Ask Larry: Could Marriage, Then Divorce Be Worth $60k?


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Larry Kotlikoff’s Social Security original 34 “secrets”, his additional secrets, his Social Security “mistakes” and his Social Security gotchas have prompted so many of you to write in that we now feature “Ask Larry” every Monday. We are determined to continue it until the queries stop or we run through the particular problems of all 78 million Baby Boomers, whichever comes first. Kotlikoff’s state-of-the-art retirement software is available here, for free, in its “basic” version

Rip Rupinski: I was going to retire at 66, but am finding I can’t/won’t retire until I have no outstanding bills. I will be living solely on Social Security at that point.

Larry Kotlikoff: I don’t mean to sound like a broken record in these answers, but try to wait until you are 70 to take your Social Security retirement benefit. If you are married, however, there are different strategies to consider that can be highly beneficial depending on your precise situation.

Lina Justice: I am 62 and started getting Social Security, including spousal benefits, in August. My husband was on disability but is now 66 so he is now on retirement Social Security. I receive $334 from my benefits and $117 from his, while he gets $1,241. Now that he is at full retirement, will I get a higher percentage?

Larry Kotlikoff: No, you won’t get a higher benefit. Social Security treated your husband’s disability benefit as his retirement benefit for purposes of calculating your spousal benefit. You might do much better by paying back what you received and waiting until full retirement age to collect your spousal benefit, which should be $620 per month, adjusted for future inflation. Yes, you’ll give up four years of benefits, but you’ll have a much higher benefit when you hit 100! Think of it as an insurance policy, which Social Security is. When you wait to take higher benefits, the money you didn’t take represents a premium you in effect “pay” in order to get a higher payout — an “annuity” — forever after.

Mary Quick: I started collecting Social Security this year but because I am still working, I had to wait. My question is, how would I find out what my spousal amount would be? I was married 26 years and have been divorced since 1996. Can I take his instead of mine now, or should I have taken his first and then waited to take mine?

Larry: If you are below full retirement age, you may want to consider repaying what you received so far. If you do this within a year of starting your retirement benefit, they will treat you as if you never applied. Then, at full retirement age, you can apply just for a spousal benefit based on your ex’s earnings record and wait until 70 to collect your largest possible retirement benefit. You’ll need to run yourself through our software (note, it costs $40) at Maximize My Social Security to see for sure what’s best.

Margaret Darr: My husband passed away at 59 (he would have been 62 this past October). I am 53 and unemployed. When can I start receiving his Social Security benefits — even if reduced?

Larry Kotlikoff: I’m going to presume you don’t have children. In that case, the earliest you can collect survivor benefits is at age 60. Age 60 may, however, not be the best age to start these benefits because they will be reduced substantially — by 28.5 percent — compared with waiting until full retirement age to collect. Also, you can wait until age 70 to start collecting your own retirement benefit, which will then be at its highest possible value. What strategy is best depends on your specific situation, including your departed spouse’s earnings record.

Kimberley: I am 42. My husband passed last November and my young children and I collect his Social Security. I was recently told that Social Security will pay for their college education because they lost a parent. Is this true? What other benefits am I unaware of?

Larry: I do not believe children who are college-age can collect Social Security benefits. To quote Social Security: Your unmarried children who are under 18 (up to age 19 if attending elementary or secondary school full time) can be eligible to receive Social Security benefits when you die. And your child can get benefits at any age if he or she was disabled before age 22 and remains disabled.

Geraldine Connors-Lynch: I will be reaching full retirement age, 66, soon. Since August, I have been trying to figure out how my benefit will be affected if I start to collect at 66 and continue working until 70. I have visited a Social Security office and used their online calculator but this only seems to tell me my benefit if I stop working and start to collect versus continuing to work and delay collection. I think I might benefit by starting to collect benefits at age 66 and continuing to work. Do you know of any way to calculate this?

Larry Kotlikoff: There is no earnings test after you reach your full retirement age. So you should not worry about working and losing any benefits. But if you are single, you may do much better to wait until 70 to start collecting benefits that will be roughly 32 percent higher. And if you are married, you should also apply now just for your spousal benefit, assuming your spouse is either collecting a retirement benefit or has filed for one and suspended its collection.

