Annuities?

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Re: Annuities?

Post by mathjak107 » Sat May 19, 2018 6:43 pm

i learned by reading books on the subject . there is a lot to know. of course now with the doing away with file and suspend , the ability to pay back ss whenever you want and start over and restricted application for those who were not 62 in 2015 or older , it is easier .

there are different rules and formulas for ss retirement and different rules and formulas for survivor .

i am pretty well versed in it now except i did not have to learn about the windfall elimination provision .

with 80 million voting baby boomers it would be political suicide letting ss take a reduction . as usual it will be dealt with in the 11th hour .
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Re: Annuities?

Post by mathjak107 » Sun May 20, 2018 3:43 am

Cortopassi wrote:
Sat May 19, 2018 3:22 pm
barrett wrote:
Sat May 19, 2018 11:55 am

All very interesting. My big realization in reviewing this stuff as a result of this thread is that my wife won't need to claim based on my earnings. She's now reached the point where it will be more favorable to collect based on her own earnings. Crap, I'd better not tell her and give her one more reason to hit the road.

Obviously there are things I have no idea about WRT SS, like this claiming discussion. Is the government website the best place to learn about this or some other site?
just don't buy any annuity product without plans to delay ss first or you will pay more and get less . i guess that can be lesson 1 .
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Re: Annuities?

Post by WiseOne » Sun May 20, 2018 8:08 am

barrett wrote:
Sat May 19, 2018 2:46 pm
ochotona wrote:
Sat May 19, 2018 2:28 pm
I'm going to discount the future Social Security cash flows after a certain date like what was it 2034 when the trust fund runs out of money? The trustees report that only 79% of the benefits will be able to be paid out? So discount by at least that much.
Yeah, the wording on the annual statements is deliberately wishy washy, I think. My last one says "... by 2034, the payroll taxes collected will be enough to pay out only about 77% of scheduled benefits." They don't really say where we are right now. I mean, it doesn't go from 100% to 77% overnight, right?

I can't imagine that Congress will do much until the very last minute, so maybe in another decade (right as Cortopassi is getting ready to claim!). The age increases under the 1983 changes to SS affect those born up to 1960. I would expect that one of the changes will be that those born in 1961 or later will see a gradual increase in age at which they can collect (both the minimum age to get anything as well as one's FRA).

But I am obviously just speculating.
That 77% number is useful to know. I've been discounting my future Social Security income by 20% for planning purposes, but maybe I should up that to 25%.

The FRA increase to 67 for those born after 1960 will decrease the boost you can get by delaying SS to age 70, so it's already effectively an SS cut. I guess the next step, when Congress gets around to it, is to continue the FRA increase all the way to age 70, and probably to delay the age when you can start taking benefits to 65. That way they can cut SS benefits by just about the right amount without actually having to say they're cutting benefits.
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Re: Annuities?

Post by mathjak107 » Sun May 20, 2018 8:46 am

well all i can say is keep working and paying in , my check depends on you ha ha ha
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Re: Annuities?

Post by barrett » Sun May 20, 2018 9:11 am

WiseOne wrote:
Sun May 20, 2018 8:08 am
barrett wrote:
Sat May 19, 2018 2:46 pm
ochotona wrote:
Sat May 19, 2018 2:28 pm
I'm going to discount the future Social Security cash flows after a certain date like what was it 2034 when the trust fund runs out of money? The trustees report that only 79% of the benefits will be able to be paid out? So discount by at least that much.
Yeah, the wording on the annual statements is deliberately wishy washy, I think. My last one says "... by 2034, the payroll taxes collected will be enough to pay out only about 77% of scheduled benefits." They don't really say where we are right now. I mean, it doesn't go from 100% to 77% overnight, right?

I can't imagine that Congress will do much until the very last minute, so maybe in another decade (right as Cortopassi is getting ready to claim!). The age increases under the 1983 changes to SS affect those born up to 1960. I would expect that one of the changes will be that those born in 1961 or later will see a gradual increase in age at which they can collect (both the minimum age to get anything as well as one's FRA).

