Social Security Spousal Planning Q&A

Speaker 1 (00:00):

Welcome everyone to the Retirement Power Hour. My name is Joe Allaria and this is episode 18. Today I'm going to be answering questions around spousal social security planning. We've been getting so many good questions coming in through our website, retirement power hour podcast.com, around social security, around the loopholes that people may be able to use and other general questions that I thought would be very helpful and valuable to our listeners if we just go through and answer them. So, if you have a question, this is a good time to remind you, you can go to retirement power hour podcast.com. You can submit your question there on the website, and we may just feature it on a future show, but it doesn't have to be just about social security. It may be about your investments, about taxes, about retirement planning, Medicare. So submit your question and we'll review it, get back to you, and we may even feature it on a future show, also at retirement power hour podcast.com.

Speaker 1 (01:02):

You can click work with me and get a free retirement analysis. The first step is scheduling a 30 minute phone call with me where we'll have a conversation, make sure that we're a good fit to potentially help you, and then we'll go from there. So have you ever wondered if you can retire on time, how you're gonna take withdrawals out, how you're gonna minimize taxes, all of those things regarding retirement? Well, that's the purpose of that exercise. So go to the website, click work with me, and uh, we'll start by having a conversation. Now I wanna get into all of these wonderful questions around spousal social security planning. You know, social security is a big topic. It applies to just about everyone out there. So, um, I'm sure that these may apply to you. So let's just jump in with the first question. Hi Joe.

Speaker 1 (01:51):

I took advantage of the spousal benefit at age 65 and we'll turn 70 in a few months. Do I need to apply for my benefits or is it automatic? And if I need to apply, do I apply for my birth month or the month after? Keep up the great work. Thanks. Well, this is a good question. So basically what this person is saying is they did take advantage of the restricted filing application strategy. So this person was in the proper age range where he could take a spousal benefit at 65, but let his own benefit delay and accrue delayed credits until he turns 70 years old, which is coming up here in a few months and he's planning to switch to his own higher benefit at that time. So to answer your question, when you turn 70, you will actually need to file a new application.

Speaker 1 (02:45):

It will not automatically switch to your own working record. So make sure you file a new application. You can do it online and you would indicate your birth month as the effective date of your retirement benefits. Now, you'll get paid the following month 'cause the benefits will be paid in arrears, but you would indicate your birth month as the effective date of when you'd like that to start. Good question. Next question. I was born in 1953. My husband was born in 1952. My husband started receiving social security benefits when he was 66, and when I turned 66, I filed a restricted application and am now receiving spousal benefits. I am still working and will retire at the end of the year at age 70. I recently talked with my local social security office. The benefit they told me I would be receiving at age 70 is much lower than the estimate that I received a few years ago.

Speaker 1 (03:38):

My salary has increased since then and I've worked that entire time. I've also completed 35 years of work. Does the fact that I received spousal benefits diminish my benefits based on my own earnings or what other reason could there be for this lower number? I did respond to this person via email and what my initial answer was, the fact that you received spousal benefits would not diminish your own working benefit at age 70. I said, I'm guessing that the initial estimate was wrong or the new estimate was wrong, one of the two. Unfortunately, social Security regularly provides inaccurate information, so you may want to contact them again and speak with a different representative. Well, guess what? Turns out that individual did respond to me after the fact they reached out to someone else at Social Security, got a correct estimate. So again, you have to be really careful about getting advice, getting basic information from Social Security.

Speaker 1 (04:37):

And if it doesn't sound right, then check again. And this is a great place, we're a great place to, to send your question because I've seen this time and time again, I've seen and heard where they told people you can't even, you can't do a restricted application anymore. And this was a year or two ago, you can't do that anymore. It's been phased out. Well, at the time it certainly wasn't phased out. So you gotta be really careful. Make sure you talk with a social security expert before you make any final decisions. Some of these questions have a lot of detail, so I, I understand that they may not apply to to all of you, but I think it, I think it's good to hear them and we will, we'll continue to, to hear some, some themes that may apply to you. So this one says, I'm 66 and retired.

