Social Security
1 like171 views
This document discusses Social Security filing strategies for married couples. It provides the full retirement ages for those born between 1943 and 1960. It then compares two filing strategies - filing individually at age 62 for reduced lifetime benefits, versus one spouse filing and suspending at full retirement age so the other can receive spousal benefits until age 70, resulting in higher lifetime cumulative benefits. The document emphasizes the importance of understanding all options before deciding on a filing strategy.
Social Security
- 1. Year of Birth Full Retirement Age 1943-1954 66 1955 66and2months 1956 66and4months 1957 66and6months 1958 66and8months 1959 66and10months 1960andlater 67 Your full retirement age1 If you are currently married and thinking about filing for Social Security retirement benefits, it’s worth taking some time to learn more about the benefit filing options that are available only to married couples who have reached full retirement age. The filing decisions you make today are likely to have a permanent impact on the benefits that you and your spouse receive as a couple and in some instances, on the benefit the surviving spouse receives. Timing is a key variable for everyone, but especially for married couples. Collecting benefits early, before reaching full retirement age, permanently reduces your monthly benefit by as much as 25%. Of course, there may be good reasons for filing before your full retirement age. Health concerns, a reduced life expectancy and financial need are all important considerations. As the chart below shows, your full retirement age is determined by the year you were born. 1 Source: Social Security Administration, Retirement Planner: Full Retirement Age, http://www.socialsecurity.gov/retire2/retirechart.htm An Educational Guide for Individuals The Social Side of RetirementSM SocialSecurityfilingstrategiesfor marriedcouples
- 2. Bill and Karen file for their individual Social Security benefits as soon as they become eligible at age 62, four years before reaching full retirement age. Nowlet’scomparetwodifferentfilingstrategiesforBillandKaren. Filing Strategy 1: Bill and Karen each file for their individual benefit at age 62, before reaching full retirement age. By collecting early, they cannot take advantage of filing strategies that are available only to married people who have reached full retirement age. Analysis: At age 62, Bill and Karen begin receiving a combined monthly benefit of $2,775; this is 25% less than the combined benefit of $3,700 they would be eligible to receive by waiting until their full retirement age to begin collecting their benefits. With this strategy, the couple’s cumulative Social Security income at age 85 is $1,018,460. In comparison, if they had waited until their full retirement age to file for benefits, their cumulative income at age 85 would be $1,173,574. The $155,114 difference is based solely on the couple’s age when they file for benefits, and does not include the impact of any other filing strategies. Cumulative benefit amounts assume 2.5% annual COLA increases. Marriedcoupleshaveavarietyoffilingoptionsavailabletothem. In thefollowingexample,we’llcomparetwoofthesestrategies to demonstratethedifferencethatfilingstrategycanmake. Remember…it’s your Social Security and your decision For simplicity, this example reflects only limited benefit filing options and variables. In fact, there are many factors that could have an impact on the amount of your Social Security retirement benefit. The benefit filing option you choose should be based on the realities of your personal situation. No matter how and when you choose to begin collecting your benefit, it’s a good idea to contact the Social Security Administration ahead of time. That way, you can get the information you need to make an informed filing decision. Bill and Karen Bill and Karen, both 62, have been married for 40 years. Both have a family history of longevity and expect to spend many years in retirement. Bill has earned more than enough Social Security retirement credits to qualify for a retirement benefit. At his full retirement age of 66, Bill will be eligible to receive a monthly benefit of $2,400, plus any cost-of- living (COLA) increases. Karen has also earned enough retirement credits to qualify for an individual Social Security retirement benefit of $1,300 at her full retirement age of 66, plus any COLA increases. Our example assumes that both Bill and Karen are no longer working at the time they begin receiving their benefits.
