Social Security Q&A: When Should I Claim If My Spouse Will Probably Outlive Me?Commentary by Laurence Kotlikoff
August 02, 2014
Social Security may be your largest or one of your largest assets. How you manage it, by deciding which benefits to collect and when, can make an absolutely huge difference to your lifetime benefits. And those with the highest past covered earnings have the most to gain from maximizing their Social Security.
I’ve been answering questions and writing columns about Social Security each week for the past two years on PBS NEWSHOUR’s website. The editors at Forbes asked me to post a Q&A each day from those columns. To see all my columns, please go to my software company’s site, www.maximizemysocialsecurity.com, and click More Press below the WSJ quote.
Today’s questions brings up the Windfall Elimination Provision and the Government Pension Offset. But it mainly highlights the complexity of puzzling out the optimal claiming strategy when one spouse is likely to outlive the other by a significant number of years.
Question: My spouse is 65 and a retired public employee. She receives a pension. She always paid into Social Security. I am 64 and have had higher earnings subject to Social Security. I plan to apply for a spousal benefit when I am 66 and to wait until 70 to apply for a retirement benefit. My spouse plans to wait until age 66 or later to apply for a retirement benefit.
I have had health problems and do not have a favorable family history of longevity. My spouse is in good health and has a good family history. If I receive a spousal benefit, can I earn the minimum or any amount? Upon my death, will my spouse also receive a survivor benefit in addition to her retirement benefit?
Answer: Since your wife paid into Social Security, the fact that she gets a pension from previous work as a public employee will not subject her own retirement benefit to the Windfall Elimination Provision. Nor would a spousal benefit or survivor benefit going to her on your work record be subject to the Government Pension Offset provision. So you can sigh a breath of relief on that score.
If your maximum age of life is relatively short, you may want to take your own retirement benefit starting now and have your wife take a full spousal benefit at 66 (full retirement age). and then take her own retirement benefit at 70. Even though she was the lower earner, her own retirement benefit at 70 could exceed her full spousal benefit.
The downside of this strategy is that if you take your retirement benefit before age 70, the survivor benefit your wife will collect will be smaller. So if you are definitely going to die early, waiting to collect your retirement benefit may, paradoxically, make the most sense in terms of getting your wife a higher survivor benefit.
When you pass, your wife won’t collect both her retirement benefit and her survivor benefit. She’ll get the larger of the two. But Social Security will describe it as her getting her own retirement benefit plus an excess survivor benefit equal to the difference, if positive, between the survivor benefit and her own retirement benefit.
In short, you have a very tricky decision. There are likely over 20,000 combinations of dates to consider for you and your wife to take your spousal, retirement and survivor benefits if you have a relatively short maximum age of life. No one can figure this out without the right software, which I’d encourage you to consult. Our Software, which costs $40, can help you see the trade-offs here and precisely what you’ll get under different scenarios.