Speaker 1 (05:17):

My husband is 67 and fully employed. We've been waiting until 70 to draw our, our social security incomes. I heard a claim on social media where a person advised to, to draw social security right away but then switch to a spousal benefit when that spouse retires. If that benefit is better than your own, is there a drawback? I'm not understanding. My spousal benefit would be several hundred dollars more than my own. So perhaps I should be drawing my benefit now than switching later. At 70, my benefit would be $1,600 at 70, his would be, my husband would be $4,200. I'm thinking of taking my benefit at full retirement age of 66 and six months and then applying to switch to a spousal benefit when he turns 70. Well, there may be a little confusion here around this talk of switching benefits. So I wanted to make sure that we understand that we're on the same page.

Speaker 1 (06:10):

There's two ways that you can really switch benefits outside of survivor benefits. The first way is when you go to apply for benefits, let's just say that you would be eligible for your own benefit or a spousal benefit, okay? And you go to file benefits and you have a choice, which benefit am I going to take? Now this only applies to folks that were born in 1953 or or earlier. Those folks had the opportunity and I guess still have for the rest of this year, although this window is, is essentially closed. But those folks would have the opportunity to say, I don't want to take my working benefit. I want to take my a spousal benefit, I'm gonna file a restricted application, then I'm going to switch later on. See, they had a choice when they filed, they were eligible for spousal benefits and that would be because their spouse is receiving benefits.

Speaker 1 (07:08):

You're not eligible for spousal benefits if your spouse isn't receiving their own benefits. So they had a choice, they can take a spousal or they could take their own benefit and again, you had to be born bef at 1953 or before for this to even be applicable to you. But in that case, in the last few years, some folks would have the ability, I wanna choose either spousal or my own and then potentially switch to, you know, take a spousal now switch to my own later if it's higher. The other scenario where we talk about switching benefits from one to the next is when I go to file, okay, I go to file in this case, in this person's own working record is less than what the spousal benefit would be. So in this case, this person wants to file. When she goes to file, she does not have a choice on what to take.

Speaker 1 (08:00):

She can take her own benefit. She cannot take a spousal benefit because her husband isn't receiving benefits. So she has no choice. So she's gonna file for her own benefits and then years later when her husband starts drawing, then she can switch to the the higher benefit. And I just wanna talk through some of the, some numbers there. Just so we understand. You would have no choice but to take your own working benefit, but when he files, then you'd get to receive an increase in the form of a spousal add-on. So you may have heard this term spousal add-on. Keep in mind that the spousal benefit is 50% of your husband's primary insurance amount. It's not 50% of the amount that he's going to get at age 70. So based on the numbers that were provided, you would start with a primary insurance amount of $1,300 a month.

Speaker 1 (08:52):

That was your benefit. Your husband's primary insurance amount was around $3,400. The amount he gets at 70 you said was was 40, around $4,200. But his primary insurance amount, that's what he would've received at full retirement age is around 3,400. So therefore 50% of 3400 1700. So your add-on your spousal add-on would be, uh, 1700, which is, which is half of his minus 1300. Your primary insurance amount, that gives you around $400. So this will give you a total benefit of $1,300 your primary insurance amount, plus the $400 the spousal add-on. So you'll get to 50% of his PIA, you will not get to 50% of his benefit at age 70. That's not how that works. Uh, based on the ages that you mentioned here in this question, neither one would be able to take advantage of the restricted filing application because neither one was born in 1953 or sooner.

Speaker 1 (09:50):

So we talked about that. So again, fun questions, good questions. Let's go to the next one. At this time I am receiving sp spousal benefits from my wife's social security. I will be turning 70 years old in April and will switch to my social security at that time. And my wife will receive spousal benefits from my social security. So what's happening right now is this person is receiving spousal benefits from his wife's social security. He was able to, sounds like file a restricted application within that window and he's receiving spousal benefits. She is receiving her own working benefit at, at this time at 70 he's gonna file for his own benefit. So he's in this 1953 or sooner category, he's gonna file his own benefit and then his wife will actually get a step up 'cause she'll get a spousal add-on. Can a person receive spousal benefits and their own social security at the same time?

Speaker 1 (10:47):

I don't know that I a hundred percent answered the que or understand the question, but what I wanted to talk about is semantics here. And that is that, um, like we talked about, can you receive your own benefit and a spousal benefit at the same time? Lemme just say in in layman's terms, you're gonna receive one benefit. Now, like we just said, if you are getting any spousal add-on, then that will add up to 50% of your spouse's PIA primary insurance amount. Now technically how you get there is you have your working benefit plus the spousal add-on. So can you receive both benefits?

