Social Security Question
 

Greetings ---

Understanding this is not a financial forum, but who better to ask than a group of older taxpayers.

Social Security question -

When my wife and I collect social security, will both my wife and I collect the same amount individually as both our ages and salary are identical or do we receive a reduced amount since we are married?

---A neighbor, (not sure if he was kidding) indicated that before he and his wife collect social security, they are going to divorce but still live together as a family in order to increase their social security benefits.--

THANKS

Each of you can collect benefits based on your own individual work records. It doesn't matter whether you are married or not. The situation is more complicated if either of you apply for a spousal benefit. But, each person can only receive one benefit at a time, so, in your case, it sounds like neither of you will be applying for the spouse benefit.

:ohdear: How about the SSA :oops:

The United States Social Security Administration

Only if they answer the phone.:)

We made an appointment and went in person with a list of questions. Very helpful people working at the Leesburg office.

1) Their age at retirement is VERY important in answering your question.

2) I understand we want to discuss these issues here but the real answer will come directly from your neighbor. Ask him how so? Tell your neighbor you studied the guidelines but couldn't come up with the answer. Maybe he'll spill the beans? Good Luck. He has the answer.

SS in Leesburg is great. They may have moved. I'm running out the door now so check it out well before you go.

Ask S.S.
 

If both of you were born on the same day, payed into S.S. the exactly same amount and retired the same day, I would say each of you would get an individual check for the same amount from S.S. That would be very unusual.

Don’t know if your neighbor was joking or not. Don’t know how that would work for your neighbor if he was serious. I do know that S.S. has closed some “loopholes” in the system the last few years to keep from “double dipping” but don’t know about this one. I wouldn’t divorce my wife for any money. Like that great philosopher, Forrest Gump said, “I think that’s all I’ve got to say about that”. Maybe S.S. Staff can give you better information than you get from me or anyone on TOTV.

I thank everyone for their responses-

To clarify, at the time of collecting social security benefits, are both myself and my wife's benefits calculated as an individual recipients are do we receive benefits based as a married couple ?

You can apply for benefits based on each of your individual records, even though you are married. However, you said that you both have the same salary. But, the benefit is not based on your current salary. It is based on your average salary over 35 years, and adjusted for inflation. So, one of your benefits could be a lot higher than the other. In that case, you may benefit by one of you applying for the spouse benefit instead of the individual benefit. You can view your work records by setting up a logon account on the SSA website.

Each of your benefits is calculated separately but there are ways to maximize your benefit.

If you have a financial advisor you should consult with them on how to take your SS. It can be complicated if you are trying to max out your benefits.

SSA maximize
 

Being married only has an impact if you collect spousal or a survivor benefit. If you each plan to collect on your own earnings record it has no impact whether you are married. From a taxation standpoint if your file married filing jointly one of you will need to take out additional taxes.

I agree the best thing is get an appointment with SSA and have them calculate your benefits. There are some calculators online, some are free some charge a fee. They can get you pretty close if you have your earnings record from SSA. But only going to SSA will get each of you exactly how much you will get for each filing strategy.

To answer your specific question without any other information when you apply for and collect SS your benefits are based only on your past work and your age and married or single makes no difference in how much you collect while you are both alive.

BINGO!!!

This is the correct response.

Did not read all the answers. Each of you can collect your own benefit which is based on your earning history.
If one spouce had much greater earnings that the other, the spouse with lower earnings can elect to receive an amount equal to 1/2 of the other spouces. Thus being married can be a plus for some. This explanation is simplified but should work as you described your case.

If your friend and his wife are high earners, they could be subject to IRMA, if they are going to use Medicare. There may be some advantages to being "single" if they earn roughly the same amount.. The IRMA "tax" is taken out of your social security payment. Obviously a good tax accountant could look at all the angles, not just SS by itself

To get the answer appropriate to your circumstances, do either or both of these things:

1. Go to The United States Social Security Administration and sign up for an on-line account for both you and your wife. There you will find the answers to your questions.

2. Go to the nearest social security office. It's in Leesburg at 900 North 14th Street. They open Monday through Friday at 9:00 a.m.

You can get a lot of opinions here but either of these two sources will give you the facts.

I would just point out that, as long as you were married for at least 10 years, being divorced does not affect your eligibility for the spouse benefit.

You hopefully will avail yourself of the information and resources offered directly by the Social Security Administration. An appointment at the Leesburg office will be well worth your time. I also can't tell you how dumb (and illegal) it would be to divorce just to scam a bigger SS check.

Save your divorce money and take her on a cruise. that is not true!

I agree with everything you said, except the part about it being illegal to divorce for a larger SS check. The IRS used to treat these divorces as a sham transaction and deny the extra benefits. However, two recent Supreme Court decisions, in 2014 and 2015, are complicated, but they seem to rule that the Federal Government must acknowledge all State marriages and divorces as legal regardless of why they were made.

Benefits are individual—if you don’t need it now put off taking it until about age 72 —benefits will increase, then start leveling off. People divorce to reduce taxes, not SS benefits.

Well, not exactly true. There is no point in waiting past age 70, not 72, to start SS benefits. Your benefit does not increase after age 70.

