MAKING SENSE -- October 1, 2012 at 2:00 PM ET
Larry Answers Social Security Queries on the Divorced, Disabled, Deceased
Creative Commons photo courtesy flickr user 26354.
Larry Kotlikoff's Social Security "secrets" and his answers to your questions (here, here and here) 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.
Alyson Kelly: My husband just started collecting Social Security benefits. He is 63 and a half and we have a 9 year old son who also collects now. I heard there are other benefits that we might be able to get that Social Security will not tell us about unless we find out what they are by ourselves? Is this true? If so, how do we find out?
Larry Kotlikoff: You should be able to collect a spousal benefit because you have a child of a retiree in your care. That will continue through the child's 16th birthday. So go check with the Social Security office about your spousal benefit. Of course, if you are working and earning enough money, all your spousal benefits may be eliminated by the earnings test.
Ron: I am 38 and receive Social Security Disability for a mental illness. If I get married, will I still get my benefit? Will it increase if my wife has kids? If I go to work and so does she, how much can we make a month before we lose the benefit?
Larry Kotlikoff: I'm not expert on DI benefits, but your check won't stop because you get married. Your children should be eligible to collect benefits.
Elaine Habernig: My husband and I are both retired. He turns 62 in October and is applying for his Social Security benefits. I will turn 62 in June. I was told that when I turn 62 I can apply for spousal benefits on my husband's Social Security and then collect on mine when I turn 66. Since I would be waiting to collect on my Social Security, is it true that I would receive the full benefit rather than the penalty for collecting early?
Larry Kotlikoff: No, it's not true. Who told you? If your husband waits to collect his retirement benefit until after you apply for yours, you can collect your reduced retirement benefit and wait until full retirement age to collect your spousal benefit. Furthermore, at full retirement age, you can suspend the collection of your own retirement benefit and start it up again at 70 at a 32 percent higher level. But this may not be the best thing to do.
Sorry for the complexity, but this is why I sit here, answering questions like yours. The problem is that if you apply for your spousal benefit after your husband starts collecting his retirement benefit; you'll be deemed to be applying for your retirement benefits as well and will NOT be able to wait until 66 to collect an unreduced retirement benefit.
You have four significantly different options to consider, it seems. One of them will generate the highest amount of benefits over your future lifetimes, measured in present value. But I'd have to know your respective earnings to do the math and if I did that for every email, it would eliminate my tennis time with Paul, and every other activity in my life, including sleep. That's why I occasionally rant about the system's Byzantine structure and devised my own software. But since it costs me money to develop and needs to be maintained and updated, it would cost you money as well.
Susan Howard: My husband passed away last year. The Social Security office said I can apply for survivor benefits at 60 (I am now 57). Should I wait? Is there a penalty for applying at 60? He was on disability when he passed. How do I know how much I am entitled to?
Larry Kotlikoff: You may want to wait or not depending on your own earnings history. If you take your survivor benefit before full retirement age (66 and 2 months if you were born in 1955), there is, indeed, a penalty. If you take your survivor benefits at 60, for example, they will be 30 percent lower forever than if you wait until full retirement age. Your best strategy may be to take survivor benefits early and retirement benefits late or the other way around. Your survivor benefit, BEFORE IT IS REDUCED if you take it early, will, I believe, be the disability benefit your husband was collecting adjusted for the ensuing inflation.
Geri Douglas: My ex-husband died at age 50, and I was able to collect widows' Social Security benefits at 62. The Social Security office told me I could draw on my account at age 70 and get maximum benefits with no reduction for drawing his at 62. Is that correct?
Larry Kotlikoff: This, as with other things people in the Social Security office sometimes say, is only part of the story. You can, indeed, wait until 70 to collect your own retirement benefit. If you do so, it will start at its largest possible value and will not be reduced at all due to the fact that you started survivor benefits prior to full retirement age. But it may be that at 70, your total check will not increase because your survivor benefit exceeds your own retirement benefit. In this case, Social Security will describe your total check as consisting of your own retirement benefit plus a redefined survivor benefit equal to your total unchanged check less your retirement benefit. If this turns out to be the case, it might have been better to take your retirement benefit early and start your survivor benefit at full retirement age at which point it would not have been reduced.
Carol Ojeda: My husband collects a small military pension. About a third of it will soon be converted to disability. He also receives a pension. The military deducted Social Security, and the statement indicates he is eligible for benefits. I read that military retirees are exempt from the government pension offset (GPO), but I cannot find anything on the Social Security site. Is he eligible to collect Social Security? Is he exempted because he is a military retiree?
Larry Kotlikoff: If your husband collects a pension from employment, including the military, from which Social Security taxes were deducted he will not be hit by either the Windfall Elimination Provision or the Government Pension Offset provision.
Sarah Clark: I need to know where to find more info about when to file for Social Security based on being divorced, never remarried, and now 64. According to the Social Security office, I have earned more benefits than my ex. I need more factual info about filing, suspending, etc.
Larry Kotlikoff: I recommend you run our program (cost is $40) Maximize My Social Security as well as read the columns and answers to questions posted at Paul's site. Also, check out my column 42 Social Security Secrets.
A reader named Larry: Several years ago, my stepfather was allowed to opt out of Social Security because the California legislature created the LTRS (1969). Since that time, he divorced my mother and he later passed away. Prior to opting out, however, he had 40 quarters that my mother believes qualifies her for Medicaid. Under what scenario do you think she wouldn't be qualified for Medicaid? They were married for over 20 years when they divorced and she receives half his retirement pension as part of the divorce settlement, but there was no provision for health care and she is now 80 years old.
Larry Kotlikoff: Your mother may be able to collect a survivor benefit. But nothing about Social Security benefit eligibility has anything whatsoever to do with qualifying for Medicaid. The qualification depends on your mom's current income and asset levels.
Richard E: I am 62 and collecting Social Security. My ex of 14 years is 55 and remarried. Will I be eligible for spousal Social Security? If so, when?
Larry Kotlikoff: You can collect a divorce benefit based on your ex-spouse's work history. If you apply for it before full retirement age, you'll be deemed to also be applying for your retirement benefits. Both benefits will be significantly reduced because you are taking them early.
A better strategy may be to wait until full retirement age (66), apply JUST for your divorce benefit, and then wait until 70 to collect your retirement benefit.