Ask Liz Weston

Get smart with your money

Retirement

Q&A: Social Security spousal benefits

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Dear Liz: I am 13 years older than my wife. Is it possible for me to receive Social Security spousal benefits based on her earnings when I reach full retirement at age 66? I’d like to shift to my benefit when it reaches its maximum at age 70. If I can do this, what impact, if any, would there be on the benefits she ultimately receives?

Answer: Spousal benefits wouldn’t reduce her checks, but she has to be old enough to qualify for Social Security for you to get these benefits. Given your age gap, waiting for that day probably isn’t an optimal solution.

On the other hand, she could file for spousal benefits when she reaches her own full retirement age (which will be somewhere between 66 and 67, as the full retirement age is pushed back). That would give her own benefit a chance to grow, and she could switch to that amount if it’s larger at age 70. If she starts benefits before full retirement age, she would lose the option to switch.

AARP’s free Social Security calculator can help you figure out the claiming strategy that makes the most sense for your situation.

Q&A: Widow’s Social Security benefits

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Dear Liz: I’ve been reading your answers to Social Security questions, but they do not address my situation, which is extremely unconventional. I was a quasi-widow at 31 with three children under age 9. My husband was institutionalized because of an accident when he was 33. He died 23 years later, having outlived all his insurance. I never remarried. I was disabled at 61 and started receiving my deceased husband’s Social Security benefit at age 62, after the expiration of my disability benefits from work. I am now 73. Am I eligible to also begin receiving my own Social Security benefits as well as my late husband’s? I hope your answer is positive.

Answer: It’s not. Although the details may not be conventional, your situation doesn’t change the fact that widows (and widowers) are entitled to only one check. They can’t collect their own benefits plus survivor’s benefits. They can and should, however, choose the larger of the checks to which they’re entitled.

It is possible that you’ve earned a larger benefit on your own work record than the survivor’s benefit you’re currently receiving. You should call Social Security at (800) 772-1213 and ask.

Q&A: Which work years determine Social Security?

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Dear Liz: My wife and I are both 59. We expect to retire in two or three years. We would not take Social Security until probably 67 because we will not need it when we retire. But would our Social Security benefits be less because we do not work for those five years before applying to Social Security? Is Social Security affected at all by the last few years of income or simply by the total lifetime deposits into the system?

Answer: Your Social Security benefits are based on your 35 highest-earning years. So if you’ve worked more than 35 years, a few years at the end of your career in which you earn less or don’t earn anything at all shouldn’t affect your benefits.

While you’re researching your options for claiming Social Security, check out the “claim now, claim more later” strategy that would allow one of you to claim spousal benefits while allowing his or her own benefit to grow. It’s one of a number of strategies available to married couples that can significantly increase the amount of Social Security benefits over a lifetime. Another important factor to consider is that one of you is likely to survive the other, perhaps by many years, and will have to get by on a single check. You should make sure that check is as large as it can be to lessen the chances the survivor will face poverty in old age. You can find more information about Social Security claiming strategies at the AARP site (aarp.org).

Q&A: Waiting to claim Social Security benefits

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Dear Liz: I am 64 and happily, gratefully receiving early Social Security benefits. My wife is 59, and when she turns 62 she will get half of my $1,650 monthly benefit. My question, though, is this: If she starts getting half of my benefit at 62, can she later switch to her own benefit? If she can get spousal benefits at 62 and switch to her own benefit when it maxes out at age 70, then starting early would be a no-brainer.

Answer: Yes it would, but that’s not how Social Security works.

First, your wife will not receive an amount equal to half of your check if she applies for spousal benefits before her own full retirement age, which is 66. Instead, she would be locked into a significantly discounted amount — closer to 35% of your benefit than 50% if she applies at 62. She also would lose the option of switching to her own benefit later. The “claim now, claim more later” strategy of starting with spousal benefits and then switching to one’s own benefit isn’t available to those who start early.

You’ve already left a lot of money on the table by starting benefits before you reached your own full retirement age. Having her begin benefits prematurely would just compound the problem. Remember too that when one of you dies, the other will have to live perhaps for many years on a single check. It makes sense to make sure that check is as large as it can possibly be.

