March 22, 2021 By

Q&A: Social Security and spousal benefits

Dear Liz: My wife and I are both 66 and have not yet filed for Social Security. I don’t plan on filing until I am 70. Is my wife able to file for her own retirement benefit now, which is much lower than mine? And then when I file at 70 years, can she switch to the spousal benefit rate, without any type of penalty?

Answer: Yes and yes. This is one of the few instances in which people can still switch from one benefit to the other.

If you had already applied, your wife’s retirement benefit would be compared to her spousal benefit and she would get the larger of the two amounts. Since you haven’t applied, however, no spousal benefit is available. Your wife could receive her own benefit and then switch to the larger spousal amount once you apply at 70, when your own benefit has maxed out.

Also, as long as your wife has reached her full retirement age (66 years and two months, if she was born in 1955), she won’t face the earnings test if she continues to work. That test otherwise reduces benefits by $1 for each $2 earned over a certain amount, which in 2021 is $18,960.

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February 22, 2021 By

Q&A: Don’t rush to start collecting Social Security

Dear Liz: Having read your advice on Social Security numerous times, I’m having a heck of a time encouraging a friend who reached full retirement age last year to start collecting her benefits. She said her Social Security isn’t enough to live on and she needs to work two more years before collecting. She said if she waits to apply that it would increase her Social Security by $400 a month. I’ve informed her that she can both collect and continue to work without penalty because she has reached full retirement age. She also would still get an annual increase based on her earnings, in addition to the annual cost-of-living increase. She won’t let me know how much her Social Security would be now, and I haven’t asked, but I’ve told her this is extra money she could invest.

Answer: Are you sure you were reading this column?

Copious research shows that most people are better off waiting as long as possible to file for Social Security. Given life expectancies at 65, most who make it that far will live beyond the break-even age where the larger checks they’ll get will more than offset the smaller ones they pass up.

Waiting is particularly important for the higher earner in a couple, since that determines what the survivor gets to live on. Waiting is also important for single people, since they don’t have a partner’s income to help. Single women have an especially high risk of finishing their days in poverty, which means maximizing their Social Security is usually the right call.

Besides, there’s no risk-free investment that would guarantee her an 8% annual return. That’s what she’s getting by waiting to start her Social Security benefit (at least until age 70, when the benefit maxes out). She might be able to generate similar returns with stock market investments, but she also could lose her shirt.

Something else to consider: Benefits are based on our 35 highest-earning years. If she’s making more now than she did in one of those previous years, she could be boosting her benefit even more by continuing to work. People who took time off to raise families or who had a history of low wages or part-time work often see a bigger benefit by continuing to work as well as waiting to apply.

Filed Under: Q&A, Social Security Tagged With: ,
February 15, 2021 By

Q&A: A young mother died in a car accident. Can her widower get survivor benefits?

Dear Liz: My grandson’s wife, 22, was killed in a motor vehicle accident just after her birthday. My grandson, 26, was left with a 2-year-old and 9-month-old. Due to COVID-19, he was staying home with the children, and she was working at a fast-food restaurant. We thought there would be Social Security survivor benefits, but he has been denied because she did not have 10 quarters of payroll. Is there an appeal for this denial? She was too young to have the required quarters.

Answer: Given her age, the family could be out of luck if she only recently started working. But there is a special rule that applies if she was working at jobs that paid into Social Security for at least a year and a half before her death.

With survivor benefits, the length of time someone needs to work typically varies according to age. To generate survivor benefits, the number of years you need to work at a job that pays into Social Security is — at most — 10 years. Each quarter of work typically generates one credit, and no more than 40 credits are needed. The younger someone is when they die, the fewer credits are needed. People, however, generally need at least six credits, and only credits earned after someone turns 22 count toward the total.

But there’s an exception. Survivor benefits can be paid if the worker earned at least six credits in the three years before death. So if your grandson’s wife worked at least 18 months before her terribly premature death, survivor benefits could be paid to her minor children and to the surviving spouse who is caring for them, said William Meyer, chief executive of Social Security Solutions, a claiming strategy site.

The benefits would be based on her earnings history, so the amounts are unlikely to be substantial, Meyer noted. Still, something would be better than nothing.

All Social Security decisions can be appealed. If your grandson already filed an application and was denied, the denial letter would explain his appeal rights, Meyer said. If he just received a verbal denial, he should go ahead and file a formal application to start the process. If his wife had earnings that might not yet have been reported, he can provide her last pay stubs or W-2 forms when filing the application.

“With there being a concern about her having enough qualifying quarters, as well as low earnings, that could be pretty important,” Meyer said.

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February 8, 2021 By

Q&A: Age minimum for survivor benefits

Dear Liz: I am 53 and Social Security is giving me a hold time for my widow support. What should I do?

Answer: The only thing you probably can do is wait.

Survivor benefits are normally only available once you turn 60. You can start as early as age 50 if you are disabled or at any age if you are caring for the deceased worker’s minor children.

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February 1, 2021 By

Q&A: More about spousal benefits

Dear Liz: You recently wrote that a wife could apply for Social Security at 62 and then switch later to her spousal benefit. I do not believe this is accurate. Once the wife starts drawing, she is committed.