But I am obviously just speculating.
That 77% number is useful to know. I've been discounting my future Social Security income by 20% for planning purposes, but maybe I should up that to 25%.

The FRA increase to 67 for those born after 1960 will decrease the boost you can get by delaying SS to age 70, so it's already effectively an SS cut. I guess the next step, when Congress gets around to it, is to continue the FRA increase all the way to age 70, and probably to delay the age when you can start taking benefits to 65. That way they can cut SS benefits by just about the right amount without actually having to say they're cutting benefits.
One of the things that was apparent to me when I was looking over my SS statements yesterday (I have paper statements from 2000 to 2010) was how much the last recession appeared to affect the SS shortfall projections (fewer people paying in because they didn't have jobs is my guess). My statement dated 6/17/09 shows 78% as of 2041, and my statement dated 6/11/10 shows 76% as of 2037. So the current numbers are probably optimistic considering that recessions are a pretty regular thing.
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Re: Annuities?

Post by Cortopassi » Sun May 20, 2018 9:25 am

mathjak107 wrote:
Sun May 20, 2018 3:43 am
Cortopassi wrote:
Sat May 19, 2018 3:22 pm
barrett wrote:
Sat May 19, 2018 11:55 am

All very interesting. My big realization in reviewing this stuff as a result of this thread is that my wife won't need to claim based on my earnings. She's now reached the point where it will be more favorable to collect based on her own earnings. Crap, I'd better not tell her and give her one more reason to hit the road.

Obviously there are things I have no idea about WRT SS, like this claiming discussion. Is the government website the best place to learn about this or some other site?
just don't buy any annuity product without plans to delay ss first or you will pay more and get less . i guess that can be lesson 1 .
mj, I don't even understand lesson 1. You mean somehow related to taxes? Or meaning the annuity is not the best vehicle and if I did that I better delay SS to make up for less than expected from the annuity?
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Re: Annuities?

Post by mathjak107 » Sun May 20, 2018 9:32 am

social security is the best annuity you can buy .

for the amount in checks you give up from 62 to 70 you can't buy any commercial annuity that gives you as much , passes to a spouse and is cola adjusted . so before you buy an annuity plan on delaying ss . you layout out what you are not getting from ss out of your portfolio from 62 to 70 and fund your draw that way ..

it would not be wise to take early ss and then spend that money on a commercial annuity .
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Re: Annuities?

Post by Libertarian666 » Wed May 23, 2018 11:39 pm

mathjak107 wrote:
Fri May 18, 2018 7:05 am
it would be poor financial sense to ever buy any annuity before delaying taking ss first .

there is no commercial annuity that you can buy that would pay as much , be cola adjusted and pass to a spouse that would be as good as what you would get from ss for the cost of laying out the ss amount you are not collecting from 62 to 70.

it is the best value in an annuity you can buy . annuities should only be considered after you delay taking ss . it is a terrible deal in comparison taking early ss and then buying a commercial annuity product.

cola adjusted annuities are the worst deals out there and the main reason you never want to use annuities in isolation . keep in mind your personal cost of living is very different from the adjustments the cpi gives you . there is little in common between your cost of living and a price index which has most of the items not applying to you or the way you buy or even your location .

you want your inflation protection in growth vehicles .
I don't trust SS not to be means-tested at some point.
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Re: Annuities?

Post by Libertarian666 » Wed May 23, 2018 11:47 pm

I have spent a lot of time writing a program to show the effects of different social security claiming times, life insurance, and annuities. It's available free at rhino-retirement-analyzers.com.

I'll also send a copy of the companion book in PDF form to anyone here who wants to read it.

BTW, I'm a licensed life insurance agent in AZ, CA, FL, IA, MI, OH, PA, TX, and VA, so if anyone who lives in one of those states is interested in buying a fixed annuity like the ones listed on immediateannuities.com, I'd be happy to discuss that with them. The cost to the purchaser is the same no matter what agent you use.

