Considering Taking Social Security Early? Think About What This Might Mean for Your Spouse

Townhall.com ^ | September 15, 2010 | Carrie Schwab Pomerantz

[Kaslin]

Dear Carrie: My husband and I are both considering taking Social Security next year at age 62. I'm told that I could draw on my husband's account and potentially collect more monthly than I would if I draw from my own earnings without it affecting what he gets. Is this true? Also, should my husband die before me, would I collect his full monthly benefit or a portion of it? -- Mary

Dear Mary: Your question is interesting because it brings up several issues about spousal and survivor Social Security benefits that can be confusing. Whether to take benefits at 62 or at full retirement age (66 for those born between 1943 and 1954) or even later (your benefits will continue to increase until age 70) is something everyone should consider.

The answer has a lot to do with your current work status, income level and life expectancy. For instance, if you take Social Security at 62 and keep working, $1 in benefits will be deducted for each $2 you earn over a certain income limit ($14,160 in 2010). Keep in mind, however, that the reduction is not permanent --you will receive a higher benefit at full retirement age to make up for it. On the other hand, if you wait until your full retirement age, there's no reduction; you can earn as much as you like without affecting your benefit.

But be aware that Social Security benefits are taxed when your income from all sources is over a certain amount. In addition, there's the break-even age -- the age you have to live to in order to make delaying Social Security worthwhile. All of these options are a lot to consider. But there's more.

What many people don't consider is the fact that taking Social Security early can affect both the spousal benefit as well as the survivor benefit for a widow or widower. So before you and your husband decide, you'll want to make sure that your decision, even if it makes sense now, doesn't negatively affect one of you in the future. Here are some things to consider:

SPOUSAL BENEFITS

At age 62, a spouse (working or not) can choose to take a benefit based on his/her own earnings or take the benefit based on his/her spouse's earnings, whichever is higher. The only caveat is that to receive the spousal benefit, the higher-earning spouse must have already filed for Social Security.

The spousal benefit is up to 50 percent of the higher earner's benefit. I say "up to" because the percentage you collect depends on when both you and your spouse file. If you both wait until full retirement age or later, you could each collect a higher benefit. However, if your husband files at age 62, his benefit would be reduced by about 25 percent. If you then wait until your full retirement age, you would collect 50 percent of that reduced benefit. But the age limits also apply to the spousal benefit. So if you also decide to take the spousal benefit at age 62, your monthly check would be reduced even further, and you'd end up collecting only about 35 percent of your husband's already reduced benefit.

This definitely merits some careful consideration. The upside is that you would have the money in your pocket sooner. The downside is that the reduction in benefits is permanent.

SURVIVOR BENEFITS

Survivor benefits are affected in the same way. A widow or widower at full retirement age qualifies for 100 percent of what a spouse has been receiving. So if a spouse opts to take Social Security early, upon his or her death, the surviving spouse would collect 100 percent of the (SET ITAL) reduced (END ITAL) benefits. Unfortunately, the IRS doesn't boost the benefit back to the full rate when someone dies.

GETTING STRATEGIC

As you can see, there are lots of permutations, which leaves room for being strategic. For example, at the time of filing, the higher earner can suspend his or her benefits until age 70 -- allowing the lower earner to collect a benefit, at the same time that the higher earner continues to accrue delayed retirement credits.

Or another strategy is for the higher earner to claim benefits at full retirement age based on the lower-earning spouse's record and then switch at age 70 to his or her own higher benefit. This could be more advantageous (than the strategy above of filing and suspending benefits) because the lower-earning spouse's survivor benefit (100 percent of the deceased spouse's benefit) will still be higher if the higher earner dies first, but meanwhile the higher earner will be bringing extra income into the household until he or she reaches age 70. At that point, the lower earner can switch to a spousal benefit based on what the higher earner would have received at full retirement age (again, reduced by the applicable early filing percentage).

SOCIAL SECURITY ADMINISTRATION HELP AND COUNSELING

As you can see, there are a lot of factors to consider as you make your ultimate decision. It pays to be thorough and methodical as you review your complete financial picture and determine the best way to maximize your benefits.

Confused? Don't be. The Social Security Administration offers information and counseling to help you weigh the various factors and make the decision that's right for you. You'll find a lot of information online at SSA.gov. Or you can ask to speak to a Social Security counselor at your local SSA office by calling 1-800-772-1213.

[Logic n' Reason]

ping

[OB1kNOb]

As Steve Miller said........take the money and run..........

[Balding_Eagle]

But be aware that Social Security benefits are taxed when your income from all sources is over a certain amount. In addition, there's the break-even age -- the age you have to live to in order to make delaying Social Security worthwhile.

For me, I'm 62, and I think for most people, it's age 77.

[Erasmus]

The answer has a lot to do with your current work status, income level and life expectancy [...]

Not only of yourself and your spouse, but of the Social Security system.