Answer: Typically, that’s true. When someone applies for Social Security, their retirement benefit is compared with their potential spousal benefit and they would get the larger of the two amounts. If the spousal benefit is larger, they would technically get their own benefit plus a supplemental amount.

Because they had already started getting their own benefit either way, they couldn’t switch later — there’s nothing else to switch to. (In the past, someone could start a spousal benefit and leave their own benefit to grow, but that’s no longer an option.)

For a spousal benefit to be available, however, the husband must have already started his retirement benefit. In this case, he would not have done so. That means the only benefit the wife could qualify for when she applies is her own. Once he applies at age 70, a spousal benefit would be triggered. If that amount is larger than what she was getting, she would get a supplement on top of her retirement benefit, as described above.

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January 25, 2021 By

Q&A: Survivor vs. retirement benefits

Dear Liz: I was 21 and my husband was 69 when we got married. He died in 1992 after 13 years of marriage. Our young son and I received survivor benefits for years. I got remarried in 2000 and divorced in 2008. When I reach my full retirement age of 66 years and 8 months, could I still claim survivor benefits from my first husband?

Answer: Yes, although you may want to start them sooner.

If your second marriage had lasted, you wouldn’t have been eligible for survivor benefits based on your first husband’s earnings record. Widows and widowers who remarry before age 60 aren’t eligible for survivor benefits.

Since that marriage ended, though, you were eligible to begin benefits at age 60. You are also free to remarry at 60 or later without losing those benefits.

Starting before your full retirement age for survivor benefits, however, means your check would be reduced and also subject to the earnings test, which reduces your benefit by $1 for every $2 you earn over a certain amount ($18,960 in 2021).

As mentioned in a previous column, your full retirement age for survivor benefits is different from your full retirement age for retirement benefits. Since you were born in 1958, your full retirement age for survivor benefits is four months earlier, or 66 years and 4 months.

In most cases, starting a Social Security benefit early locks you into a smaller check permanently. With survivor benefits, though, you also have the option of switching to your own retirement benefit later, if it’s larger. The ability to switch benefits is severely limited with Social Security, but survivor benefits remain the exception.

Being eligible for survivor benefits complicates claiming decisions, so consider using a more sophisticated claiming calculator such as Maximize My Social Security or Social Security Solutions to determine how best to file.

Filed Under: Q&A, Retirement, Social Security Tagged With: , , ,
January 11, 2021 By

Q&A: For Social Security benefits, playing a waiting game really pays off

Dear Liz: My wife and I are both 63. She recently applied for Social Security. I will apply for mine when I am 70, at which time she will apply for a spousal payment, which will be half of mine. Last night as I was in bed I thought, “What if I die before 70?” Can she still wait until what would be my 70th year to collect my maximum benefit?

Answer: Your wife will get a larger survivor benefit because you delayed. If you die after she reaches 66 years and two months, however, she won’t get a larger check by waiting.

Social Security rules can be mind-numbingly complicated, and they’re different for different types of benefits, so this will take some explaining.

The three types of benefits that matter for this discussion are retirement benefits, which are based on your own earnings record; spousal benefits, which are based on a spouse’s earnings record while both partners are alive; and survivor benefits, which are based on a spouse’s earnings record after his or her death.

These benefits may be reduced if you start them before your “full retirement age,” which is different for survivor benefits than for retirement and spousal benefits, said William Meyer, founder of Social Security Solutions, a claiming-strategies site.

If your wife was born in 1957, then her full retirement age for retirement or spousal benefits is 66 years and 6 months. For survivor benefits, it’s 66 years and 2 months.

The full retirement age for retirement and spousal benefits is 66 for those born between 1943 and 1954. People born between 1955 and 1959 have full retirement ages ranging from 66 and 2 months to 66 and 10 months. Those born in 1960 and later have a full retirement age for retirement benefits of 67.

With survivor benefits, the schedule is pushed back two years. Survivors born between 1945 and 1956 have a full retirement age of 66. Survivors born from 1957 to 1961 have full retirement ages ranging from 66 and 2 months to 66 and 10 months. Survivors born in 1962 and later have full retirement ages of 67.

The reason you’re waiting to start retirement benefits until 70 is probably because you know your benefit will increase 8% for each year you delay between your own full retirement age and 70, when retirement benefits max out. The 8% per year increases are called delayed retirement credits. As you likely know, delaying is particularly important for the higher earner in a couple because that benefit determines what the survivor gets.

If you start retirement benefits before your full retirement age, your wife’s survivor benefit will be based on what you would have gotten at your full retirement age. If you delay your retirement benefits beyond your full retirement age, your wife’s survivor benefit will reflect any delayed retirement credits you have earned.

Your retirement benefit doesn’t earn delayed retirement credits after you’re dead, however. And your wife won’t earn delayed retirement credits on her survivor benefit. Once she reaches her full retirement age for survivor benefits, there’s no point in further delaying her switch from her retirement benefit to her survivor benefit.