Note: I don't believe in, and will not sell, any variable annuities, including "fixed indexed".
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Re: Annuities?

Post by Libertarian666 » Wed May 23, 2018 11:50 pm

mathjak107 wrote:
Sun May 20, 2018 9:32 am
social security is the best annuity you can buy .

for the amount in checks you give up from 62 to 70 you can't buy any commercial annuity that gives you as much , passes to a spouse and is cola adjusted . so before you buy an annuity plan on delaying ss . you layout out what you are not getting from ss out of your portfolio from 62 to 70 and fund your draw that way ..

it would not be wise to take early ss and then spend that money on a commercial annuity .
SS does not pass to a spouse in the same way as joint and survivor annuities do. In fact, if both spouses have the same SS payment, the survivor gets 0 benefit from the first spouse's SS account after the first spouse dies. (Oversimplified but generally accurate).
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Re: Annuities?

Post by mathjak107 » Thu May 24, 2018 3:06 am

this is true , under those circumstances . but it is rare there is not a higher and lower benefit in ss . especially in survivor benefits which can contain not only delayed credits but where it is not based on half amounts either. even if both benefits are the same if you were at least 62 in 2015 you can let your benefit grow and collect spousal no matter who's is bigger.

you also get to have ex wives if they qualify collect off your record no matter how many there are , you can't do that with an annuity. the fact still stands , do not buy an annuity without delaying ss first , it makes no sense . there is no better cola adjusted annuity that will pay you as much for the price !
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Re: Annuities?

Post by Libertarian666 » Thu May 24, 2018 9:39 am

mathjak107 wrote:
Thu May 24, 2018 3:06 am
this is true , under those circumstances . but it is rare there is not a higher and lower benefit in ss . especially in survivor benefits which can contain not only delayed credits but where it is not based on half amounts either. even if both benefits are the same if you were at least 62 in 2015 you can let your benefit grow and collect spousal no matter who's is bigger.

you also get to have ex wives if they qualify collect off your record no matter how many there are , you can't do that with an annuity. the fact still stands , do not buy an annuity without delaying ss first , it makes no sense . there is no better cola adjusted annuity that will pay you as much for the price !
For all those who want ex-wives to collect on their record, this is definitely very important.

I suspect most people with ex-wives aren't in that category.

And I agree that if you believe that SS will remain the same rather than being cut or means-tested, delaying SS is probably a good choice. But it's not the black-and-white situation that you claim.
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Re: Annuities?

Post by mathjak107 » Thu May 24, 2018 2:22 pm

well if you don't delay then you can end up more dependent on markets ,rates and inflation outcomes as your check will be 70% less at the age of 70.

so from 70 on delaying makes you more longevity dependent but a lot less market,rate and inflation dependent. so you have your choice .
survivor benefits can be a lot bigger too .

for the record i went in the middle at 65 and my wife 62
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Re: Annuities?

Post by mathjak107 » Fri May 25, 2018 3:08 am

MangoMan wrote:
Thu May 24, 2018 7:23 am
mathjak107 wrote:
Thu May 24, 2018 3:06 am
you also get to have ex wives if they qualify collect off your record no matter how many there are , you can't do that with an annuity.
Why would you want to? Is that a privilege for you? Why the heck would anyone want one of their exes to benefit? You clearly have never been through a woman-initiated divorce [which for the uninitiated, is most of them].
i guess it depends on your relationship with the ex . i always make sure my ex knows to file on my record via restricted application while letting her own grow . i want her to get the best deal ss wise that she can even if it is off my record
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Re: Annuities?

