Social Security benefits

Q&A: Social Security Benefits and Divorce

May 26, 2014 By Liz Weston

Dear Liz: I am 53 and divorced. My ex-husband died at the age of 49 and had contributed significantly to Social Security. I don’t plan to remarry. Would I be able to make any claim on his record as an ex-spouse when I reach age 62, or would he have had to reach retirement age for this to be possible?

Answer: If your marriage lasted at least 10 years, you could get the same benefits as a widow or widower. We’ll assume your ex was “fully insured” under Social Security, which means he paid enough into the system to qualify for benefits.

For the sake of brevity, we’ll also assume that you’re not disabled or caring for his minor or disabled child. (You could still qualify for benefits if any of these were true, but the rules would be somewhat different.)

Your survivors’ checks would be based on what he would have received had he survived until retirement (a sum known as his primary insurance amount). If he had been 62 or older when he died and had started receiving Social Security checks, your benefit would have been based on what he was actually receiving.

You can start survivors’ benefits as early as age 60 if you’re not disabled. If you start benefits before your own full retirement age, however, your benefits will be reduced because of the early start. Another thing to keep in mind is that if you don’t apply until age 62 or later and your own retirement benefits are larger than your widows’ benefit, you’ll get your own benefit instead.

On the other hand, you’re allowed to switch from his benefit to your own at any point between age 62 and age 70. It’s possible that your own benefit, left untouched to grow, eventually could exceed your survivors’ benefit. Obviously, this decision will involve crunching some numbers to see which approach makes the most sense. The Social Security Administration suggests you contact your local office or call (800) 772-1213 to learn how much you could receive on your ex’s work record, since that’s not information you can access online.

One other thing you should know: Since you’d be getting survivors’ rather than spousal benefits, you could remarry after you reach age 60 without endangering your checks. Those whose exes are still alive have to refrain from remarrying if they want their spousal benefits to continue.

Social Security statements make a comeback

April 25, 2014 By Liz Weston

Until a few years ago, Social Security sent annual statements to just about everybody who was still working to let them know what they could expect to receive in retirement, survivor and disability benefits (minus a 25% or so haircut if Congress never gets its act together to fix the system). Those statements got axed by budget cuts, but now Congress wants them resumed.

Here’s the scoop from Reuters columnist Mark Miller:

Starting this September, the Social Security Administration (SSA) will resume mailings at five-year intervals to workers who have not signed up to view their statements online, an agency spokesman told Reuters. The statements will be sent to workers at ages 25, 30, 35, 40, 45, 50, 55 and 60, he said, adding the agency would continue to promote use of the online statements.

We won’t be getting these in the Weston household, since we signed up for online accounts. (If you decide to go that route, note that some people have had trouble setting up their Social Security accounts because they have security freezes on their credit reports at Experian, the bureau that Social Security uses to verify identity. Investment News columnist Mary Beth Franklin says you’ll have to unfreeze your report, or visit a Social Security office in person with a government-issued ID to set up an online account.)

Social Security tends to be a pretty vague concept for most people until they start closing in on retirement age–or they’re unlikely enough to need its survivor or disability benefits. But the system contributes half or more of most people’s retirement income, so it’s worth knowing what you’ve been promised. Perhaps knowing might even inspire you to lean on your lawmakers to get the system’s problems fixed while there’s still time.

A Social Security “do over” you should consider

April 25, 2014 By Liz Weston

For years Social Security had a loophole that allowed people to hit “reset” on their benefits.

Those who had made the mistake of starting benefits early had the option of paying back all the money they’d received from Social Security. Then they could restart their checks at a higher rate that they would enjoy for the rest of their lives. For those who could afford it, this “do over” was similar to buying an annuity with a risk-free annual payout of 7% to 9%.

Social Security closed the loophole in 2010, and now you have only 12 months from the time you start benefits to pay back what you’ve received and hit the reset button. This limited do over could help those who make smaller mistakes, such as starting benefits right before their full retirement ages, but doesn’t represent the great investment deal that it used to.

But there’s another potential do over that people should know about, and it has to do with the “file and suspend” strategy.

This strategy is typically recommended for married couples. The first to reach full retirement age (currently 66, gradually increasing to 67) files for Social Security benefits but then immediately suspends the application. This move allows spouses to file for spousal benefits while leaving the older spouse’s benefit alone to grow.

If the younger spouses wait until their own full retirement age to begin spousal benefits, they’ll have the option of switching to their own benefit later, say at age 70 when it maxes out.

This strategy can add as much as $250,000 to the lifetime benefits a married couple can receive.

But the file-and-suspend strategy has other applications. It can be a kind of insurance policy for single people as well as married couples. Those who file and suspend can later change their mind and receive a lump-sum payout.

Let’s say you’re single and want to leave your benefit alone to continue growing at 8% a year until age 70. So you file and suspend at your full retirement age of 66. But if you should lose your job, run into financial problems or get a bad medical diagnosis, you can start your checks and request a lump-sum payout of your benefits back to the date you suspended.

Anyone who files-and-suspends so a spouse can get benefits could do the same thing, of course. For those who want to maximize their benefits but still give themselves a safety net in case of disaster, file and suspend can make a lot of sense.