you start early, you are permanently reduced.

For @bonnap,  It was on the previous page.

I also found this which might be helpful.

Dear Liz: I am 63 and not nearly ready to collect Social Security. In fact I probably won’t be ready for quite a few years. My husband, who is 64, wants to collect on my Social Security as it is higher than his. Is there a way for him to do this that would not hurt me? I have called the Social Security office five times and have received five different answers. My husband went into the local office and they told him to have me apply for benefits and then after a short time send them a letter rescinding my application. That would allow him to collect on my work record and wouldn’t hurt my eventual benefit. I am not comfortable doing this. What do you suggest? Answer: At your current age, you must start your own benefits for your husband to get a check based on your work record. The so-called spousal benefit is basically half your retirement benefit, and it will be somewhat reduced because your husband hasn’t achieved “full retirement age” (which is 66 for both of you). When he applies for spousal benefits, the Social Security Administration will compare that benefit with the one based on his own record and give him the larger of the two. Starting benefits now, however, would lock you into a lower payment for the rest of your life. Your checks could be further reduced based on your earnings, if you continue to work. - See more at: asklizweston.com/file-and-suspend-can-boost-social-security-benefits/#sthash.Cq0Huf8K.dpuf

[tallguy]

There was another fantastic trick which they DID discontinue.  You could claim benefits early, and then later on repay all monies received and restart your benefits at the later, higher rate.  You in effect had an interest-free, long-term loan from the government which you could invest and make money from, repay the government out of your profits, keep what was left, and restart your benefits as if you had never taken them.  THAT was one I REALLY wish had survived until it would be my time.  I would have been ALL over that one....        

[973beachbum]

Aug 9, 2013 21:21:46 GMT -5 Sum Dum Gai said:

It's looking more and more like welfare.

Completely agree, but the plan was originally sold as a pension for the very old.  If you never work, or only work part time for low wages, you weren't supposed to get benefits or get very little.  It's a pension plan for working people that protects you from being destitute if you live much longer than average, or that was the original plan.  Then we added all kinds of benefits for people that don't work, and we all started living much much longer than we used too.  Now it's welfare for old people.

It was sold as a stop gap from elderly people being poor and not having enough money to pay for food and shelter.  It was very restrictive in the first few years.  Very few people actually qualified.  It was more of a white man's pension system.  It didn't cover jobs that were by and large preformed by minorities or women.  

the insurance part of the plan is still doing fine.  the numbers of  survivors benefits and the numbers of people who pay in but die, without qualified survivors, is basically a wash.  People may not like what they see as not being fair but life's not fair.

SS was started with about 80 workers for every retiree.  We are at about 2 workers for every retiree.  For every poster here getting $2400 a month we would need two workers paying in $1200 a month. That sounds like double the max.   And that assumes that the people working are even making enough to pay the max.

I still only see two choices to right the good ship SS,  encourage people to have more babies so we can get more workers, or start bumping off retirees.

[Deleted]

Thanks!

[tallguy]

For every poster here getting $2400 a month we would need two workers paying in $1200 a month. That sounds like double the max. And that assumes that the people working are even making enough to pay the max.

Well, it's not double the max.  Don't forget that employers also pay in at the 6.2% rate that workers do.  And while most workers don't pay in anywhere close to that, most recipients aren't taking out max benefits either.

The thing that is killing the SS model is longer lifespans.  That can be dealt with, but politicians don't want to take the hit to do it.    

[973beachbum]

Aug 9, 2013 22:00:56 GMT -5 tallguy said:

For every poster here getting $2400 a month we would need two workers paying in $1200 a month. That sounds like double the max. And that assumes that the people working are even making enough to pay the max.

Well, it's not double the max.  Don't forget that employers also pay in at the 6.2% rate that workers do.  And while most workers don't pay in anywhere close to that, most recipients aren't taking out max benefits either.

The thing that is killing the SS model is longer lifespans.  That can be dealt with, but politicians don't want to take the hit to do it.    

I agree that the longer lifespans is a problem but you are dismissing the effect of 70ish million baby boomer retirees.  We are already down to only 2 workers to every retiree and it is only getting worse.  there is no way the smaller number of workers in the generation following the baby boomers can pay for the boomers SS by themselves in a pay as you go system. 

[Deleted]

I thought Gen Y was pushing Baby Boomer size? 

[tallguy]

I agree that the longer lifespans is a problem but you are dismissing the effect of 70ish million baby boomer retirees.

I'm not dismissing it.  What I am saying is that all other "problems" of the system pale in comparison to longer lifespans, and thus payouts.  The Social Security Act was passed in 1935.  It was basically "old-age insurance."  Payouts began at age 65.  The average life expectancy was 61.7 years.  Now granted, there were a couple of wars and a pandemic in there to skew that number, but that was still a sustainable model. 