Post by mathjak107 » Fri May 25, 2018 3:19 am

a good reason to delay ss is also because the tax gods give us a gift if we can make use of it .

every year we can take ira money that was written off at higher tax rates and we can take more than 24k out tax free as a couple or more than 40k out at as little as 4% tax while ss is growing .

just the standard deductions and exemption makes that possible . over 8 years that can reduce rmd's by 320k and you can have that money for almost no tax .

throw in some roth money , some cash set a side and some over funded life insurance money and you can have a nice 100k plus income while delaying ss , pay almost no tax , get an aca subsidy from 62 to medicare age .

you are allowed to over fund a whole life policy up to modified endowment limits where it is no longer considered life insurance and no fees or expenses can be charged on any money over funded .

in a land of less than 1% my policy was paying 4% so any extra money i put in grew by 4% tax free since in retirement you borrow the overage out and never pay it back .

you can see how with knowledge and planning you can get quite a efficient comprehensive plan but it takes planning for early on .

i thought i knew all i needed to know about retirement since my investments were doing well so i never went for help until way later .
by that time it was like telling the guy who build the brooklyn bridge , it is nice but can you move it 2" left .

it was to late for most of the good planning by the time i realized i don't know what i don't know.

knowing what i do now i would have done far more roths because of all the things that hinge on your taxable income in retirement .
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Re: Annuities?

Post by mathjak107 » Sat May 26, 2018 3:00 am

how do you know you can get 1.70% above the rate of inflation until after the game is over ?
so basically delaying is really taking the guaranteed return and taking on more longevity risk or taking it early is betting on markets ,rates and inflation and taking on more market risks .

the choice is yours ......

in the end the roi will be about the same if one lives long enough.

what i am learning though is the taxation of ss is very complex and very low . if you look at the irs worksheet for social security it will make your hair hurt . but the way it is calculated you can have 80k in ss for a couple and about 4k is actually taxed . plus most states don't tax ss .

that is far lss than you would pay on interest ,dividends and appreciation.

the good news is delaying lets you choose when you want to throw in the towel and file. no one says you have to wait 8 years .
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Re: Annuities?

Post by mathjak107 » Sat May 26, 2018 12:16 pm

don't you worry .something as important to american life as social security will be funded fully in the 11th hr like every thing else. they just funded social security disability when it ran out of money.

it isn't that your own investing can't match it , it is your own investing can fail to match it while ss is likely what it is . odds have been good investing works well but there are those failures we have had already where investing failed to keep up with inflation and the retirees were hammered .

ss being cola adjusted was fine .
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Re: Annuities?

Post by mathjak107 » Sun May 27, 2018 5:40 am

MangoMan wrote:
Sat May 26, 2018 9:26 am
mathjak107 wrote:
Sat May 26, 2018 3:00 am
how do you know you can get 1.70% above the rate of inflation until after the game is over ?
so basically delaying is really taking the guaranteed return and taking on more longevity risk or taking it early is betting on markets ,rates and inflation and taking on more market risks .

the choice is yours ......

in the end the roi will be about the same if one lives long enough.

what i am learning though is the taxation of ss is very complex and very low . if you look at the irs worksheet for social security it will make your hair hurt . but the way it is calculated you can have 80k in ss for a couple and about 4k is actually taxed . plus most states don't tax ss .

that is far lss than you would pay on interest ,dividends and appreciation.

the good news is delaying lets you choose when you want to throw in the towel and file. no one says you have to wait 8 years .
Not saying I don't agree. But
1. guarantees from the government are not worth much, and
2. the PP and some other similar portfolios have been shown [by Tyler] to have very good SWR and PWR
the pp really is not comparable to the standardized stress testing that a safe withdrawal rate is based on . gold not only went through some extrodinary once in a lifetime events but you could not own gold as bullion in this country over the time frames a safe withdrawal rate is tested against .

the dates a safe withdrawal rate is based on are 1907,1929,1937 and 1965/1966 . those dates are what failed and were our worst case scenarios , starting the calculations in the 1970's misses every worst case outcome we had that the term safe withdrawal rate is based on . . we had no worst case outcomes after 1965/1966 .

