Retirement 2.0blog

Mary Beth Franklin: Advisers unaware of this Social Security twist

Claiming spousal benefits often leads to larger check than expected

Dec 4, 2012 @ 9:38 am

By Mary Beth Franklin

I love hearing from Investment News readers as they discover the mysteries of Social Security claiming strategies. One adviser from Gaithersburg, Md., recently wrote to me about the pleasant surprise he received when he filed for Social Security benefits at his normal retirement age and restricted his claim to spousal benefits only.

“I've always told my clients that if they do the so called Double Dip – filing for spousal benefits only and delay collecting their own larger benefit until later – that they would get 50% of their spouse's benefit,” Jim wrote. “I didn't find out that that's not true for most people until I did it myself and the result is good news!”

Jim's wife retired at 62 and filed for her own retirement benefits. When Jim turned 66 earlier this year, he filed for spousal benefits and expected to receive 50% of her age-62 benefits. “To my surprise, I received a larger check,” he wrote. “The 50% spousal benefit that everyone talks about is half of the Primary Insurance Amount (PIA) – the benefit at normal retirement – not half of the age-62 amount when many people file for benefits.”

Jim added: “Most practitioners and virtually all recipients of Social Security benefits are unaware of this.” The bottom line: He is now receiving 63% of his wife's age 62 benefits.

After congratulating Jim on his windfall, I confirmed that filing for spousal benefits at his normal retirement age entitles him to half of his wife's full retirement benefit, even if she collected reduced benefits early. It's a hard concept for many people to grasp, but it makes for a nice surprise.

RELATED ITEM Retirement timeline for boomers

I noted that Social Security claiming rules are a double-edged sword, however. Many people are disappointed to learn that they will not get half of their spouse's enhanced benefit if the first spouse delays collecting Social Security benefits until they are worth the maximum amount at age 70. Again, it's half of PIA, not half of the enhanced benefit that includes delayed retirement credits.

If the spouse with the bigger retirement benefit dies first, though, the surviving spouse will collect 100% of what he received, including the extra credits. Of course, her own retirement benefits would drop off at that point.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Featured video

INTV

Here's how we came up with our list of undiscovered talent in mutual funds

Senior columnist John Waggoner talks with assistant managing editor Susan Kelly about how hard work, curiosity and passion landed some fund managers on our list.

Latest news & opinion

SEC advice rule hearing updates

Commission says a lot of work ahead, public will have 90 days to comment.

SEC advice proposal unveiling: Here's what to expect

Chairman Jay Clayton will initiate momentous action Wednesday, as the commission meets to debate a rule on broker and adviser standards.

How active are the largest actively managed funds?

Active-share measures for the 15 largest actively traded mutual funds.

Morgan Stanley's success looks long in the tooth to analyst

Sanford C. Bernstein & Co. analyst Christian Bolu, concerned over stalled adviser growth and what it means for lending and deposit growth, believes the stock will "under perform."

Retirement coverage gap, 401(k) rollovers are big emerging threats for plan advisers

Proliferation of state retirement programs approaching the 'tipping point' where it will lead the federal government to step in.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print