Unsure when to start drawing SS benefit.

[JoseL639821]

Background information:

I'm currently 66-4 months and full retirement age is 66-8 months. My wife is 55. I retired 2 years ago and my wife will be retiring in 2 months. We both are collecting decent pensions.

1. Here's what I wanted to do.  I wanted to wait to 70 to start collecting SS benefits mainly because I wanted my wife to collect the amount of my benefit at 70 if I were pass away before her.
2. At what age will my wife be eligible for my 70 year old benefit?

[fffred]

@JoseL639821 

Hello! My circumstances are similar to yours. My wife is 11 years younger than me; I am 72 and started Social Security at age 70, my wife is 61 and has not yet applied for any SS benefits.

A short answer to "At what age will my wife be eligible for my 70 year old benefit?" is that the "spousal benefit" never includes delayed retirement credits; regardless of the spouse's age. However, "survivor's (widow) benefit" does include your delayed retirement credits. So regardless of your wife's age when you might pass (before her) she would be entitled to a benefit that is based on your then-current benefit including the DRCs.

You can read about the DRCs here https://www.ssa.gov/OP_Home/cfr20/404/404-0313.htm (this is the SS site and is a copy of the Code of Federal Regulations for this topic ...the "law" governing this issue).

If I can expand a bit; like you, I wanted to maximize the potential SS benefit for my wife should I predecease her; this was my rationale to delay until I was 70. My FRA was 66 so the DRCs (delayed retirement credits) amounted to 4 years at 8% per year, so, an increase of 32% in my benefit.

My wife has no work history of her own and will have only spousal benefits. We plan for her to begin collecting spousal benefit at age 62. Of course, her spousal benefit will be knocked down considerably from that at her FRA of 67 but (i) we'd rather have the increased cash flow now instead of 5 years from now, and (ii) because I took benefits at age 70 she has considerable financial back-up should I die before her.

A question I had was if the knock-down for early spousal benefit carried over to survivor's (widow) benefit. If so, the large reduction in benefit for the 5 years from age 62 to 67 could be consequential. But good news on two points: (1) if the spouse-now-widow claims survivor benfits at or after their FRA there is no reduction in the benefit even if they had taken spousal benefit before FRA. Very good news. (2) if the spouse-now-widow claims survivor benefit before their FRA there is a reduction in benefit (the formula is different for survivors than the one used for early spousal benefit) but this is based on the time period between when they claim and their FRA, it doesn't go back to when early spousal was claimed. This all set my mind at ease. (I do have documentation and references on this, some of this has been discussed/shared in this forum previously.)

I still wasn't fully satisfied. I wanted to make a table showing my age at death, my wife's age, and the benefit reduction that she would be subject to. The point being that if I die when she's 62 she'll be subject to a reduction in benefit due to 5 years (between 62 and her FRA), but every year longer that I can hold on the penalty gets smaller and smaller. Until finally, if I can just squeak out until she's her FRA then there is no reduction in benefit and she would receive my full unreduced benefit. But in all cases her benefit is based on mine including those delayed retirement credits.

Age N  Reduc   Net     Net with DRC
67  0  0       1       1.32
66  12 0.04071 0.95929 1.26626
65  24 0.08143 0.91857 1.21251
64  36 0.12214 0.87786 1.15878
63  48 0.16286 0.83714 1.10502
62  60 0.20357 0.79643 1.05129
61  72 0.24429 0.75571 0.99754
60  84 0.285   0.715   0.9438

Age = Survivor's Age. I have assumed that 67 is their FRA
N = number of months between age at my death and FRA
Reduc = Reduction factor applied to survivor's benefit
Net = Net survivor's benefit factor = (1 - Reduc)
Net with DRC = Net factor with 1.32 Delayed Retirement Credit applied

For completeness, the table runs down to age 60, which is the youngest age at which the widow can obtain survivor benefits under normal circumstances. I am still alive after her age 60

An important point to consider is that when your wife applies for old age benefit under her own record she will be deemed to be filing for spousal benefit as well (or vice versa). So should you pass before she is at FRA she might want to postpone the survivor benefit so that it would not be reduced. There is a form for this that I can't; locate at the moment, I'll keeping looking. The delay might be beneficial to your spouse.

Good luck! (and long life!)

[GailL1]

@JoseL639821 If your wife is only 55 years old, she cannot retire under the Social Security system until she is at a minimum age of 62 and then the benefit will be reduced because 62 is less than her Full Retirement Age under Social Security.  I assume that what you meant by this is that she is retiring from her job with the pension, not her SS Retirement benefit.  

If YOU wait until 70 years old to file a retirement claim with Social Security, you will get all of the Delayed Retirement Credits - adding about 8 % a year to your benefit at full retirement age.  

Upon your passing, your wife will receive the benefit that your are receiving IF it is a higher amount than her own.  The delayed retirement credits will be included in the amount she receives from your record as Survivors benefits.  As to the age she would get the WHOLE Survivors benefit from your account - she would have to be her Full Retirement Age.  If would be eligible for a reduced amount of it at the age of 60 or anyplace between 60 and her full retirement age.

There are also a few other eligibility requirements for the surviving spouse.  These are covered in the 1st link - 

Some links for you 

SSA.gov - Survivors Benefits 

SSA.gov - SSA Handbook - 407. Amount of Widow(er)'s Insurance Benefit 

Waiting until you are 70 to file for your SS Retirement benefit so that you get all of the delayed retirement credits is a good way to leave the widow with the best possible amount - and if she can wait until her full retirement age to get them that will maximize the amount to which she is entitled with no reduction for getting them early even though she can get the benefit as early as 60 but it would be reduced between 60 and her full retirement age.

[JoseL639821]

But my main question/concern is if she begins collecting at 62 (the reducted amount) and then if I die when she is FRA or older, would she be eligible for my credits since I for waited until 70?

[Tonster521]

@JoseL639821 I believe Gail1 has answered your question in the third paragraph of her reply. Also, Gail1 provided a link to the SSA Handbook that explains.the Amount of Widow(er)'s Benefit (see paragraph 407.2 B). Without your SS Benefit amounts, it is impossible to determine if your Spouse will actually receive any SS Benefits (money) that is related  to any Delayed Retirement Credits. I will provide an example with hypothetical amounts. Your SS Worker Benefit at death is $2,500 (includes delayed retirement credits of $500) and your Spouse's SS Worker Benefit is $1,500. She will continue to receive a Worker SS Benefit of $1,500 and a Survivor SS Benefit of $1,000 for a total of $2,500. Hope this helps.