Speaker 1 (11:27):

Not really, but it's not typical that I just get a hundred percent an spousal add-on. I mean, if I had any earnings then I'm gonna have my benefit, but then I'm gonna get that spousal add-on to get me to 50% of my spouse's PIA and we'll talk more about, uh, how do I make sure I get to 50%? Because if I, if I start taking my benefit early, there could be reduction. So there are reasons that you may not get to 50% of your spouse's PIA if you, for example, file early. So I just wanted to mention the semantics there. I wanted to make sure that, uh, we understood how that worked and we understood what that spousal add-on means. The next question, I hope these are helping you. The next question, I am still working, but my spouse is retired. Would my spouse get dinged on their benefit from my earnings based on the income threshold of $19,560?

Speaker 1 (12:21):

If so, do they lose that benefit forever or do they get it back once they hit full retirement age? So this question is asking about the earnings test. We have one spouse working and we have one spouse that's retired and the spouse that's retired wants to take social security benefits, but they wanna receive their, their full benefit. They don't wanna be dinged for the earnings test. It sounds like both are younger than their full retirement age because if you hit your full retirement age, you don't have to worry about the earnings test. The earnings test says that, uh, and actually I wanted to update on that. The threshold that you mentioned is, is an old number. The new threshold for, for this year is $21,240. And so if you earn above that, if you're younger than your full retirement age, then $1 in benefits will be withheld for every $2 earned over $21,240.

Speaker 1 (13:13):

Now, that's just for the working spouse. Your spouse would not be affected by your earnings because the earnings test goes off of who is earning the income. So if the non-working spouse who is retired and wants to take social security is not, does not have any earnings, they will not be affected by the earnings test. If you, if you're working and you're younger than full retirement age, then you may be affected by the earnings test if you wanted to start taking benefits. Now, joint income is considered when you talk about taxation of social security. Now you are looking at joint income. But as far as the earnings test goes, then we're just looking out, we're looking at who is earning the money and then your question, if so, do they lose that benefit for, well, you don't get any back pay on the benefits that you miss out on as a result of the earnings test.

Speaker 1 (14:09):

You don't get any back pay. But when you hit full retirement age, then the earnings test goes away and that's not a factor anymore. So you don't, you don't get that money back, but you're not, you don't see a permanent reduction because when you get to full retirement age, the earnings test goes away. You can make a million dollars a year and still get all of your social security and not have any benefits withheld. It's also important to note, note that the benefits that are withheld, those aren't taxes. It's just you just don't get that amount. You know, the $1 withheld for every $2 earned over that amount that we mentioned, you just don't get it. It's not a tax, just don't get it. So it's a little bit, there's a difference there. So hopefully that that answers your question. Next question. I'm confused as to what the spousal add-on is.

Speaker 1 (14:58):

Well, we've talked about it a little bit, but it doesn't hurt to talk about it a little bit more. My wife's benefit is not coming out to half of mine. Is it due to an age gap? Okay, so like I said, your wife's benefit will be a combination of her own retirement benefit and a spousal add-on the spousal add-on is equal to the difference between her primary insurance amount and 50% of your primary insurance amount. That's the spousal add-on. If she is claiming, uh, at early at 62, that could be a reason that she's not getting to half of your PIA. So I wanted to give you an example with some numbers on this. So we have Jack and Jill. Let's say Jill is 62, she wants to retire right away. Jack has not yet filed. So Jill is not entitled to a spousal benefit.

Speaker 1 (15:47):

Do you remember when we said that from before? If Jill goes to file and Jack hasn't filed, Jill has one option she can file for her own benefit. Your spouse has to be receiving benefits for you to earn and receive a spousal benefit. So we have Jack and Jill, Jill wants to file, she's not entitled to a spousal benefit. Sometime after that Jack does file for his benefit, which now entitles Jill to a spousal benefit. When she files for the spousal benefit, she will be paid the spousal add-on. Again, the difference between her PIA and 50% of his PIA. So let's say her PIA is $800 and his is $3,000 and let's say her full retirement age is 67. So when she, when she files, if she files initially at 62, she's not going to get the $800 her PIA of 800. She's not gonna get that.