You're correct not to wait past the age of 70, but not quite correct in saying your benefits won't (potentially) increase.

Social Security allows you to start collecting at age 62. For each year up until age 70 that you delay starting your SS collecting, they will bump up your SS yearly income stream by ~8%. SS does not bump up the stream for those who have delayed starting SS collection anytime after age 70. So it makes no sense at all not to start collecting at age 70 if you are purposely delaying. You will lose money if you delay collecting past the age of 70.

However, no matter when you start collecting, the 35-year rule of highest wages still applies when calculating what SS will pay you. *** So, say you're 75 and are still working a job that's paying you a good income. You're already collecting SS at this time. Chances are that your job/employment income at 75 may be higher than your income at, say, 40 years old. If that's true, your income at 75 will displace the lower income year you had at age 40, and your SS benefits will be recalculated based upon that amount - your highest 35 years of income. Make sense?

Example: Say your income at age 40 was one of the years SS used to calculate your SS benefit when you started collecting, as it was one of your 35 highest income years. Say you made an income of $80K at age 40. Now, you're still chugging along at age 75 working full time, and your salary at age 75 is $95K. SS will use that $95K number to take the place of your $80K salary you had at age 40, and will recalculate what they pay you monthly.

(*** If you collect SS earlier than your full retirement age and continue to work, you may be penalized on what SS will pay you based upon your salary.

Additionally, SS increases payments based upon the Cost of Living Adjustment (COLA). I'm not referring to that in this post.)

I wouldn't rely upon the people who work at Social Security offices, myself. Does that mean none of them have wise/accurate info? Of course not. But you just don't know. I would, instead, use an expert to help figure the contingencies out.

One of those experts is Professor Laurence Kotlikoff. He's written/co-written several books answering questions about how/when/why to take SS based upon your family's situation. He also has his own software available now that you can pay for that you just plug in the numbers and/or other information needed, and let it do its thing. You can check out one of his SS products at maximizemysocialsecurity.com. It's $40 / year, but I'm not really sure why anyone would need to pay for it more than once (more years).

If you want to go cheaper, go look for one of his Social Security books (make sure it's the latest edition current through 2019) on an online site.

Anyway, best of luck.

Social Security book
 

Rather than purchasing a book, which I did and read, then the following year there were so many changes, it no longer applied, go to a good CPA or Financial Planner who should be keeping up on all changes and can give you a good answer in real time.

you will both be able to collect your own social security.

I should have said "if your not working". This was implied by the OP.

Your example of an $80K income at age 40 and a $95K income at age 75 is not correct. The income at age 40 will be adjusted (indexed) to current dollars and will exceed a value of $95K (this year) for choosing the high 35 years. Specifically, the index factor would be 3.23 so $80K at age 40 is worth $258K today. This exceeds $95K this year.

Good catch on the ages I used and indexing. However, by my reading, your "3.23" indexing may be incorrect, as well. (I'm rushing this do to "honey do" work on the schedule, lol.)

Here's SSA's primer on indexing (snippet):

"Eligibility and indexing

Wage indexing depends on the year in which a person is first eligible to receive benefits. For retirement, eligibility is at age 62. So if a person reaches age 62 in 2020, then 2020 is the person's year of eligibility.

An individual's earnings are always indexed to the average wage level two years prior to the year of first eligibility. Thus, for a person retiring at age 62 in 2020, the person's earnings would be indexed to the average wage index for 2018."

In my example, I used the age of 75 which would be this year, 2020. Age 62, the first year of eligibility, would be 13 years prior, 2007 (and the person would have been born in 1945). According to SSA, then, the two-years-prior indexing would be indexed to the average wage index for 2005.

So, the index number should be 2.4248, no? But your main point is accurate about factoring in indexing to prior years.


Indexing Factors for Earnings

Soooo much of all the confusion and paying for advice could be eliminated if we only knew our expiration date.

Yes, good catch. It appears the indexing is to the year you hit 62 and not the year you start benefits. I believe the index factor is 2.42 as you indicated.

Leesburg SSA office
 

I don’t know the answer to your question, but I can confirm that the staff at the Leesburg office are very helpful. Maybe go soon because I heard that it fills up with villagers during winter!

If the husband made more than the wife during his working years, then waiting until 70 will allow the wife to get the higher benefit when he passes away.

The way I understand it you’re SS benifits based on how much you paid in. If you both worked it’s based on what you earned individually. The spouse benifits is for those who divorced or didn’t work due to being homemaker and wasn’t able to work full career and could claim spouse benifits and receive 1/2 of they’re benifits if it calculated to be more? If you both worked and paid in full quarters required to collect benifits it probably not worth trying to claim spousal benifits unless one of you made substantial more.

The amount you get is based on the highest 35 years of inflation adjusted earnings. If less than 35 years, an amount of zero is used. If the wife is younger and earns less then the husband, he might take the spousal benefit when he hits FRA until he hits 70 at which time he collects his own. Of course the wife will apply for SS early, since she will get difference between what she was getting and what he was getting to bring her up to his SS amount.

This strategy works as long as you were born before Jan 2, 1954.