By 1970, life expectancy had increased nine years.  It has further increased another eight years since then.  There are people now who collect SS for a longer period of time than they worked and contributed to it.  And almost no matter how large the "boom" was in comparison to the period after it, SS would not be in trouble if the average recipient collected for five to ten years instead of 15 to 25.   

[973beachbum]

Aug 9, 2013 22:40:17 GMT -5 tallguy said:

I agree that the longer lifespans is a problem but you are dismissing the effect of 70ish million baby boomer retirees.

I'm not dismissing it.  What I am saying is that all other "problems" of the system pale in comparison to longer lifespans, and thus payouts.  The Social Security Act was passed in 1935.  It was basically "old-age insurance."  Payouts began at age 65.  The average life expectancy was 61.7 years.  Now granted, there were a couple of wars and a pandemic in there to skew that number, but that was still a sustainable model. 

By 1970, life expectancy had increased nine years.  It has further increased another eight years since then.  There are people now who collect SS for a longer period of time than they worked and contributed to it.  And almost no matter how large the "boom" was in comparison to the period after it, SS would not be in trouble if the average recipient collected for five to ten years instead of 15 to 25.   

They also had 80 workers paying in for every single retiree.  We would be fine with 8 workers for every retiree, but we would have to almost triple our workforce to do it.  (And not every person in the country of "working age" is actually in the work force every year so the numbers never add up to 100%.) 

People working today are also paying in double the % that workers did before the 90's.  The short answer is, they had enough workers then to not need it.  Pretty soon the doubled amount won't be enough.

[tallguy]

Aug 9, 2013 22:50:30 GMT -5 973beachbum said:

Aug 9, 2013 22:40:17 GMT -5 tallguy said:

I'm not dismissing it.  What I am saying is that all other "problems" of the system pale in comparison to longer lifespans, and thus payouts.  The Social Security Act was passed in 1935.  It was basically "old-age insurance."  Payouts began at age 65.  The average life expectancy was 61.7 years.  Now granted, there were a couple of wars and a pandemic in there to skew that number, but that was still a sustainable model. 

By 1970, life expectancy had increased nine years.  It has further increased another eight years since then.  There are people now who collect SS for a longer period of time than they worked and contributed to it.  And almost no matter how large the "boom" was in comparison to the period after it, SS would not be in trouble if the average recipient collected for five to ten years instead of 15 to 25.   

They also had 80 workers paying in for every single retiree.  We would be fine with 8 workers for every retiree, but we would have to almost triple our workforce to do it.  (And not every person in the country of "working age" is actually in the work force every year so the numbers never add up to 100%.) 

People working today are also paying in double the % that workers did before the 90's.  The short answer is, they had enough workers then to not need it.  Pretty soon the doubled amount won't be enough.

You can't just focus on that half of the equation.  U.S. employment is near an all-time high, and certainly far higher than in 1935.  But the ratio of workers to retirees is dependent also on the number of retirees.  We have increased the number of workers since then, but the number of retirees has increased much faster.  When you add in (maybe) 50 million people who, for lack a "nicer" term, didn't die, that is going to impact the ratio.   

[Deleted]

Aug 9, 2013 21:23:10 GMT -5 oped said:

Actually, I think it was sold as an insurance plan...

It sure was.  The line on your pay stub used to read "FICA", which was "Federal Insurance Contributions Act".

They blew that concept with the first recipient, Miss Ida Mae Fuller, who retired after contributing $24.75 into the system.  She died at age 100, having collected $22,888,92.

Aug 9, 2013 21:45:54 GMT -5 973beachbum said:

It was sold as a stop gap from elderly people being poor and not having enough money to pay for food and shelter.  It was very restrictive in the first few years.  Very few people actually qualified.  It was more of a white man's pension system.  It didn't cover jobs that were by and large performed by minorities or women.

Part of the problem is that it was supposed to be one leg of a "3-legged stool" which included a private pension and personal savings. Well, the average worker can't control what happened to private pensions but many conveniently ignored the personal savings part. People who owned houses typically had them paid off at retirement. You buy a house in your 20s, you take out a 30-year mortgage, it's paid off when you retire. Not any more. Between the group that upgraded every 5 years and the group that used their houses as an ATM, many retirees have mortgages. So SS doesn't go as far as it used to.

[Deleted]

Aug 10, 2013 7:06:26 GMT -5 @athena53 said:

Aug 9, 2013 21:23:10 GMT -5 oped said:

Actually, I think it was sold as an insurance plan...

