Ask Liz Weston

Get smart with your money

Social Security

Q&A: About the ex’s Social Security

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Dear Liz: I’ve been divorced since 2004. My ex received half of all my pension funds and lives off that and his Social Security. I have not yet drawn Social Security, but I am retired. Am I eligible to receive part of his Social Security? How does that work?

Answer: Yes, if your marriage lasted at least 10 years. If you were born before Jan. 2, 1954, you also have the option of filing a “restricted application” for divorced spousal benefits while allowing your own benefit to continue growing.

Divorced spousal benefits, like regular spousal benefits, allow you to get an amount of up to half your ex’s benefit. The amount would be reduced if you start before your own full retirement age, which is currently 66 and rising to 67 for those born in 1960 and later. If you start at age 62, for example, you would get about one-third of his benefit, rather than half. (Your claim doesn’t take money away from him or any of his current or former spouses, in case you were concerned.)

Regular spousal benefits require that the primary worker has started his or her own retirement benefit. Divorced spousal benefits don’t have that requirement: You both just need to be at least 62. Also, the divorced benefit is based on the primary earner’s benefit at his or her full retirement age. With regular spousal benefits, the amount is typically based on what the primary earner actually receives, which could be less if the primary earner started benefits early.

If you were born on or after Jan. 2, 1954, you can’t file a restricted application. Instead, you’ll be deemed to be applying for both your own benefit and the divorced spousal benefit, and given the larger of the two amounts. You can’t switch to your own benefit later.

If your ex should die before you do, you also would be eligible for a divorced survivor benefit that is up to 100% of his. That has the unfortunate effect of making your ex worth more to you dead than alive.

Q&A: Social Security minors’ benefits

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Dear Liz: One thing I rarely see mentioned in discussions of when to take Social Security is the benefit for minors who are still in school. I took my benefit at 62. Social Security called me and told me that my daughter was eligible as well. We collected over $60,000 by the time she graduated high school.

Answer: Child benefits can indeed change the math of Social Security claiming strategies.

To get a child benefit, the parent must be receiving Social Security retirement or disability benefits. The child must be unmarried and benefits stop at age 18, unless she is still in high school — in which case checks stop at graduation or two months after she turns 19, whichever comes first. Child benefits are available for those 18 or older with a disability that began before age 22.

The child can receive up to half the parent’s benefit, although both benefits are subject to the earnings test if the parent started Social Security before his or her full retirement age. The earnings test reduces checks by $1 for every $2 the parent earns over a certain amount, which in 2019 was $17,640. Also, there’s a limit to how much a family can get based on one person’s work record. The family limit is 150% to 180% of the parent’s full benefit amount.

Many free Social Security claiming calculators don’t include child benefits as one of the variables they include, so if your child would be eligible it can make sense to pay $40 for a customized strategy from a more sophisticated calculator, such as the one at Maximize My Social Security.

Q&A: Don’t fall for Social Security phone scams

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Dear Liz: I have just received a phone call advising me that my Social Security number “is about to be suspended” and that for help, I should call a certain number. Is this legitimate?

Answer: No. Your Social Security number can’t be locked or suspended or any of the other dire-sounding consequences these robo-callers threaten. If you did call the number, the scam artist on the other end would try to trick you into revealing personal information or convince you to wire money or buy gift cards, which they can quickly exchange (or “wash”) to erase their trails. People lost $10 million to these Social Security scams last year, according to the Federal Trade Commission.

Q&A: Working after retirement

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Dear Liz: My profession was one of the hardest hit by the Great Recession. I retired by default when I turned 62 in 2012. My Social Security payment was reduced because I started it early. I’ve found it necessary to return to the workforce part time to move beyond just surviving and have some discretionary funds. What does my employment mean for future Social Security payments?

Answer: You’re past your “full retirement age” of 66, so you no longer face the earnings test that can reduce your Social Security benefit by $1 for every $2 you earn over a certain limit ($17,640 in 2019).

Sometimes returning to work — or continuing to work after you start receiving Social Security — can increase your benefit if you had some low- or no-wage years in your work history. Social Security uses your 35 highest-earning years to calculate your checks. The amounts are adjusted to reflect changes in average wages, which is somewhat similar to an inflation adjustment. If you should earn more this year than you did in one of those previous years, your current earnings would replace that year’s earnings in the calculation and could increase your check.

Another way to boost your benefit if you’ve reached full retirement age but are not yet 70 is to suspend it. That means going without checks for a while, but your benefit earns delayed retirement credits that can increase the amount by 2/3 of 1% each month, or 8% a year. It may not be practical for you to do this: You probably need the money, and you could be too close to 70 to get much benefit. But perhaps that’s not the case for someone else reading this.

Q&A: Bad Social Security math

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Dear Liz: Regarding when to begin receiving Social Security payments: I would think that people should begin taking payments as early as possible if they can invest it rather than spend it, as a lot of money is “left on the table” between ages, say, 62 and 70. Your thoughts?

Answer: That argument was more compelling a few decades ago when you could get a 7% or 8% return on an FDIC-insured certificate of deposit. These days, there’s no investment that offers a guaranteed return as high as what you’d get from delaying the start of Social Security.

The “take it early and invest” approach also ignores the longevity insurance aspect of Social Security benefits. Most people face a real risk of outliving their savings, which could leave them relying on Social Security for most if not all of their income. Maximizing Social Security benefits by delaying your application can help you live more comfortably, should that happen.

Also, starting early can cause harm to whichever spouse survives the other. When one spouse dies, one of the two Social Security checks the couple was receiving will stop. The remaining spouse will get only the larger of the two checks, which is known as a survivor’s benefit. Maximizing that benefit can help ease the shock of going from two checks to one, so financial planners generally recommend that the higher earner in a couple delay his or her application if possible.

Q&A: Inflation and Social Security

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Dear Liz: Every time someone asks a question about when to start taking Social Security, all you financial advisers make your calculations based on the 7% to 8% annual increase you get by delaying between ages 62 and 70. What you never mention is that once you start getting Social Security, you also start getting the cost of living annual adjustments. I started at 63 and my monthly check has already gone up 5% and it’s compounded. In this era of higher inflation, that pushes out the break-even point into an age in the late eighties. You need to add that into your advice.

Answer: Surveys have shown that most people are happy with their decision to start Social Security, even when they started it early. Perhaps they don’t know what they’re missing.

The researchers who have studied Social Security claiming strategies have factored inflation into the mix, as well as longevity, investment returns and taxes (there’s something known as the “tax torpedo,” which can jack up marginal tax rates for middle-income Social Security recipients). The assumptions can differ, but the results don’t: The majority of people benefit from delaying. In today’s low-interest-rate environment, many researchers say the vast majority are better off.

Another factor the researchers consider — and that many early starters don’t — is what happens to the surviving spouse. When one member of a married couple dies, one of their two Social Security checks goes away and the survivor has to get by on a single check, which will be the larger of the two. That’s why it’s so important that the higher earner in a couple try to delay as long as possible, because it will boost the check for the person left behind.

That doesn’t mean single people should start early, however. Single people tend to have less savings and wealth than married people; they’re more likely to be poor than married couples, and single women have a higher poverty rate than single men. If you wind up getting most if not all your income from Social Security, you’ll want that check to be as large as possible.

As for your phrase, “this era of higher inflation” — yes, the 2.8% cost-of-living boost was higher than the 2% increase of the prior year. The year before that, the inflation adjustment was close to zero, and it was actually zero in 2010, 2011 and 2016. Annual adjustments over the last 20 years have averaged just a little over 2%. That’s not a lot to get excited about.