Rule A: Take Social Security's really good deal, namely waiting to collect much higher benefits, over somewhat fewer years.Using a hypothetical example, CBS Moneywatch confirms his approach:
Rule B: Take spousal, survivor, mother/father, and child benefits, which may be available to you based on your current or former spouse's earnings history.
Rule C: Make sure that following Rule A doesn't undermine following Rule B and vice versa.
A working husband files for his benefits at full retirement age [currently 66 to 67, depending on one's date of birth], and his spouse (with little or no earnings history) files for her spousal benefits.There are many exceptions, of course, to the traditional-American-family-plus-lengthy-golden-years scenario. Both spouses may have long earnings histories, either or both may have divorced and remarried, either or both may have poor health, or the family finances may not be able to afford deferring the benefits. Most individuals will require expert help to run the numbers; failing that, they may decide to make an important and irreversible decision based on "gut feel."
The husband's request to file also includes an immediate request to suspend his benefits. By doing this, his wife can begin to receive her spousal benefits.
Later, ideally at age 70, the husband can claim his benefits when the monthly amount is larger.
It is a sad fact of modern life that interactions with our government, such as paying taxes, receiving benefits, or applying for permits and licenses, are complex and burdensome, where the penalties for making a mistake can be significant. Thanks go to Prof. Kotlikoff, whose articles on Social Security are a regular feature on pbs.org, for helping us to navigate these treacherous waters. © 2013 Stephen Yuen
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