Chris Stein, CFP®
Spousal Benefit Rule of Deeming
This week, a question from a husband who is almost 68 years old and is wondering if he can claim spousal benefits from his wife’s Social Security benefit, which she will claim early at age 62. This brings into play the Spousal Benefit Rule of Deeming:
My wife will be 62 in August 2019, and I would like to know if I can claim spousal benefits if I have not yet filed a claim for my own Social Security benefits. I will be 68 this October (2019). Is this strategy still available for me and, if so, will I be able to collect 50% of the benefit amount that she will receive at age 62? If not, how would the amount of spousal benefit be figured?
Surprising Spousal Benefits
I have some good news for you. Here’s why:
In August of 2019, your wife is turning 62, the first age at which she can file for her own retirement benefit. Since you are 67 years old, you are well past that age. You are asking if you can apply the strategy of filing for the spousal benefit even though you haven’t filed for your own benefit and your wife is filing early. Lastly, you’d like to know how much you could expect to receive under those circumstances.
By my calculations, your wife was born in August 1957. She will not receive the full retirement age benefit she has earned unless she waits to age 66 and 6 months to file. She is one of the people who has fallen into the transitional period between 1955 and 1959 where, if you were born in those years, Social Security has slowly raised the full retirement age from 66 to 67. So, she will be filing early and receiving a reduced benefit because of that early filing status.Year of BirthFull (Normal) Retirement Age1943-195466195566 and 2 months195666 and 4 months195766 and 6 months195866 and 8 months195966 and 10 months1960 and later67
What Is the Spousal Benefit Rule of Deeming?
Under current law, if you file for a spousal benefit, you are ‘deemed’ to be filing for your own benefit first and then you would only receive a spousal benefit if it helps you. That is, the spousal benefit would have to exceed what your own benefit might be. That’s called ‘deeming.’
The Spousal Benefit Rule of Deeming used to only apply to you before your full retirement age, but now it happens even after you reach your full retirement age. The exception is if you were born before January 2nd of 1954. So, January 1st of 1954 you’re okay, all years before that, you’re okay: you are not subject to the deeming rule.
Because you will be 68 years old this October, you have a little over a year worth of delayed retirement credit you can still potentially earn if you delay claiming your own benefit until age 70. It sounds like that is what you plan to do. Luckily, you were grandfathered into access to spousal benefits because you were born in 1951 (which is before January 2nd, 1954, as required by the new law).
So, when your wife files at age 62, it unlocks your ability to file what’s called a “restricted application.” It allows you to go into Social Security and say, “I’m eligible for my own benefit, and I’m eligible for my spousal benefit, but I’d like to restrict my application today to only the spousal benefit, leaving my own benefit to continue to grow in the background earning delayed retirement credits.” You can file a spousal application – and only spousal – based on her record, letting your own benefit grow for that final ‘year plus a little bit’ and get to your full retirement benefit.
Not many people can still do that because the clock keeps ticking forward, and more and more people are becoming subject to this ‘deeming’ rule that went into effect a few years ago.
How Much Will You Collect?
Here I have another bit of good news. You mentioned that you might “be able to collect 50% of the benefit amount that she will receive at age 62.” Better yet, you’re going to be able to collect half of what she would have collected had she waited until her full retirement age to file. You will be due the full spousal benefit, which is one half of your wife’s ‘PIA’ (or Primary Insurance Amount, the amount earned by full retirement age).
The fact that your wife is claiming early does not reduce your spousal benefit. It is not determined by the age of the working spouse and when they file; it’s the age of the recipient spouse and when they file.
So, the good news is that, yes, you are grandfathered in and, yes, you can file for just a spousal benefit – and you are going to collect even more than what you expected.
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