so the only way you can really compare is see if the pp managed to have a 2% real return over the first 15 years of every rolling 30 year period but we still don't really know how 25% of the portfolio in gold would have influenced things and if you would have seen a 2% real return over the first 15 years of those worst case time frames ..

but a safe withdrawal rate also assumes you ended with a buck left at the end of the 30 years . so you really need to look at the balance left to besides that draw rate . that balance is used for all those big expenses not in the yearly budget , healthcare costs down the road that exceed things and money for heirs , a car , home repairs and renovations , etc ..

so as an example a 60/40 mix has had a 96% success rate at 4% inflation adjusted while 90% of every rolling time frame left you with more than you started with . 67% of the time it left you with 2x what you started and 50% of the time 3x what you started with .

that is 117 rolling 30 year cycles stress tested . if we eliminated those worst years for starting retirement a safe withdrawal rate for 60/40 would be about 6.50% with money still left over most time frames for heirs .

so there really is not a good way to see how the pp would have done against conventional investing because gold was such a wild card .

but in practice all that counts is how you do .

we have been retired just about 3 years now and despite delaying social security until 65 and spending down 100k a year from assets since age 62 we are still a few hundred thousand higher than the day we retired 3 years ago and that is all that matters when it comes to safe withdrawal rates .at the end of the day it is only about what has your portfolio done over your time frame .
Last edited by mathjak107 on Sun May 27, 2018 6:14 am, edited 6 times in total.
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Re: Annuities?

Post by mathjak107 » Sun May 27, 2018 6:02 am

so where does all this fit in with insurance products ?

well technically when we use our own assets we are really self insuring . we are self insuring our income , we are self insuring our long term care and we are self insuring our LONGEVITY .

key word is longevity . if you ask people how long they will live the answers are usually understated and are in the 80's . about 1 in 4 of us will see 90 and if a couple odds are 1 in 2 that one of us will see 90 so longevity is our big risk .

that means we need to self insure and keep quite a lot of dry powder unspent for the what if we live to our 90's or what if we need long term care of a sort ?

so it can be rather inefficient use of our own money trying to keep a buffer for the unknown .

that is where pooled money in insurance products could be a big help because we take the unknown out of the equation on some of the stuff .

by having those who die help pay for those who live , the self insuring aspect of things becomes easier .

what if we took our own assets and only planned to 85 rather than the chance one of us as a couple will see 95 ? we could spend a whole lot more if we just bought a deferred longevity annuity for very little money that kicked in at 85 and supported us through death on the chance we make it that far . .

that may be a far better deal than counting on the whims of the markets to leave you with a balance big enough to spend as much without the annuity for as long .

so the insurance products can trade uncertainty for certainty and reduce the buffer you need for self insuring all these aspects of life . delaying ss does a lot of the same thing .
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Re: Annuities?

Post by mathjak107 » Sun May 27, 2018 9:48 am

many years ago money magazine featured my wife and i in an article . they wanted to see how my plans met up with their team of pro's ideas . so we did it with them .

we differed in one area . i wanted to self insure long term care . they were against it . they turned out to be right . because like i said above self insuring means the money you self insure with has to be kept safe ,secure and there ready to go . you can't leave it in the investment pool you use for income since a safe withdrawal rate assumes that can be spent down to 1 dollar if needed .

so it really meant taking a large chunk of money , hundreds of thousands of dollars , segregating it in low yielding safe investments . for a mere piece of the long term gains keeping that money invested we can easily pay the premiums on an actual policy without decreasing our income by segragating that money .
our estate attorney said most of his clients are the self insurers who never really did anything to actually self insure other than say the words and keep their fingers crossed . now when the crap hits the fan the stay at home spouse realizes she can be impoverished .

so there are lots of benefits using certain types of insurance products that can insure us far better than we can self insure . having some income insurance , longevity insurance and long term care insurance with no uncertainty can be a pretty good thing to have and the assets they protect can pay for the costs and come out further ahead.

at this stage i only have a small life policy and a ny state partnership plan for ltc . no annuity products yet
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Re: Annuities?

