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Well, it wouldn't work like that. Because your wife can earn 1 million dollars and it won't affect her checks, but the $37,000.00 on your W2- you would need to apply the math the way I showed with the 50000.00.
Now, you have to have your boss put your wife on the payroll, and you take a sabbatical!
If the higher earner husband takes his benefit reduced when his older wife is FRA, she can receive 1/2 of his FRA. Then, Kotlikoff says, when the hubby is his FRA, he suspends until he is 70. Meanwhile, Joann is receiving spousal only until she turns 70. Then, she applies for retirement for the first time. Now, when I did this, her retirement, plus delayed retirement credits, was still less than 1/2 of Dave's. I said "what's the point of that- but, I went back to Kotlikoff and he said, and it is correct, that the excess spousal (1/2 of husband's FRA, minus wife's full FRA = spousal) gets added to whatever the wife is receiving at the time she files for her retirement. In this scenario, Joann doesn't apply until she is 70 so it gets added to the FRA/DRC amount. In all the questions previously, we were adding it to her reduced retirement amount. But, now, that we add it to her FRA/DRC amount, it exceeded 1/2 of Dave's FRA. When Dave turns 70, his delayed retirement credits get added to his MBA (monthly benefit amount- not his FRA- because he took benefits reduced). But, it finally made sense!
Here are the figures I used for Dave and Joann:
Dave's FRA is $2450.00. Joann's FRA is $890.00.
Dave's reduced retirement- 2 years early(24 reduction months) = $2123.00
Joann's reduced retirement (if she was taking it-but in this example, she is not) $648.00 (age 62+1)
Joann at FRA -gets 1/2 of Dave's $2450 =$1225.00
Dave at FRA = suspends and gets 0.00 for 38 months. (because his FRA is 66/10 there are only 38 months until he turns 70)
Dave at 70 - gets his 38 DRC's which is an extra 25.33% added to his reduced retirement of $2123, for a total of $2660.00.
Joann at 70 -gets her $890.00 own retirement, plus DRC's of extra 28% ($249.00) plus her excess spousal of $335.00 for a total of $1474.00.
Joann's excess spousal amount $335.00 (take 1/2 of Dave's $2450= $1225. Subtract her FRA of $890.00. It leaves $335.00.
I have been trying to understand how Joann can receive both her own benefit at 70 and the excess spousal benefit. I thought the excess spousal benefit only applied if Joann filed for benefits before FRA. I have been trying to find some independent confirmation that it also applies to Joann if she does not take her benefits until after FRA. The only information I have been able to find states Joann would either get the spousal benefit or her own benefits which ever is greater. I guess my confusion is due to the fact that at Joann's FRA she gets true spousal benefits and not excess spousal benefits.
Can you direct me to where I can get more information on this particular benefit after FRA? If the excess spousal benefit works the way you say after FRA, does it only work if Joann's benefit is less than half of Dave's FRA benefit? Thanks for any clarification you give me.
I have been trying to understand how Joann can receive both her own benefit at 70 and the excess spousal benefit. I thought the excess spousal benefit only applied if Joann filed for benefits before FRA. I have been trying to find some independent confirmation that it also applies to Joann if she does not take her benefits until after FRA. The only information I have been able to find states Joann would either get the spousal benefit or her own benefits which ever is greater. I guess my confusion is due to the fact that at Joann's FRA she gets true spousal benefits and not excess spousal benefits.
Can you direct me to where I can get more information on this particular benefit after FRA? If the excess spousal benefit works the way you say after FRA, does it only work if Joann's benefit is less than half of Dave's FRA benefit? Thanks for any clarification you give me.
Yes, indianamike, it only works that way if Joann's benefit (her FRA amount )is less than 1/2 of her husband's FRA amount.
Remember at one point I gave an example of 2 high earner couples who at FRA decide which one should take spousal on the other and then later take their own with DRC's?