- 3. Bill files for his Social Security benefits at full retirement age and immediately suspends his benefit. Karen files a restricted application for spousal benefits. Her spousal benefit is equal to 50% of Bill’s full retirement age benefit. 66 67 68 69 70 During this period, Bill earns delayed retirement credits equal to 8% of his own full retirement age benefit.1 During this period, Karen collects a spousal benefit while her individual benefit earns delayed retirement credits.1 At age 70, Bill begins collecting his Social Security monthly benefit, which includes delayed retirement credits that have increased his benefit by 32%. At age 70, Karen stops collecting a spousal benefit and begins collecting her individual monthly Social Security benefit, which includes accumulated delayed retirement credits equal to 32% of her full retirement age benefit. Social Security Benefit Spousal Benefit Spousal Benefit Social Security Benefit Social Security Benefit 1 2 3 4 Filing Strategy 2: Suspend and Restrict combination The “File and Suspend” and “File and Restrict” combination strategy is available only to married couples who have reached full retirement age. Analysis:When Bill files for and immediately “suspends” his benefit at age 66, he opens the “restricted” filing window for Karen. This strategy increases the couple’s cumulative lifetime benefit. It also assumes that the couple has another source of income during the time Bill’s benefit is suspended. By the time Karen and Bill are age 70, their combined monthly Social Security benefit is $5,951. That’s $2,570 more each month than the $3,381 that Strategy 1 provides at the same age. If they both live until age 85, their combined, cumulative Social Security benefit will be $1,346,489, or $328,029 more than Strategy 1 provides. Cumulative benefit amounts assume 2.5% annual COLA increases. 1 Delayed retirement credits may accrue for each year beyond full retirement age that individual benefits are delayed. People born in 1943 or later who have reached full retirement age can earn delayed retirement credits equal to 8% of their full retirement age benefit, up until age 70. This can increase monthly benefit amounts by up to 32%. Spousal benefits are not eligible for delayed retirement credits.
- 4. ©2015MassachusettsMutualLifeInsuranceCompany,Springfield,MA01111-0001.Allrightsreserved.www.massmutual.com.MassMutualFinancialGroupisamarketingnamefor MassachusettsMutualLifeInsuranceCompany(MassMutual)anditsaffiliatedcompaniesandsalesrepresentatives. AN6412 315 CRN201702-189490 “If you are in a same-sex marriage or non-marital legal same-sex relationship, or a surviving spouse of a same-sex marriage or non-marital legal same-sex relationship, Social Security encourages you to file right away for benefits. This allows Social Security to determine if you are entitled to any spousal or survivor benefits. If you have questions about how a same-sex marriage or non-marital legal relationship may affect your claim or to tell Social Security if you are married, separated or divorced, please call 1-800-772-1213 (TTY 1-800-325-0778) or contact your local Social Security Office.” Important information for same-sex couples Social Security Administration, same-sex couples, http://www.socialsecurity.gov/people/same-sexcouples/ For more information, copies of publications or to set up your own Social Security account, visit the Social Security Administration website at www.socialsecurity.gov or call toll-free at 1-800-772-1213 (deaf or hearing impaired, call TTY number, 1-800-325-0778). The information provided is not written or intended as specific tax or legal advice. MassMutual, its employees and representatives are not authorized to give tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel. Final decisions about Social Security filing strategies always rest with you and should always be based on your specific needs and health considerations. It is important to acquire as much information as possible in order to make an informed Social Security claiming decision because one year after the Social Security claiming decision is made, it cannot be changed. Some people, such as federal, state and local government workers, may be subject to the “Government Pension Offset” and the “Windfall Elimination Provision” which could decrease their Social Security Benefits. If you work for an employer that offers a retirement plan, your plan benefit may be subject to a Social Security “pension offset” provision. (Your 401(k) contributions and the employer match are not subject to a pension offset.) A pension offset may reduce the amount of your retirement plan benefit when you become eligible to collect Social Security retirement benefits. This reduction may apply whether or not you are collecting Social Security retirement benefits. This could be an important consideration as you make your filing decision. Your plan administrator can tell you whether your plan includes a Social Security pension offset provision and how it might affect your retirement plan benefit. The Social Security program was created by an Act of Congress. It is subject to change. In the past, Congress has made changes to the law which have had an impact on Social Security benefits. Congress can make changes to the law at any time, which might impact benefits in the future. Taketheguessworkoutofyour SocialSecurityfilingdecision. Your Social Security retirement benefit is too important for guesswork. Learn more about your retirement benefits at www.socialsecurity.gov or contact your local Social Security office. One of the most important steps you can take is to set up your own “My Social Security” page on www.socialsecurity.gov. This is an easy and secure way to view your estimated benefits and earnings history. The Social Security Administration will use this information when it calculates your benefit, so be sure that it accurately reflects your work history. We’re here to help Once you and your spouse have set up your individual Social Security pages, your financial professional can help you explore different filing strategies. With this information, you will be better able to make an informed Social Security filing decision.