Speaker 1 (16:37):

She's gonna get a reduction. Most people know that if you file early, you're gonna get a reduction. So she'll get 70% of the 800 that's only $560. Now, five years later when Jack files, Jill can now file for a spousal benefit and she'll get a spousal add-on at that time. So have you, have you memorized it yet? What is the spousal add-on equal to? It's equal to the difference between between 50% of her husband Jack's primary insurance amount and her primary insurance amount. So Jack's primary insurance amount was 3050% of that's $1,500. So it'd be $1,500 minus her primary insurance amount is $800. The difference is $700. So she'll get $700 plus what she got from her own benefit $560 because she took a reduction. So her benefit is 1260. Now Jack's benefit's 3000. Is she getting 50%? No, she's not. Why? Because she filed early.

Speaker 1 (17:36):

So that's one reason. Another reason it's always 50% of the husband's primary insurance amount. But if you do have the husband delaying beyond that, you know they're gonna get a higher amount. But that spousal benefit doesn't continue to, you know, become 50% of the spouse's. The husband's benefit or the wife's benefit, whoever's is higher. It doesn't keep growing past their primary insurance amount. So that's important to know. All right, these are good. We got a few more here. I turned 69 last November and my spouse hit full retirement age last August. We are both retired and wondering if we could take advantage of the social security loophole of claiming one benefit and then switching to another. My benefit at 70 is 4,300 and my spouse's benefit at 70 is 3,900. So this is very interesting. The strategy you're talking about is that restricted filing strategy and very interesting because the answer is yes, you technically could take advantage of the restricted filing application.

Speaker 1 (18:34):

Here's what would have to happen. The spouse, your spouse would have to file for her benefits so that you could then file a restricted application and start receiving spousal benefits. Then when you hit 70, which looks like it's gonna happen in November of this year, you could switch to your higher benefit. Now we're already in March of this year, so unfortunately if you did all that now you wouldn't, you wouldn't receive the full benefit if you started to everything in March, you're only gonna get from March to November. Right? But here's the interesting and fun thing that you can do. You both can actually file her retroactive benefits. So your spouse can file retroactive up to six months and maybe you just go back to November, but you can file retroactive and she can start receiving her own benefit retroactive, which means you'll get paid back.

Speaker 1 (19:23):

You can do that a max of six months and then you, after her application is processed, can do something similar and you can file retroactive restricted spousal application. I, I'm not sure how that's, you know, gonna be received from the social security office, but technically you can do that and you may want to have someone and talk to someone who knows what they're doing there. But I think some of this could be done online too. The more that can be done online, the better I think, uh, rather than try and talk this out. But isn't that a creative strategy that you can use and uh, that may apply to some of you out there that maybe you kind of missed the window but you didn't miss it entirely. You could still go back, get retroactive benefits. Think about that. You can get a spousal benefit for a a year, that's a year of spousal benefits you weren't gonna get before.

Speaker 1 (20:09):

You were just planning to wait till you're 70. That's a whole year of spousal benefits you can get. So hopefully that helps. Uh, next question. My wife wants to claim early at 62 and then wait until I claim which I'm gonna do at age 70 and then switch over to a spousal benefit at that point. Is that allowable? So we're back to this switching question and he just says, I was born in 1955, my wife was born in 1959. Well that tells me right there, you cannot do a restricted application. But that's not really what we're talking about here. He's just saying my wife wants to start receiving her own benefit, but then whenever I file, can she switch to the spousal benefit, which is gonna be higher? And yes, she can do that. Just providing that her, uh, PIA is less than 50% of your PIA.

Speaker 1 (20:57):

So in other words, if it is more beneficial for her to take a spousal benefit, she can certainly do that when you start collecting. So she'll start with her own reduced benefit when she files, she'll get a reduced benefit 'cause she's filing at 62. And then once you claim she can file for her own spousal add-on the difference between her PIA and one half of your PIA and the spousal add-on would go on top of her existing reduced benefit. So she gonna get 50% of your benefit. Actually, she won't, if she's filing at 62, she won't quite get to 50. But if that still, if it's higher, if there is a spousal add-on there, if there is just means if there's a positive number when you take 50% of your PIA minus her PIA, that is a positive number, then there will be something to add on to what she's gonna start getting now at 62.