Well, that spousal strategy is really the same as Joann and Dave, with one big exception: that in Joann's case, she is due something as a spouse, at any point she decides to take benefits. pre fra, fra or age 70.
With the 2 high earners, say one FRA amount is $2800.00 and one is $2400.00, that spouse can only get something as a spouse at one point: FRA.
With that couple, say the guy had the PIA (primary insurance amt) of $2800.00 and he decides to forgo getting his $2800.00 for 4 years - he decides to only file for spouse's and get 1/2 of his wife's $2400.00 (her PIA) benefit -$1200.00 for the 4 years.
Then at 70, he files for the first time for his retirement, he would get his $2800.00 + 32% of the $2800, or an additional $896 added to his $2800 = $3696.00.
That's it for him: the spousal of $1200.00 goes to zero and there is nothing else due. Because his own PIA exceeds 1/2 of his spouse's PIA.
Whereas, with Joann, her "full spousal" was $1225.00, but she loses the $1225.00 at 70- she just gets the "excess spousal" of $335.00, because her own full ($890.00) (without DRC's) is less than 1/2 of Dave's Full ($1225.00).
You see, part of the problem with this is the language- part of the problem was people calling it different things- spousal, true spousal, excess spousal, kicker spousal. But, it is really all the same, just different amounts at different times.
And it was new for me as well- because in real life, never once in 35 years had I taken a claim where a spouse, who was due something on their own (had their 40 quarters) had just taken a spousal (didn't file for their own at FRA ) and I also had never taken a claim where the spouse "just filed as a spouse" to preserve their own DRC's.
Now I retired in 2008, so I have asked co-workers who are still there if this comes up, and now they have had a few. I think someone here posted that when he filed for "just spousal", the SSA worker said it rarely comes up.
I think my original post has the link to Kotlikoff's article in Forbes. You can read it there. Let me know if you have further questions or need some more clarification. As always, I hope this helped.
Thanks for the explanation. While the wife and I are a few years from FRA, we are trying to decide how to file for benefits. We are both the same age, within 6 weeks, and since she was a stay at home mom for many years, the above strategy will make a significant difference when we reach 70.
I did read the article of Kotlikoff's and I caught the reference, but I was looking for a more complete explanation.
If I read ilove's last post correctly is it saying what we are planning on doing is something she had never seen done before? That is both strange and a bit concerning.
Although I really like this plan it does have drawbacks. By filing at 64 1/2 my benefits will reduced for life and should my wife die I will be worse off than had I waitied until FRA. .
Correct. There is always a trade off or gamble. For many, maybe most, the gamble is not worth it and they just take the safe bet and collect at 62.'or whenever they stop working.
To the OP, thanks so much for starting this thread!!!
I am age 58 and was widowed at age 44 when my husband was 49. I would like to retire at age 64 which at that time I will have 20 years of Federal employment under the FERS pension plan and can continue my Federal BC/BS and not have to wait for Medicare to have health insurance coverage. I spoke with SS several times and they tell me if I first claim on my late husband's benefit at age 64 the amount will be $1700/month and I can delay taking my own anytime after up until age 70. If I pursue this plan, does it in any way reduce my own overall benefit ?
To the OP, thanks so much for starting this thread!!!
I am age 58 and was widowed at age 44 when my husband was 49. I would like to retire at age 64 which at that time I will have 20 years of Federal employment under the FERS pension plan and can continue my Federal BC/BS and not have to wait for Medicare to have health insurance coverage. I spoke with SS several times and they tell me if I first claim on my late husband's benefit at age 64 the amount will be $1700/month and I can delay taking my own anytime after up until age 70. If I pursue this plan, does it in any way reduce my own overall benefit ?
I am a little confused about the plan you have to work until age 64 so you have 20 years of federal service and can carry FEHBP (fed employee health benefit plan) into retirement. You can carry FEHB into retirement as long as you have 5 continuous years of paying into FEHB before retirement and you can retire from the feds at age 62 with as little as 5 years of work.
