spousal benefits

All my exes and Social Security taxes: a quiz

July 17, 2013 By Liz Weston

The questions I get about Social Security have made it clear how incredibly complicated this benefits system can be. So here’s a little story to illustrate one important facet of Social Security: spousal benefits.

Jack was a charming guy—maybe too charming. He enjoyed the ladies and the ladies enjoyed him, at least until they discovered they weren’t the only ladies in his life. This led to more than a little drama, and a few divorces.

Jack first married at 20, to Mary. Their marriage lasted 10 years and produced two children before breaking up. Mary went on to marry again and had a happy 30 years until her second husband died.

Jack’s second marriage was to Anne. That lasted five years. Anne never remarried.

After a few years playing the field, Jack married a third time, to Jo Beth. They separated after nine years and divorced a couple years later. Jo Beth remarried and had kids with her second husband. This marriage also ended in divorce after thirteen years.

For the past decade, Jack has been happily married to Dianne. Both are 62, but Jack has decided not to retire for a few years (all those divorces took their financial toll).

Now for the question: which of Jack’s wives qualify for Social Security spousal benefits based on Jack’s earnings record?

The answer: Mary and Jo Beth. Both were married to Jack for at least 10 years, and neither is currently married. Mary and Jo Beth also would be eligible for benefits based on their second husbands’ records (Mary as a survivor, Jo Beth as a divorced spouse) but they wouldn’t be able to claim more than one benefit. They would typically get whatever benefit is largest: the one based on Jack’s earning record, the one based on the second spouse’s earnings record, or the one based on her own earnings record.

Why wouldn’t Dianne qualify for spousal benefits, since she’s the current spouse? Because Jack hasn’t applied for his own benefits. That doesn’t matter to the former wives, since the ex’s cooperation isn’t required for them to start getting spousal benefits. The ex merely has to be old enough to qualify for retirement benefits (which you typically are at age 62.). If you’re currently married, though, you can’t start spousal benefits unless your “earner” has applied.

Jack could allow Dianne to start benefits with a technique called “file and suspend,” in which he would file for benefits and then immediately suspend his application. That would allow his own benefit to continue to grow while allowing her to get checks based on his earnings record.

So conceivably, three women and Jack himself eventually could be earning benefits based solely on Jack’s earnings records. The amounts the women get wouldn’t affect or reduce each other’s benefit, or his.

Most people can’t squeeze quite that much mileage out of the Social Security taxes they pay. But since spousal benefits could result in a bigger check than you might get on your own, they’re worth knowing about.

“File and suspend” can boost Social Security benefits

October 15, 2012 By Liz Weston

Dear Liz: I am 63 and not nearly ready to collect Social Security. In fact I probably won’t be ready for quite a few years. My husband, who is 64, wants to collect on my Social Security as it is higher than his. Is there a way for him to do this that would not hurt me? I have called the Social Security office five times and have received five different answers. My husband went into the local office and they told him to have me apply for benefits and then after a short time send them a letter rescinding my application. That would allow him to collect on my work record and wouldn’t hurt my eventual benefit. I am not comfortable doing this. What do you suggest?

Answer: At your current age, you must start your own benefits for your husband to get a check based on your work record. The so-called spousal benefit is basically half your retirement benefit, and it will be somewhat reduced because your husband hasn’t achieved “full retirement age” (which is 66 for both of you). When he applies for spousal benefits, the Social Security Administration will compare that benefit with the one based on his own record and give him the larger of the two.

Starting benefits now, however, would lock you into a lower payment for the rest of your life. Your checks could be further reduced based on your earnings, if you continue to work.

If you can wait three years, you have another option called “file and suspend” that would allow your husband to collect a spousal benefit without reducing your eventual checks. Once you reach your full retirement age of 66, you can go to your local office to file for your benefit and then immediately suspend your application. That would allow your husband to collect a spousal benefit while your own uncollected benefit could continue to grow.

Another advantage for your hubby if you wait: He will have achieved his full retirement age when he starts receiving spousal benefits, so he would be allowed to switch to his own benefit later, if it’s larger. If he starts receiving spousal benefits before his full retirement age, he loses the option to switch.

You can learn more about the file-and-suspend strategy on the Social Security site at www.ssa.gov/retire2/yourspouse.htm. You may want to bring a printout of that page with you to the Social Security office. File and suspend is not an obscure strategy, but it doesn’t appear that your local office is quite aware of all the details.

Delay collecting Social Security for a bigger benefit

July 23, 2012 By Liz Weston

Dear Liz: My spouse started collecting Social Security in 2002 at age 63. I am 59, and not working, so my future benefits are unlikely to increase very much, even if I wait until age 70. If he dies before I do, will I get same amount he would be collecting at that time? If I collect Social Security at 62, would Social Security combine our records to calculate my benefit? In other words, should I try to wait or just start collecting at 62?

Answer: Your presumption that your benefit wouldn’t increase much by waiting is incorrect. Even if you aren’t working now, your benefit amount will grow the longer you can wait to apply. That’s true whether you ultimately get benefits based on your own work record or your husband’s.

When you apply, the Social Security Administration will compare your earned benefit with your spousal benefit and give you the larger of the two. Your spousal benefit starts at half of what your husband’s benefit would have been at full retirement age. That amount is reduced significantly if you apply for benefits before your own full retirement age (which is 66 for you, although it rises to 67 for anyone born after 1959).

Also, if you apply for spousal benefits before your full retirement age, you wouldn’t have the option of switching to your own benefit later, even if your benefit grows to a larger amount than what you’re receiving based on your husband’s record.

When your husband dies, you can switch to survivor’s benefits, which equal what he was receiving. Since he started benefits early, however, his checks have been permanently reduced to reflect that early retirement. In other words, if he had waited longer to retire, you would have been entitled to a larger survivor’s benefit.

The Social Security system is designed to reward people for delaying retirement, which is why it often makes sense to do so.