Delayed retirement credits also don’t apply to spousal benefits. Her maximum spousal benefit would be half of your benefit amount as of your full retirement age. Because she started her own benefit early, however, her spousal benefit would be reduced.

The penalties for starting early are significant enough that it’s usually best to wait, and your wife may still have a “do over” option. If it’s been less than 12 months since she applied for benefits, she can repay any benefits she received and withdraw her application. That will undo her previous claiming decision and allow her benefit to keep growing. The claiming calculators and experts at Social Security Solutions and Maximize My Social Security can help you determine if that might be the best course.

Liz Weston, Certified Financial Planner, is a personal finance columnist for NerdWallet. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.

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December 28, 2020 By

Q&A: The perils of procrastination can be huge where finances are concerned

Dear Liz: My husband was killed in 2016 and was self-employed for the last three years of his life. I hadn’t gotten around to filing his taxes until earlier this year in June. At first the Social Security rep told me we were approved for survivor benefits but within the hour changed her decision. She said that since it’s been more than three years, the IRS won’t report his credits to Social Security and that is what ultimately disqualifies my children and me. I’m so confused and feel like my stomach just dropped to the floor.

Answer: Understandably. This appears to be one of those awful cases where putting something off has profound, irreversible consequences.

Survivor benefits are monthly checks paid to a worker’s minor children, typically until they turn 18. Surviving spouses normally can start benefits at age 60, but they can start at any age if they’re caring for the worker’s minor children. In that case, the caretaking spouse qualifies for benefits until the youngest child turns 16.

Limits vary, but what a family can receive is generally equal to between 150% and 180% of the worker’s basic benefit. The average survivor benefit for children is more than $800 a month, and the average for a caretaking mother or father is over $900 a month.

No worker needs more than 40 credits, which requires 10 years of work, to qualify a family for survivor benefits. The number of credits varies by age, so younger people need fewer credits.

Even if your husband didn’t have the required number of credits for his age, survivor benefits could have been paid if he had worked for at least 18 months in the previous three years.

But there is a deadline for self-employed taxpayers to have their incomes counted toward Social Security credits, which they do by filing their federal tax returns. The deadline is three years, three months and 15 days after the end of the calendar year in which the income is earned, said economist and Social Security expert Laurence Kotlikoff of MaximizeMySocialSecurity.com.

The deadline for reporting your husband’s 2016 income passed in March, while the deadlines for his 2014 and 2015 income passed in March 2018 and March 2019, respectively.

Appeal the decision because it’s possible that your husband earned enough other credits to qualify your family for benefits even without his last few years of work. But steel yourself for the likelihood that you’ve lost thousands and perhaps tens of thousands of dollars of potential benefits.

Filed Under: Estate planning, Q&A, Social Security Tagged With: , ,
December 7, 2020 By

Q&A: Her dead ex’s kids can’t dictate benefits

Dear Liz: My husband and I were living apart but not legally separated when he passed away. He was receiving disability benefits. His children, who are grown, tell me I am not eligible for widow or survivor benefits and that only they can collect his benefits. I am disabled myself and 51. Do their claims hold any weight? Could he have removed me as a recipient?

Answer: No and no. The children are wrong, not just about your eligibility for benefits but also about their own. Social Security survivor benefits typically aren’t available to children over 18, but they are available to widows and widowers starting at age 60, or starting at 50 if the spouse is disabled.

As long as you weren’t divorced, you would be eligible for survivor benefits. And if you had divorced, you could still be eligible for survivor benefits if the marriage lasted at least 10 years.

You can call the Social Security toll-free number at (800) 772-1213 for more information.

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November 16, 2020 By

Q&A: A young widow seeks help with Social Security survivor benefits

Dear Liz: My husband died at 30, making me a widow at 29. I did receive Social Security survivor benefits for our underage children, but what, if anything, am I entitled to as his wife? At the time of his death, we were living separately, although we were still legally married.

Answer: The earliest a widow or widower can get survivor benefits is typically age 60, unless they are disabled, when survivor benefits can begin at 50. Starting benefits before their own full retirement age of 66 to 67 means accepting a reduced payment, but widows and widowers have the option of switching to their own retirement benefit later. (Retirement benefits begin at a reduced amount at age 62 and reach their maximum at age 70.)

Like other Social Security benefits, survivor benefits also are subject to the earnings test if you start them before full retirement age. The earnings test reduces your benefit by $1 for every $2 you earn over a certain amount, which in 2020 is $18,240.

You mentioned receiving survivor benefits for your children, but you probably also received benefits then. A spouse caring for the children of a deceased worker is entitled to survivor benefits until the youngest of those children turns 16. (A child’s survivor benefits can continue until age 18, or 19 if the child is still in high school, or indefinitely if they are disabled and the disability began before age 22.) Each family member can receive up to 75% of the deceased worker’s benefit, but there’s a maximum any household can receive based on one worker’s earnings record. The limit varies but is generally 150% to 180% of the worker’s benefit.

If you had been divorced rather than separated when he died, you would still have been entitled to survivor benefits as the caretaker of underage children, no matter how long the marriage lasted. You would only receive regular survivor benefits at 60, however, if your marriage had lasted at least 10 years.

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