Question on retirement. Checking for gotchas

We believe that it is best for my wife to take SS at 62 and me to delay it mine to 70. I will work until 70 unless something unforeseen happens, like failing health, or a windfall of cash.

My wife is drawing a small retirement from Texas Teachers and has paid into social security before she worked for the school system. Due to the double dipping law passed under Clinton, she will see her Social Security reduced by her Teachers Retirement. (It is not one for one at her income level) Also her SS will be much lower than mine, less than half.

So doing the math it makes sense to take hers now, mine when I retire and let her collect mine when I die.

Please note. Her family history and her current health says she will live to 104, my family history and current health says I will live to 84. If she dies before me, I will have plenty of money to live on without her income.

So, are there gotchas I am not seeing.

Cheers
Qazulight

If her social security is going to be affected by her Teachers pension, then she will not be able to collect your social security for a full amount either. My wife is a teacher and can only collect a very small amount of my social security.

Andy

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As I understand it her SS will be offset by less than a dollar for dollar amount. The offset would continue with mine and hers would go away.

This is how I see it playing out. Probably wrong but it is the way I see it now.

She starts drawing SS at 62. Let us say it will be 1200 a month, but it is offset by 600 a month for her teachers retirement.

So she gets 7200 a year for 22 years. When I die she will quit drawing her SS and start drawing mine which will be about 3000. So 3000 minus 600 would be 2600 a month. until she dies at 104.

In addition she would draw about 1200 a month in a non inflation adjusted pension. (I am not sure this pension will be structured this way, I have other choices) plus a couple hundred in another inflation adjusted pension plus her teachers retirement. So for the most part we can assume about 4600 a month in steady income not including 401ks and IRAs. for her after I am gone.

For our retirement we are looking at

3000 my SS
1200 my company pension
200 my government pension
600 her teachers pension
600 her Social Security

5600 a month in monthly income in todays dollars when I retire.

Actually there is a little more that brings that to an even 6000 a month.

This does not include 401ks and IRAs.

I think if we sell our water front condo and move to Texas or the Mid-West we could get by OK.

Cheers
Qazulight

Hi Qazu,
Every state is different so just make sure how it will plays out for your wife. I think the whole thing stinks because our spouses should be able to get our social security but unfortunately that is not the way the world works.

Andy

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Yes, your clacs look pretty good, at least for ball-parking. You don’t mention it, but SS has a WEP(SS Retirement adjustment) and GPO(Retirement) calculator, but you’ll need to go to MYSocialSecurity.gov to get your SS covered annual income subject to SS tax.

If you wait to age 70 to begin your SS benefit and she has already started hers, if you do die first, your benefit will simply shift to her and then get the GPO reduction. Of course, another option to consider might be for her to continue working and paying SS tax, which will gradually reduced the WEP and GPO reductions.

And if her school district is government, she should have an inflation adjuster, although it may be fixed at a max each year. In OR, the max is 2%, which when CPI-U is running 1.5% - 2.5% is sufficient, but not much when inflation is running 7% - 9%.

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Social security gets confusing and I’m not familiar with offsets for various pensions since we don’t fall into that scenario.

I do wonder if you are leaving out the factor that by your wife taking her social security earlier, that reduces the amount she will get if you pass away.

For example if there was no pensions involved, if she would get $1,100 at 62, and $2,000 at full retirement age and yours at full retirement age was $3,000 then I believe the following is true:
If you then pass away she would not get $3,000 but would get her $1,100 that she started with and a $1,000 difference that is the amount between your full amount at 67 and her full amount at 67. So she would be getting $2,100 and not $3,000. The penalty for early collection remains in effect.

Maybe I missed it in your post.

No, that’s not correct. From page 6 of SS’s publication on Survivor’s Benefits Survivors Benefits (ssa.gov)

So, as you can see, the penalty is only based on the wife’s age at the husband’s death, not on when she took SS.

AJ

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