Social Security rules are complicated and change often. For the most recent “Ask Larry” columns, check out maximizemysocialsecurity.com/ask-larry.
Editor’s Note: Boston University economist Larry Kotlikoff has spent every week, for over three years, answering questions about what is likely your largest financial asset — your Social Security benefits. His Social Security columns have prompted so many of you to write in that we feature “Ask Larry” every Monday. Find a complete list of his columns here. And keep sending us your Social Security questions.
Kotlikoff’s state-of-the-art retirement software is available here, for free, in its “basic” version. His book, “Get What’s Yours — the Secrets to Maxing Out Your Social Security Benefits,” (co-authored with Paul Solman and Making Sen$e Medicare columnist Phil Moeller) was published before the changes from the Bipartisan Budget Act of 2015 went into effect. The three authors are now doing an overhaul of the book. The new version of “Get What’s Yours” should be out this spring.
Kotlikoff has been keeping readers updated on how the budget act changes a number of Social Security rules with “This is not how you fix Social Security,” “Congress is pulling the rug out from people’s retirement decisions” and “12 secrets to maximizing your Social Security benefits under the new rules,” as well as his answers to viewer questions. We’ll continue publishing updates on what this new law means for you. Stay tuned.
Arthur: My former wife of over 10 years reaches the age of 66 in March. She has not filed for her Social Security. I told her she should file for a former spousal benefit on my Social Security account, but that she must do so before the end of March.
She was told that she cannot collect that benefit. Can she? If so, when must she file?
Larry Kotlikoff: Your former wife can, indeed, file just for her divorced spousal benefit (equal to half of your full retirement benefit) when she reaches age 66, assuming you are over 62 when she turns 66, or she can file as soon as you turn 62. She can let her own retirement benefit grow and take it at age 70.
The only way Social Security would have this right is if your ex has a pension from non-covered employment. If that’s the case, her spousal benefit will be reduced by two-thirds of this non-covered pension via the Government Pension Offset provision. If large enough, this would wipe out her Social Security divorced spousal benefit.
Alicia: My father passed away last week. When my brothers and I were going through paper files with our mother, we were flabbergasted to find out that they never filed for their Social Security benefits. My dad did have a retirement program through the railroad, but he did have other employers in his lifetime. My mother also worked her entire life. Now, at age 78, she is finding out that she is not eligible to receive any of the Social Security payments she would have received upon retirement had she filed at that time. She is also being told that any Social Security benefits my father would have received, had he filed, are no longer available. Is there any way to get back some of these benefits for her?
Larry Kotlikoff: I’m very sorry about your dad. Unfortunately, the most your mom might be able to collect is six months of retroactive spousal benefits along with future widow’s benefits. I’m worried, however, that if your dad was collecting from the Railroad Retirement Board, there may be no additional benefits available through Social Security. I believe you get one or the other, but not both.
I’ve asked Jerry Lutz, a former Social Security technical expert, to weigh in.
Jerry Lutz: I’d be willing to bet that nothing was lost in this case. The Railroad Retirement Board considers a worker’s earnings under Social Security when calculating their Railroad Retirement Board benefit, so I’m virtually certain he didn’t lose anything. I assume that the wife was receiving a railroad spousal benefit, which includes a “tier 1” amount similar to Social Security Administration benefits. It’s possible that the wife’s Social Security benefit may have been higher than her tier 1 Railroad Retirement Board spousal benefit, in which case she would be out the difference between the two. If that is the case, she could apply for and receive the difference for six months retroactively.
You might want to explain to Susan that when a railroad annuitant dies, only one agency — either the Railroad Retirement Board or the Social Security Administration — pays survivor benefits. The Railroad Retirement Board has responsibility for determining which agency has jurisdiction of the survivor benefits. If they decide that the Social Security Administration has jurisdiction, the widow will need to apply with the Social Security Administration, and the widow’s benefit amount will be calculated using both railroad and Social Security earnings. If the Railroad Retirement Board retains jurisdiction, her railroad spousal benefit will automatically convert to a widow’s benefit, which would include her husband’s Social Security earnings as well as his railroad earnings.
Ralph: I’ve already applied for Social Security benefits, and my wife was going to suspend and collect half of my Social Security. Unfortunately, she turns 66 in November. With the new Social Security law, is there a way around the new spousal deadline, or do we just lose that 50 percent while her Social Security benefit grows?
Larry Kotlikoff: She is grandfathered in. You can do as you planned.
George: I’ve read “Get What’s Yours,” written by you, Paul Solman and Phil Moeller. It’s very informative and timely. I’m two months short of full retirement age, and my wife will be 62 on the same day in April. I plan to file and suspend. My wife will file for spousal benefits at that time. We wanted to run your calculator program to make sure this is the best plan for us. We do meet the marriage requirements.
Larry Kotlikoff: Unfortunately, our software will likely deliver bad news for your plan. When your wife files for her reduced spousal benefit, she will be forced to take her reduced retirement benefit. In this case, she will get approximately the larger of the two benefits. If her own full retirement benefit exceeds half of yours, her spousal benefit will be set to zero, and she’ll just get a reduced retirement benefit forever. If it’s the other way around, she’ll get her reduced retirement benefit plus a reduced excess spousal benefit. Depending on your maximum ages of life, the software will very likely tell you both to wait until 70 to collect.