It sure was.  The line on your pay stub used to read "FICA", which was "Federal Insurance Contributions Act".

They blew that concept with the first recipient, Miss Ida Mae Fuller, who retired after contributing $24.75 into the system.  She died at age 100, having collected $22,888,92.

How does that blow the insurance concept? Most people who draw from insurance draw more than they contribute....

[Deleted]

Aug 10, 2013 7:38:50 GMT -5 oped said:

How does that blow the insurance concept? Most people who draw from insurance draw more than they contribute....

If you're comparing it with, say, homeowners insurance, you're right, but the ones who collect are balanced out by the 95% or so who don't have any losses in a given year.

They type of insurance to which this would compare is an annuity. When you're 65, go to an insurance company with $24.75 and tell them you want to buy a life annuity. Let me know what they promise to pay you. The only number that I could pull out of my research is that for $50,000 they'll sell you one that pays $14,000/year- starting at age 85.

[zibazinski]

But if you did save and have a paid off house, you get shafted because they take your social security because "you don't need it." Never mind you were forced to pay into it.

[Deleted]

Aug 10, 2013 8:13:16 GMT -5 zibazinski said:

But if you did save and have a paid off house, you get shafted because they take your social security because "you don't need it." Never mind you were forced to pay into it.

Well, having a paid-off house doesn't affect your benefit but as for savings- total agree with you.

[Deleted]

Aug 10, 2013 8:05:35 GMT -5 @athena53 said:

Aug 10, 2013 7:38:50 GMT -5 oped said:

How does that blow the insurance concept? Most people who draw from insurance draw more than they contribute....

If you're comparing it with, say, homeowners insurance, you're right, but the ones who collect are balanced out by the 95% or so who don't have any losses in a given year.

They type of insurance to which this would compare is an annuity. When you're 65, go to an insurance company with $24.75 and tell them you want to buy a life annuity. Let me know what they promise to pay you. The only number that I could pull out of my research is that for $50,000 they'll sell you one that pays $14,000/year- starting at age 85.

But you start paying into SS long before 65.... I'm not sure i understand the analogy? You mean that first person? Well insurance CAN pay out after just a few months premiums...

Do you hunk medi should also consider pre existing conditions?

[Sum Dum Gai]

I thought Gen Y was pushing Baby Boomer size?

I'm pretty sure it's larger in pure numbers.  It's not as big if you're comparing average number of children per family though.  Gen Y is still pretty young so most of them aren't making much money yet.

[Gardening Grandma]

Aug 10, 2013 8:13:16 GMT -5 zibazinski said:

But if you did save and have a paid off house, you get shafted because they take your social security because "you don't need it." Never mind you were forced to pay into it.

Huh? "They take your social security"?  Who takes your social security?  And where does a paid off house fit in?  I'm really confused since I do have a paid off house and nobody has taken my social security.

[zibazinski]

If you don't "need" all of it, they tax it. S if you've saved, you're shafted again.

[Gardening Grandma]

Aug 10, 2013 15:58:52 GMT -5 zibazinski said:

If you don't "need" all of it, they tax it. S if you've saved, you're shafted again.

What!?  Who determines whether I "need" all of it?

If you are talking about the taxing of SS benefits, that is set by law, but it has absolutely nothing to do with how much I've saved in accounts or whether my house is paid for or not.

[Baby Fawkes]

I think Zib is suggesting that the law is their way of deciding whether or not you really "need" it to live in the eyes of the IRS

[Gardening Grandma]

Aug 10, 2013 18:50:17 GMT -5 Baby Fawkes said:

I think Zib is suggesting that the law is their way of deciding whether or not you really "need" it to live in the eyes of the IRS

Well, whatever she is suggesting, (and I'm not clarivoyant), she is saying things that simply are not factually correct.

85% of SS benefits may be taxed if income is over a certain amount (a fact that annoys me), but whether or not benefits are taxed is completely unrelated to the amount of money someone has saved/invested and totally unrelated to whether one has a mortgage or not.

The person who has saved and invested over a lifetime of working is certainly going to enjoy a more comfortable retirement than the person who relies solely on SS benefits.

And no one is "taking away" anyone's SS benefit.  If the chained CPI becomes the determiner for increases, that will affect future benefits, but even that is not "taking away" the benefit.

[Sum Dum Gai]

We'd all likely do better if our ss monies were invested privately in annuities....but of course - they would mismanage the funds too, and we'd be SOL either way

Fuck that, I'd be millionare if my 12.5% was going into an index fund, but of course it doesn't work that way.  My contributions are immediately paid to my grandparents there's nothing left over to invest.