Speaker 1 (21:46):

These are good questions. Next question, husband is 62 wants to retire and collect social security. I am 49 and I do not work. My daughter is seven. Can my husband claim at 62? My daughter received benefits until age 16 and then I receive a spousal benefit for caring for a minor. And yes, you can do that. The child's benefit will continue until she is 18. Your benefit will continue until she is 16 and that's the child in care benefit. Each benefit will be 50% of the, of her husband's primary insurance amount, but it may be limited by something called a family maximum. So, very good question, very interesting possibility. Something to keep in mind for those of you that are eligible for social security and, and taking care of minor children. So something to keep in mind. Next question. I'm 66, my wife is 58.

Speaker 1 (22:38):

The plan is to wait until I am 70 to take my social security and then my spouse would take hers at 62. And my benefit at at age 70 is $3,700. My wife's at 62 is 1800. What happens if I pass away prematurely before my wife? Does she get the entire $3,700 a month benefit that I would be getting at age 70? Does she get the 3,700 a month? But is it reduced by 30% since she took her benefit at 62? Well, hopefully you don't go anywhere, but obviously there are cases where people are, you know, have illnesses and maybe terminally ill. So in that case, here's, this is talking about survivor benefits. So will she get the full $3,700? The survivor benefit is affected by the age at which she claims the survivor benefit. And if she claims it when she she's full retirement age or older, the survivor benefit, then yes, she'll get the full survivor benefit.

Speaker 1 (23:39):

If it's, if she claims before that, then she wouldn't get the full benefit, there would be a reduction. So this goes back to switching benefits. And I said earlier, outside of survivor benefits, when I, I was talking about spousal planning, well with survivor benefits, now we can actually bring this switching back in. So in this case, if your wife starts drawing at 62, she will get a reduction, a reduction in her working benefit. And then if you, God forbid, if you did pass away, she could continue to take to get her own working benefit and just delay her survivor benefit until full retirement age. That's the max, that's the the latest that would accrue any extra delayed credits. So she could do that. Now, if she immediately switches to the survivor benefit and she's younger than her full retirement age, there's gonna be a reduction.

Speaker 1 (24:30):

So hopefully that answers your question. So something to keep in mind with survivor benefits is there is that switching available? You can take your own benefit, let that survivor benefit grow until full retirement age. Or you can take a survivor benefit. You can do it the opposite. If you haven't started drawing yet, you could take a survivor benefit as early as age 60 and let your own benefit grow and accrue to a max age of 70, right? Your own benefit can grow to 70. Now why would you do that? Because if your benefit was larger than the survivor benefit, you could take the smaller one now, let the bigger one grow until you're 70. A lot of very good questions and I'm thrilled to see so many coming through our website, retirement power hour podcast.com. So go to the website, submit your question, doesn't have to be about social security.

Speaker 1 (25:18):

We can talk about investments, we can talk about retirement, Medicare taxes, anything that you have, submit it, send it in. We'll be glad to help you and be sure to leave a review. If you can go to Apple, go to Spotify, you can watch us on YouTube and we appreciate any reviews. If this has helped you at all, please leave a review because it helps us get our message out to everyone else that's out there and listening. With that, I wanna thank you for watching this episode or listening to this episode, episode 18 of the Retirement Power Hour podcast, where we help listeners invest wiser and retire better. I hope to see you next time. Take care.

Speaker 2 (26:00):

Thank you for listening to the Retirement Power Hour podcast. All material discussed on this podcast is for educational purposes only and should not be construed as individual tax, legal, or investment advice in investing involves risk of loss and invest should be prepared to bear potential losses. Past performance may not be indicative of future results. Joe Allaria is an investment advisor representative of Carson Allaria Wealth Management, a registered investment advisory firm. Information discussed on this podcast may be derived from third parties that are believed to be reliable, but Carson Allaria Wealth Management does not control or guarantee the accuracy or timeliness of such information and disclaims all liability for damages resulting from such sources. Any references to third parties are provided as a convenience and do not constitute an endorsement.