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I'm confused. (It doesn't take much.) The Boston College paper by Alicia Munnell often referenced by Scott says that for spouses the same age where one spouse's PIA is 0-30% of the other's, the right time to take benefits is when both spouse's are 66 (Table 4). However, in Scott's new book, Spend 'til the End, it says the lower-earning spouse should sign up for SS at 62. Not doing so is lost money.

Which is correct?

If a lower-earning, retired spouse does sign up at 62, what's the impact on a joint tax return if the other spouse is a high earner?

 

 dlw,

 The Munnell study is based on optimizing total benefits. It uses a 3x7 grid (Table 4) that optimizes by age difference from 0 to 7 years and by 3 measures of relative income. Of the 21 cases, 13 post an optimal age for the lower earning spouse of 62, with the higher earning spouse taking benefits at 68 or 69. We believe this covers the majority of households since the average age difference between men and women, at first marriage, is 3 years. (After the first marriage, all bets are off.) So that's the basic case we assume for the book.

In addition, if you simply assume that the lower earning spouse is female will retire at 62, it is ALWAYS advantagious for the older, higher earning spouse to take benefits later due to the higher life expectancy of women. 

 Link to the original paper: http://crr.bc.edu/images/stories/Briefs/ib_35.pdf?phpMyAdmin=43ac483c4de9t51d9eb41

 Link to the original column: http://assetbuilder.com/blogs/scott_burns/archive/2006/09/30/A-Real-Life-Case-for-Delaying-Social-Security-Benefits.aspx

As you can see from all the forum contributions that follow the column, lots of readers are very interested in this. For the record: My wife retired and started taking benefits at 62. I will be 68 in November and have yet to take benefits. I will probably start taking them sometime early in 2009, in my 69th year.

Scott

My situation is the reverse: My wife is one year older than I am and has made approximately twice my income during our working lives. (I spent much of my work time as a poorly-paid journalist, alas!) Does this mean it would behoove me to take my Social Security at age 62 and my wife wait until full retirement age or age 70 to take hers?

Thanks in advance! 

 

VMiller, obviously I'm not an expert since I posted the first question in this current thread. However, your situation seems to match the "Bill and Hillary" example in Scott's latest book. So I would say the answer is yes. You should probably also consider the "suspension" option if your spousal benefits would be higher than your retirement benefits.

dlw

My spouse is already on SS having reached full retirement age. I would like to postpone drawing from my SS account to maximize my SS payments. I asked SSA if I could have spousal benefits when reaching full retirement age and later switch my SS account. SSA replied: "Thank you for contacting the Social Security Administration." "A spouse receives one-half of the retired worker's full benefit unless the spouse begins collecting benefits before full retirement age. In that case, the amount of the spouse's benefit is permanently reduced by a percentage based on the number of months before he/she reaches full retirement age." "Yes, you can collect from your spouse's benefit and then file under your own record at age 69 or 70." Does anybody see any "gotchas" in doing so? -- Ron

VMiller,

The first thing to know is that EVERYONE benefits from delaying taking Social Security benefits. It would cost more to buy a private life annuity for the increased income than it will cost you in foregone benefits.

The rest is a matter of actuarial probability. The highest probability of long term benefit is for a man with a younger wife delaying benefits because his survivor is likely to live far longer than he and collect the benefits for a much longer time. Your situation has a lower probability of long duration so it will be somewhat less beneficial. But it will still be a good trade for you to take benefits early and for your wife to delay taking them.

Scott

Ron,

 This strategy is covered in Chapter 18 of "Spend 'til the End" and it's for real.

The only caution light I can think of is that you would not want to do this if you were still working and younger than full retirement age. Remember, between age 62 and your full retirement age, having earnings from work that exceed $13,560 (in 2008) will trigger having to return some of the benefits. Earn more and you can have to return 100 percent of the benefits.

Scott 

If at all possible, I'll try and delay my SS for a few years and have my wife take hers close to age 70. Thank you again!

Scott, Which earnings are used for the SS earnings test--only those earned by the individual or the total earnings on a joint tax return? In other words, in the scenario with a nonworking spouse who applies for SS benefits at 62 but whose spouse is a high earner, would the spouse have to return the benefits because the couple's joint income exceeds $13,560? dlw PS - I promise to get ESPlanner so I can figure this out for myself as soon as I get a new iMac that can run Windows.

Wage earnings from age 62 to full retirement age are subject to the earnings test--- but only the wage earnings of the SS recipient are counted. Earnings of a spouse are not considered.

This changes for the other way to lose SS benefits--- having them subject to taxation due to having a relatively high income.

Scott