John Bellio: I am 52, my wife is 51 and we are both working. While we still have a ways until our retirement, we are thinking about it. Given that much (or little) could change over 10 to 15 years, at what point do we seriously sit down to make our decisions?

Larry: Now. Our free software program, ESPlanner Basic, is a start. Our comprehensive software program — ESPlannerPLUS, which we market for $249 here — can help you with your entire planning issues, including Social Security. But you need to do lifetime financial planning. You need to do it immediately, not when it’s too late. And you need to consider all future issues, including Social Security.

John: I am 55 and my partner is 56. We have kids and own homes together, but have never married. Can you briefly explain the advantages/disadvantages of handling our Social Security as singles versus married? With approximately 10 years remaining before my partner’s full retirement age, is this decision at a critical point if we were to become eligible for spousal benefits? It would be very informative to see an actual example of how it might calculate out as single versus married for each of us.

Larry Kotlikoff: If you get and stay married, then one of you can collect a free spousal benefit at full retirement age. If you get married and then divorce after 10 years, you can both collect free spousal benefits. Then when you both reach 70, you can remarry and not be penalized. This sounds wacky, but I believe it’s all perfectly legit and may net you up to an extra $60,000. For actual examples, you can run our program, which costs $40, at Maximize My Social Security. Also, look for some more columns from me in December on these issues.

Mae: How long after I file my income tax next year, showing that I have 40 credits, will I have to wait before I can start drawing?

Larry Kotlikoff: The earliest date at which you can be eligible to collect retirement benefits is after you have been age 62 for a full month.

Mary M. Zashin: I am 70. I have received Social Security since I was 65 (more like 66). When I applied, I inquired about taking benefits on my ex-husband’s earnings instead of mine. My inquiry was dismissed. I have since learned that I could have taken half of my ex-husband’s benefit and then claimed my own benefit at age 70, but that the benefit from my ex would be only half of his benefit. I would like to see if I can somehow “go back,” claim under my ex, and now that I am 70 claim for myself at the higher rate. Is there any way for me to ask for an appeal?

Larry Kotlikoff: I doubt it. And it’s terrible that they have made the system so complex that people who know the rules (and very few do) can get much more from it than those who don’t. That’s why I write this column. But it can’t hurt to pose the question.

Carol Vanderwalker: I am still confused. My husband and I are both 59; he is six months younger. I receive Social Security disability. He is no longer able to work, but he will probably have a hard time collecting SSD. He wants to collect benefits as soon as possible, at 62. He will probably outlive me. What am I entitled to collect and when? His estimate at 62 is $1,350. I currently receive $1,181 with a 1.7 percent COLA due in January. Will I revert to my regular Social Security earnings at 66? Am I able to get any spousal pay without losing any for me or him?

Larry Kotlikoff: If you continue to take disability between now and full retirement age, you will be able to collect a spousal benefit on your husband’s record when he starts to collect his retirement benefit. But if he starts to collect after you reach 62, I believe you can wait until full retirement age before applying for your spousal benefit. At that point you can collect it with no reduction. Furthermore, you can suspend your own benefit until age 70 (but make sure to pay your Medicare Part B premiums out of pocket and keep the checks so they credit you for higher retirement benefits at age 70). Whether these moves will help or help much depends on your particular circumstances.

Brian Mudd: I am 66, still working and planning on retiring at 72 to collect my maximum Social Security benefit. I have paid in the maximum throughout all my employment. My wife is 60. Should I wait until age 72 before collecting her spousal benefit because it will be larger, or start it now? Will it be lower if we start it now?

Larry Kotlikoff: No reason to wait until 72. You should start taking your benefit at 70. It won’t be any higher at 72. You’ll just lose two years of benefits for no reason! Once your wife reaches age 62, she can apply for her retirement benefit and you can apply just for a spousal benefit. Then when your wife reaches full retirement age, she can suspend her own retirement benefit and apply for a spousal benefit on your account. At 70 she can restart her retirement benefit at a 32 percent larger value. Whether this is what our software program would actually recommend is an open question. Everything depends on the particulars of your case. So my guess of what’s best is just a guess.

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This entry is cross-posted on the Rundown– NewsHour’s blog of news and insight.