Post by barrett » Sun May 27, 2018 11:14 am

mj,

As enthusiastic as you are about delaying SS as long as possible (which I totally agree with... I think), why did you decide to claim at age 65?

Wouldn't it make the most sense to have a master annuity/LTC/SS claiming strategy in place before pulling the trigger on any of these?
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Re: Annuities?

Post by mathjak107 » Sun May 27, 2018 12:53 pm

simple answer... it fit in our plans better . i enjoy working one day a week doing motor control and vfd training for my old company . i would have made over the limit if i filed early . but the special rules for the year you will be fra allow you to make up to 45k so it worked well .

also my wife gets a healthy spousal adder of almost 4500 a year to her early ss benefit when i file . for every year i waited we gave up 4500 more on her end . so 65 was a good balance for reducing market risk and balancing it with longevity risk .

we are all going to have different situations . if our income was lower and i could have spent down our ira's at near no tax and taken advantage of zero percent capital gain brackets i may have delayed longer .

we have an excellent LTC plan in place so we do not need to buffer any money for that .
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Re: Annuities?

Post by barrett » Sun May 27, 2018 1:38 pm

mathjak107 wrote:
Sun May 27, 2018 12:53 pm
simple answer... it fit in our plans better . i enjoy working one day a week doing motor control and vfd training for my old company . i would have made over the limit if i filed early . but the special rules for the year you will be fra allow you to make up to 45k so it worked well .

also my wife gets a healthy spousal adder of almost 4500 a year to her early ss benefit when i file . for every year i waited we gave up 4500 more on her end . so 65 was a good balance for reducing market risk and balancing it with longevity risk .

we are all going to have different situations . if our income was lower and i could have spent down our ira's at near no tax and taken advantage of zero percent capital gain brackets i may have delayed longer .

we have an excellent LTC plan in place so we do not need to buffer any money for that .
Ah, got it. Thanks for that. I don't know anything about the spousal "adder" so will have to look into that. But in our case I don't think it matters. When I turn 70 in 2028, my wife will be 61.6.

I also have not looked into LTC but am thinking that it might be cheaper to purchase now rather than wait until I turn 60 in September (just a guess). I have been going on the assumption that we will "self insure" but I know that's a gamble. I was just talking to a guy at the gym whose dad is paying $13,000 per month for being in a memory care facility.
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Re: Annuities?

Post by mathjak107 » Sun May 27, 2018 6:36 pm

my dad was under care 24/7 for 5 years and it left his spouse impoverished . it just did not make sense to actually self insure . not when the partnership plans here are so great .

i get 3 years of 400 a day increased 5% a year for a nursing home or 6 years of assisted living or in home care .

but that is nothing compared to the perks . the partnership has a special version of medicaid picking up all the bills forever once the insurance runs out . all assets are 100% protected and the stay at home spouse has no income limits on them .

the perks are really why we wanted it .

i waited from 60 to 62 and i turned prediabetic . i got a 1k surcharge every year now forever because i waited and did not take it while i had no issues .
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Re: Annuities?

Post by mathjak107 » Mon May 28, 2018 4:56 am

barrett wrote:
Sun May 27, 2018 1:38 pm
mathjak107 wrote:
Sun May 27, 2018 12:53 pm
Ah, got it. Thanks for that. I don't know anything about the spousal "adder" so will have to look into that. But in our case I don't think it matters. When I turn 70 in 2028, my wife will be 61.6.

if you were not 62 or older in 2015 if you have a work record of your own you can only get your own benefit . you can no longer take a spouses benefit and let yours grow .

if as an example your wife files at fra for her benefit and 1/2 your fra amount is larger than her fra amount , they add the difference to her check . that is a spousal adder .

as long as you file she can get that spousal adder whenever she files . if she is only 62 when she files than the difference is added to her early benefit . it will always be less than 1/2 your full since she is penalized for filing early
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