Advanced Underwriting Consultants

Ask the Experts – June 3

Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers. Here’s the question of the day.

Question: Can an individual collect spousal benefits now, and switch to her own retirement benefits at a later date?

Answer: Yes, but only if her spouse has filed for his own retirement benefits, and only if she, herself, has reached full retirement age (FRA).

First, spousal benefits are only available if the other spouse has filed for his or her own retirement benefits. This includes individuals who have elected to file and suspend their benefits—a strategy we discussed here.

Second, according to the SSA, if a spouse has reached FRA, she may choose to receive only her spousal benefit and delay receiving her own benefits. This strategy allows her to earn delayed retirement credits (DRCs) on her own account while still accessing some Social Security spousal benefits. If the spouse hasn’t yet reached FRA and files for spousal benefits, she is deemed to have filed for her own retirement benefits as well.

For example, assume wife’s own benefit at FRA is $880 per month, while her husband’s is $2,000 per month. If she files for spousal benefits at age 62, her benefits will be reduced by 25% to $750 (i.e. half of his $2,000 PIA, reduced by 25%). Of that $750, $660 is from her own retirement benefits (i.e. $880 reduced by 25%) while $90 is based on the husband’s retirement benefits (i.e. $750 less $660). Her own retirement benefits are permanently reduced and will not earn DRCs because she has begun receiving her own retirement benefits.

However, if she waits until FRA and is still eligible for benefits based on the husband’s record, she has the option to receive only the husband’s benefits and delay receiving her own benefits until a later date, allowing her own benefits to build up to age 70. Using the same numbers from above, this means she could receive $1,000 per month while still allowing her own retirement benefits to earn DRCs. If she delays filing for her own benefits until age 70, her benefits will increase by 32%, to $1,161.60 per month.

Have a question for the professionals at AUC? Feel welcome to submit it by email. We may post your question and the answer as the question of the day.