Dear Liz: My wife and I have been married for 18 months. I am 67, she is 66. She is not eligible to receive Social Security due to her work history. Is she eligible to receive spousal benefits now, even though I plan to wait until age 70 to receive mine?
Answer: Your wife can’t start spousal benefits until you begin receiving your own benefit. In the past, someone in your position could file a Social Security application and then immediately suspend it. That triggered the spousal benefit while allowing the primary earner’s benefit to continue growing. Congress changed those rules in 2015, however.
Social Security
Q&A: Figuring taxes on Social Security
Dear Liz: How will our Social Security payments be affected by any passive income such as from rental properties? We have two properties, which add $3,000 monthly to our current income. I plan on retiring at 72, which is six years away. My husband may retire earlier due to health problems. We will have savings as well as my 401(k) when I retire. Although my retirement income “pencils out,” I don’t know exactly what to expect from Social Security. How should I calculate my net income in retirement?
Answer: You could pay income taxes on up to 85% of your Social Security benefits if you have other taxable income. Examples of taxable income include wages, interest, dividends, capital gains, rent, royalties, annuities, pension payments and distributions from retirement accounts other than Roths.
To determine how much of your benefit is taxable, you would first calculate your “combined income,” which consists of your adjusted gross income plus any nontaxable interest you receive plus half of your Social Security benefits. If you file a joint return, you typically would have to pay income tax on up to half of your benefits if your combined income fell between $32,000 and $44,000. If your combined income was more than $44,000, up to 85% of your benefits would be taxable.
Q&A: Guard your Social Security number
Dear Liz: You recently stated Social Security numbers were never intended to be used as a universal identifier. I’ve found that every place asking for my number has other means of identification and will ask for my mother’s maiden name or my place of birth when I tell them I don’t use my Social Security number for identification purposes. This also works for financial institutions that have a legitimate claim for having it.
Answer: To clarify, you probably had to disclose your Social Security number when you applied for accounts at your financial institutions. You also typically need to disclose it when you apply for credit, employment or government benefits.
But you don’t necessarily have to cough it up on demand to verify your identity or to do business with the many, many other companies and organizations that ask you for it without good reason to do so.
Q&A: Government pensions and Social Security
Dear Liz: Both of my parents have been retired for over 25 years. My father collects Social Security but my mother didn’t have enough quarters to collect. Both have Postal Service retirements. Can my mother file and get half of my father’s amount? Can they get back payments for 25 years?
Answer: The answer to both questions is “probably not.”
Your parents’ situation is complicated by the fact that the federal government changed its pension system for civilian employment in the 1980s. Prior to 1984, civilian employment was covered by the Civil Service Retirement System and workers did not pay into Social Security. Starting in January 1984, new hires were covered by the Federal Employee Retirement System and were required to pay into Social Security. Current hires had the option, but not the requirement, to join FERS, says William Meyer, founder of Social Security Solutions, a claiming strategy site.
Normally when someone receives a pension from a job that didn’t pay into Social Security, the government pension offset would reduce or eliminate any Social Security spousal benefit they might otherwise receive. However, there is an exception: The offset doesn’t apply to government workers who pay Social Security taxes for the last 60 months of employment. This exception applies to employees paying into FERS, Meyer says.
If your mother paid into FERS during the last 60 months of her employment at the Postal Service, she would be eligible for a spousal benefit on your father’s record, Meyer says. If your mother didn’t pay into FERS those last 60 months, the government pension offset would apply and would reduce or eliminate any spousal benefit.
That option should have been explored when your parents applied for their Postal Service retirement benefits, Meyer says. Social Security also would have looked into it as part of your father’s application process. If she’s not receiving a Social Security spousal benefit, she probably didn’t switch to FERS and did not pay into Social Security during the last 60 months of her employment at the Postal Service, Meyer says.
Q&A: How Social Security child benefits work
Dear Liz: I am drawing Social Security and my daughter just turned 18. Will she lose her Social Security and can I claim my wife in her place?
Answer: Child benefits, which is what your daughter receives, are designed to help the dependent minor children of Social Security recipients who are retired, disabled or deceased.
If your daughter is still a full-time high school student, then her child benefit can continue until she graduates or turns 19, whichever comes first. Otherwise the benefit typically ends at 18. (A child 18 and over with a disability can continue to get child benefits, as long as the disability started before age 22.)
Child benefits are only for the unmarried children of Social Security recipients, so obviously your wife doesn’t qualify. She may be eligible for her own Social Security benefit if she’s at least 62, or a spousal benefit based on your work record if that’s larger than her own benefit. AARP has a free Social Security claiming calculator that could help her sort through her options.
Q&A: Social Security is insurance
Dear Liz: My wife died in March 2020. I receive nothing from her Social Security (other than $255) and will receive only a portion of mine due to the windfall elimination provision. Is there anything I can do since I am receiving none of what she paid into Social Security and only a fraction of mine?
Answer: In a word, no. If you’re receiving a pension from a job that didn’t pay into Social Security, the government pension offset reduces any Social Security survivor or spousal benefit by two-thirds of the amount of your pension. If two-thirds of the amount of your pension is greater than your survivor benefit, you don’t get a survivor benefit.
Is that an outrage? Perhaps, if you think that Social Security should act like a retirement account. In reality, it’s insurance. (The formal name for Social Security is Old Age, Survivors and Disability Insurance.)
With a retirement account, what you take out usually bears some relationship to what you put in. With insurance, that’s not necessarily the case. You may take out more than you put in, less or nothing at all.
Many people pay Social Security taxes for decades but ultimately get more from a spousal or survivor benefit than from their own work record. Then there are those, like you, who have their retirement benefit reduced, or a survivor benefit eliminated, because they have a generous pension from a government job that didn’t pay into the Social Security system. In these cases, it can feel like the Social Security taxes paid — the “premiums,” if you will — have been wasted even if financially you’ve come out ahead.