So, all I am saying is that from 62 on, you would have health insurance in retirement as long as you qualify for a fed pension and were paying into FEHB for the past 5 years.
To retire earlier than 62- like at age 60, you need 20 years of work.
However, going back to your plan: you do get a bump in the computation of your FERS retirement with 20 years of work: they compute your FERS basic with 1.1 % times each year of service times your high 3 average salary. With less than 20 years, they do 1 % times each year of service times your high 3.
I know that is all an aside. But, I wanted to clarify some of your thoughts about FERS.
In any case, a widow/ worker, which you are has many choices. Yes, you can take your husband's first and then switch to your own full at FRA or later- up to 70 and get the delayed retirement credits. You would also get your FERS basic, while collecting the widow's and you could take your thrift plan whenever you like as well.
So, that is a good plan. Any more questions, just ask. Good luck!
I am a little confused about the plan you have to work until age 64 so you have 20 years of federal service and can carry FEHBP (fed employee health benefit plan) into retirement. You can carry FEHB into retirement as long as you have 5 continuous years of paying into FEHB before retirement and you can retire from the feds at age 62 with as little as 5 years of work.
So, all I am saying is that from 62 on, you would have health insurance in retirement as long as you qualify for a fed pension and were paying into FEHB for the past 5 years.
To retire earlier than 62- like at age 60, you need 20 years of work.
However, going back to your plan: you do get a bump in the computation of your FERS retirement with 20 years of work: they compute your FERS basic with 1.1 % times each year of service times your high 3 average salary. With less than 20 years, they do 1 % times each year of service times your high 3.
I know that is all an aside. But, I wanted to clarify some of your thoughts about FERS.
In any case, a widow/ worker, which you are has many choices. Yes, you can take your husband's first and then switch to your own full at FRA or later- up to 70 and get the delayed retirement credits. You would also get your FERS basic, while collecting the widow's and you could take your thrift plan whenever you like as well.
So, that is a good plan. Any more questions, just ask. Good luck!
Sorry if I was not clear in my post. I had my retirement calculations done by my Fed Gov retirement specialist and at age 64 with 20 years of service which I will be into my top Title 38 pay grade 3 + years by that point, and the difference between 62 with 18 years and 64 with 20 years comes out to around $380 a month. Sticking it out two more years to add nearly $400 to my monthly income, plus contributing those additional 2 years at max to my TSP I think makes the best financial sense for me.
Basically I just wanted to make sure by claiming 1st on my late husband's benefit before my FRA which is 66.5 I would not loose any major amount of my own benefit when I convert if this makes sense.
Sorry if I was not clear in my post. I had my retirement calculations done by my Fed Gov retirement specialist and at age 64 with 20 years of service which I will be into my top Title 38 pay grade 3 + years by that point, and the difference between 62 with 18 years and 64 with 20 years comes out to around $380 a month. Sticking it out two more years to add nearly $400 to my monthly income, plus contributing those additional 2 years at max to my TSP I think makes the best financial sense for me.
Basically I just wanted to make sure by claiming 1st on my late husband's benefit before my FRA which is 66.5 I would not loose any major amount of my own benefit when I convert if this makes sense.
Thanks again for your input.
Glad you have a good person assisting you on the FERS end, and I agree that adding the $400.00 extra each month is the way to go.
Back to your original post: when you are getting your widow's estimates, is the person at SSA just pulling up the estimate on the computer? They would be able to do so if you had collected for surviving children or as a young mother with children?
The reason I mention that, is because, as an "aged widow"- past age 60, very often the estimate they give you just by pulling up the old record is lower than what you might actually receive. Because your husband died before age 62, you would be due a "windex pia". It is a more beneficial type of computation. SSA can get you a truer estimate by requesting a survivor earnings record. It will provide the different computations and of course you will always receive your benefit based on the highest.
So, when you get a chance, ask for one, unless they were getting you the correct kind already.
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