Ask Larry: If I File Early, Will My WIfe’s Social Security Spousal Benefit Also Be Reduced?

Today’s column addresses questions about potential effects of filing for early retirement benefits on a spouse’s benefit, when reductions for filing early can and cannot be lifted and retirement benefit estimates on SSA’s website. Larry Kotlikoff is a Professor of Economics at Boston University and the founder and president of Economic Security Planning, Inc, which markets Maximize My Social Security and MaxiFi Planner.

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If I File Early, Will My WIfe’s Social Security Spousal Benefit Also Be Reduced?

Hi Larry, My question involves the spousal benefit and I’ve searched the internet to no avail for a straight answer to this. If I am the higher earning spouse and I decide to take my Social Security retirement benefit before my FRA, will my wife’s spousal benefit be based on my PIA at my FRA rather than my reduced benefit amount? You wouldn’t believe how difficult it is to find a straightforward, simple answer to this. Thanks, Roger

Hi Roger, Unreduced spousal benefits are based on 50% of the worker’s primary insurance amount (PIA), but the reason it’s hard to find a straight answer is because a lot of variables can come into play.

The straightest way I can answer your question is to say that if your wife isn’t eligible for retirement benefits based on her own earnings history and if she applies for spousal benefits at full retirement age (FRA) or later, she could be paid an unreduced spousal benefit equal to 50% of your PIA even if you start drawing your benefits prior to FRA. A person’s PIA is equal to their Social Security retirement benefit rate if they start drawing their benefits at full retirement age (FRA).

However, if your wife has enough credits to qualify for Social Security retirement benefits based on her own earnings history, then her options depend on when she was born. If your wife was born after 1/1/1954, she’ll be deemed to be filing for both her own benefits and for spousal benefits whenever she files for either benefit. In that case, if 50% of your PIA is higher than your wife’s PIA, she’d only get a full 50% of your PIA if she doesn’t start drawing either her own retirement benefits or spousal benefits prior to FRA.

But if your wife was born prior to 1/2/1954 and if you’re drawing your retirement benefits, she could potentially file just for spousal benefits at FRA or later without filing for her own retirement benefits. In that case, she’d get a full 50% of your PIA regardless of what age you started drawing your benefits at. Regardless of when your wife was born though, if she starts drawing either her own retirement benefits or spousal benefits prior to FRA, her benefit rate will be reduced for age.

It sounds like you and your wife might want to consider using my company’s software — Maximize My Social Security or MaxiFi Planner — to do your Social Security planning. The software analyzes all of the pertinent variables in order to determine the best strategy for maximizing your benefits. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry

If I Take Social Security At 63 At A Reduced Rate, Will My Rate Go Back Up To The Full Amount At My Full Retirement Age?

Hi, I’m thinking of taking my Social Security retirement benefit at 63. I know it’ll be reduced since I’d be filing before my FRA, but my neighbor told me it would go back up to the full amount once I reach my FRA. I haven’t been able to find support for this anywhere but it would of course be great if it was true. Is it true? Thanks, Cal

Hi Cal, If you start collecting benefits prior to full retirement age (FRA) the reduction for age that’s applied is permanent, assuming that you’re paid all of your benefits prior to FRA. However, if any of your benefits are withheld because of Social Security’s earnings test, your benefit rate would be adjusted effective at your FRA to remove at least some of the age reduction.

For example, say Bill files for his Social Security retirement benefits this year at age 63. Bill’s full retirement age rate, or primary insurance amount (PIA), is $1,500, but since he’s electing to start drawing his benefits early Bill’s benefit rate is reduced to $1,162. However, Bill is still working and because of his earnings, half of Bill’s benefits are withheld due to the earnings test between the time he starts drawing benefits and when he reaches FRA.

Since he never received half of his early benefits, effective the month Bill reaches FRA his benefit rate would be adjusted to remove half of the reduction for age that was originally applied to his benefit rate, increasing his reduced benefit rate from $1,162 to $1,325. But if none of Bill’s benefits had been withheld, the original reduction for age that was applied to his benefit rate would be permanent and he would not get a rate adjustment at FRA. Best, Larry

Didn’t I File A Restricted Application?

Hi Larry, I was born in 1953 and am currently getting spousal benefits. I want to switch to my own retirement benefit at 70 but on the SSA website no longer gives me an estimate of what by own retirement benefits will be. I thought I filed a restricted application. Thanks, Betsy

Hi Betsy, I have no way of knowing for sure what you filed for, but even if you did file a restricted application for spousal benefits only, many people have complained that they can no longer obtain benefit estimates on Social Security’s website even though they’re just drawing spousal benefits.

The Social Security website doesn’t specifically mention that as being a limitation, but it seems to be nonetheless. If you can’t get a benefit estimate on Social Security’s website you can try calling them. Best, Larry