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ginahoy  
#1 Posted : Sunday, May 31, 2020 3:30:14 AM(UTC)

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Hypotehetical:
Mary is 68 and John is 65 and both are retired and intend to wait until age 70 to start receiving social security. However, Mary's spousal benefit based on John's coverage (50% of his Primary Insurance Amount or PIA) may be only slightly less than her own benefit at age 70. If so, she might be better off filing for her benefit immediately and then filing for the spousal benefit once John starts collecting at age 70. The extra two years of benefits she would collect should more than make up for the smaller amount.

The question is how to determine John's PIA looking back from age 70. According to another thread elsewhere in this forum, the spousal benefit is based on the PIA that's in effect at the time the spouse files to receive the benefit. However, I'm not sure what that means, and the thread is too old to reignite. The problem is that after one reaches FRA, social security statements no longer show the PIA. Presumably it would continue to be indexed for inflation, no? Surely the spousal benefit wouldn't be based on the unadjusted PIA benefit 46 months prior, at John's FRA (66 + 2 months)!?

Edited by user Sunday, May 31, 2020 3:42:50 AM(UTC)  | Reason: Not specified

someoldguy  
#2 Posted : Sunday, May 31, 2020 5:34:11 AM(UTC)
someoldguy

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This doesn't answer the question... but if the spousal benefit is less, why can't Mary just keep receiving her own benefit?
DISCLAIMER: You read it on an open internet forum :)
ginahoy  
#3 Posted : Sunday, May 31, 2020 12:07:54 PM(UTC)

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Originally Posted by: someoldguy Go to Quoted Post
if the spousal benefit is less, why can't Mary just keep receiving her own benefit?

The following numbers are fabricated to illustrate the issue, ignoring future COLA's. As you can see, this analysis is very sensitive to John's PRI. If it's $26,400 or higher, then it's a no-brainer for Mary to claim immediately. However, if John's PRI is less than $26,400 as shown here (i.e., Mary's spousal benefit is less than her own benefit at age 70), then it becomes an actuarial question, which I'm prepared to evaluate. So what I need to know is how social security determines John' PRI at his age 70 for the purposes of calculating Mary's spousal benefit... is it the unadjusted amount when he reached FRA (looking back from 2025), or does John's theoretical PRI continue to index with COLA?

Mary's PRI 10,000 (2018 FRA @ 66)
John's PRI 26,300 (2021 FRA @ 66 and 2 months)

Mary defer to 68 (i.e., now)
2020 $11,600 (16% deferment credit)
2021 $11,600
2022 $11,600
2023 $11,600
2024 $11,600
total $58,000

2025 $13,150 spousal benefit (50% of John's PRI @ age 70)
2026 $13,150 "
2027 $13,150 "
2028 $13,150 "
etc...

Mary defer to 70
2020 ...$0
2021 ...$0
2022 $13,200 (32% deferment credit)
2023 $13,200
2024 $13,200
total $39,600

2025 $13,200 don't claim spousal benefit
2026 $13,200 "
2027 $13,200 "
2028 $13,200 "
etc...

Edited by user Sunday, May 31, 2020 12:08:42 PM(UTC)  | Reason: Not specified

GoHuskers  
#4 Posted : Monday, June 1, 2020 10:58:41 AM(UTC)

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An individual's initial PIA for retirement benefits is calculated based on the factors in effect for the year the individual attains age 62. Assuming there is no prior period of disability involved the 35 years with the highest earnings, indexed for changes in wage levels, are used to compute the average indexed monthly earnings that are used in the PIA computation. The indexing factors are specific to the year of age 62 attainment. You add up those 35 years of indexed earnings and then divide by 420, the number of months in 35 years, to get the average indexed monthly earnings (AIME). Then, what are called "Bend Points" come into play. These, again are based on the year of age 62 attainment. For example if the individual was 62 in 2017, the bend points are 885 and 5337.

To calculate the actual PIA. percentages are applied based on these bend points. If the AIME is $885 or less, the PIA will be 90% of the AIME. If the AIME is over 885 but no more than 5336, the PIA will be 90% of 885, or $796.50, plus 32% of the excess AIME over 885. If the AIME is more than 5336 the percentage applied to the additional excess is 15%. (This assumes that the Windfall Elimination Provision isn't involved. If it is the percentage applied to that first bend point will change, but that isn't really pertinent to the issue you're asking about.)

What this does is establish the PIA as of January of the year of age 62 attainment. That PIA is then brought forward through all subsequent COLA increases. So the January 2017 PIA for someone age 62 in 2017 would then be increased by all subsequent COLAs, which to date would include 2% effective 12/17. 2.8% effective 12/18 and 1.6% effective 12/19, and will include any future COLAs through age 70 and beyond. And both the individual's retirement benefit and the spousal benefit will be based on the PIA calculated with the inclusion of those COLAs that would be effective the first month of their entitlement to benefits.

I hope that is fairly clear. If you really want to delve in depth into PIA calculations SSA has the procedure on line as part of their POMS manual system ( https://www.ssa.gov/planners/retire/claiming.html ) Also, SSA has a PIA calculator available for download if you would like to do the calculations. It is available at https://www.ssa.gov/OACT/anypia/download.html .

Also, note that if both parties wait until after their Full retirement age to receive benefits, the retirement benefits will include Delayed Retirement benefits, making them more than the actual PIA. But the spousal benefit will be 50% of the PIA, not 50% of the husband's increased retirement benefit, so just keep that in mind.

Edited by user Monday, June 1, 2020 3:21:19 PM(UTC)  | Reason: remove "deemed filing" info and added link to PIA program

ginahoy  
#5 Posted : Tuesday, June 2, 2020 9:28:22 AM(UTC)

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Originally Posted by: GoHuskers Go to Quoted Post
An individual's initial PIA for retirement benefits is calculated based on the factors in effect for the year the individual attains age 62... That PIA is then brought forward through all subsequent COLA increases.
Thank you! I had a good handle on most of this, but not the part about subsequent COLA increases. Rather than trying to calculate the PIA using wage history and bend points, my idea was to simply refer to the FRA benefit amount on John's SSA current statement since the PIA is not explicitly shown. I just needed to know how to project that amount forward to 2025 for the purposes of estimating Mary's spousal benefit. It makes sense that it would be subject to future COLA's but I couldn't find where that was stated explicity.

Quote:
...the spousal benefit will be 50% of the PIA, not 50% of the husband's increased retirement benefit, so just keep that in mind.
That important detail was clear on the SSA site's page about spousal benefits, which is why I needed to know how to project John's PIA forward. Once I go through the calculations in detail, I may have further questions. Thanks again!
teeeeej  
#6 Posted : Friday, June 12, 2020 2:19:21 PM(UTC)
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I recommend playing with https://opensocialsecurity.com/
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