AARP has excellent information on its site about Social Security claiming strategies, as well as a calculator that can help you see how much it pays to wait. Please educate yourselves before making a decision that you, or she, could live to regret.

Q&A: Social Security and spousal benefits

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Dear Liz: A friend of mine has told me that he thinks that I can apply for spousal benefits at my full retirement age and hold off getting my Social Security under my own work record until I am 70. Here is the scenario: My husband is 77 and has been collecting Social Security since he was 62. He continues to work. I will be 66 in November and I am still working. I plan to take Social Security at age 70. Can I apply for spousal benefits and receive an amount equal to half of what my husband receives from the age of 66 until I turn 70 and then apply under my own account at age 70 and receive my maximum benefit at that age? My friend feels strongly that this can be done, but I called Social Security and explained it clearly (or at least I thought I did) to them and they said that this could not be done. Then I went into the Social Security website and looked under “Spousal Benefits,” but the wording did not clearly say that this couldn’t be done.

Answer: What you’re describing is the “claim now, claim more later” strategy that can boost a couple’s lifetime Social Security by tens of thousands of dollars. It’s one of the approaches outlined in AARP’s excellent primer, “How to Maximize Your Social Security Benefits,” which you’ll find on its site, http://www.aarp.org, along with a calculator to help you understand how different claiming strategies could affect what you get.

These strategies capitalize on the fact that delaying the start of Social Security benefits results in substantially larger checks for life. In the case of two-earner couples, the “claim now, claim more later” strategy allows one spouse the option of getting checks (the spousal benefit) for a few years while allowing her own benefit to grow to its maximum.

As long as you wait until your own full retirement age to apply for spousal benefits, and your spouse is already receiving benefits, then you should be allowed to switch to your own benefit when it maxes out at age 70. If your spouse weren’t receiving benefits yet, but had reached his full retirement age, he could file for benefits and immediately suspend his application (“file and suspend”) so that you would be eligible for spousal benefits and his own benefit could continue to grow.

It’s not clear why you would have been told otherwise, since this isn’t exactly a secret strategy. But not all Social Security employees are equally informed. Sometimes calling back and asking your question again of another representative will result in a different or more complete answer.

When you file for benefits, make clear on the form that you are restricting your application to the spousal benefit only and aren’t collecting your own retirement benefit

Q&A: When elderly parents are in financial trouble

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Dear Liz: My in-laws just informed us that they have gone through their retirement fund and soon won’t be able to pay their mortgage. They borrowed against the house they’ve lived in for 30 years and currently owe $325,000. They are devastated, so I am trying to figure out the best way for them to stay in their house in their final years, as they are both 73. They have about $300,000 in equity but do not want to sell. They are willing to sell the house to my wife and me at their current balance. We would make the payments and they remain in the house. When they pass, the house would be ours. They looked into a reverse mortgage but this would cover only the payments, not taxes, insurance or maintenance. What is the best way to do this? Do I get a loan and purchase outright? Do I contact their bank and see if I can assume their loan? Do they quit-claim the home to my wife and me? My wife and I can afford to do this, but we want to make the right financial decision.

Answer: Before you do anything, please consult a tax professional and an attorney with experience in estate and elder law.

It’s unlikely the lender will allow you to assume the loan, so you probably would need to set this up as a sale of the home with you and your wife obtaining a new mortgage.
But their plan to sell the house to you at a below-market value could create gift tax issues and could delay their eligibility for Medicaid, should they need help paying for nursing home care.

There are other risks to your in-laws. Your creditors could come after the home if you lose a lawsuit, for example. You could sell the home without their consent, and you would have a claim on the property if you and your wife split up.

Then there are the risks to you. You say you can afford to make the payments (and presumably pay the taxes, insurance and maintenance as well), but what happens if you lose a job or suffer another financial setback?

All of you need to understand the risks involved, and your alternatives, before proceeding.

A sale of the home or a reverse mortgage may well prove to be a better choice. A reverse mortgage wouldn’t completely eliminate their home costs, but would substantially lower them — whoever winds up paying the bill.