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: I have a client who will turn 62 this year, and her husband is currently receiving Social Security disability benefits. Can she file for spousal benefits off his disability when she turns 62, and if so, can she switch to her own retirement benefits at age 66?
Answer: She may file for spousal benefits based on her husband’s disability amount starting at age 62, but in doing so, she is deemed to have filed for her own retirement benefits early as well, which will permanently reduce both her own benefits and her spousal benefits.
This is because spousal disability benefits work exactly like normal spousal benefits. That is, the Social Security Administration pays the spouse based on her own record first; but if the spousal benefit is larger than her retirement benefit based on her own record, she will be entitled to a combination of benefits that equals the higher amount.
For example, suppose your client’s husband is receiving $2,000 per month in Social Security disability, and your client herself has earned a $900 monthly benefit at full retirement age based on her own work record.
If she files for spousal benefits now, she will receive a $1,000 monthly benefit, reduced by 25% for filing early, resulting in a $750 benefit. This amount includes $675 from her own retirement benefits ($900 reduced by 25%), and the remaining $75 from spousal benefits ($1,000 less $900, reduced by 25%).
It might be advisable for her to wait until she has reached full retirement age, file for spousal benefits, and defer taking her own benefits until she’s age 70, at which point her own benefits will be $1,188 ($900 increased by 32% for delayed retirement credits).
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