Social Security rules are complicated and change often. For the most recent “Ask Larry” columns, check out maximizemysocialsecurity.com/ask-larry.
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. Find a complete list of his columns here. 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. Let us know your Social Security questions. Kotlikoff’s state-of-the-art retirement software is available here, for free, in its “basic” version.
Editor’s Note: Larry Kotlikoff joins us Tuesday this week since Monday was a holiday.
Jerry Lutz, the former Social Security technical expert who reviews my weekly answers to your questions, helped me last week respond to a divorcée’s email. The divorcée, who was married for less than 10 years, asked whether she could remarry the same husband and stay married long enough to at least reach the 10-year mark, at which point she’d be able to collect divorced spousal and, possibly, divorced widow benefits.
Here’s Jerry’s reply:
For the marriages to be treated as continuous in meeting the 10-year rule, the remarriage must occur no later than in the calendar year immediately following the year in which the divorce became final.
For example, say Jack married Jill on July 1, 1983 and divorced Jan. 1, 1988. If they remarry on Dec. 31, 1989 and divorce again on July 1, 1993, they would meet the 10-year duration of marriage requirement, even though they were actually married slightly over eight years.
On the other hand, if Jack and Jill married July 1, 1983, divorced Dec. 31, 1992, remarried Jan. 1, 1994 and divorced again on Dec. 31, 2003, they don’t meet the duration requirement even though they were married for just short of 20 years.
The moral to this story? Be careful when you get divorced and consider remarrying in time to hit the 10-year threshold for collecting divorcée benefits.
And now, to your questions:
Atlanta, Ga.: My wife and I both turn 66 next year. My Social Security benefit at that time will be $2,578 and my wife’s will be $1,473. My plan is to file and suspend at age 66, with my wife filing for spousal benefits only at that time. As I calculate it, she would receive $1,289 (one half of $2,578) until age 70. At age 70, I would then file for my benefit and receive $3,403, and at age 70, my wife would file for her benefit and receive $1,944. (Both amounts are 132 percent of our age-66 benefits). Am I misinterpreting anything? We both come from strong gene pools, are in relatively good health and expect to live into our 90s. We can live on our retirement savings until age 70 and still have sufficient funds.
GOT SOCIAL SECURITY QUESTIONS?
Larry Kotlikoff: This sounds pretty close to the target. But if you are really trying to maximize your combined lifetime benefits, you may do somewhat better by filing for a reduced benefit when your wife, whom I presume is older, reaches 66. This way she won’t have to wait until you reach 66 to collect a full spousal benefit. When you reach 66, you can suspend and restart your benefit at 70. She too will, as you indicated, take her benefit at 70. This start-stop-start strategy may add a few thousand dollars to your lifetime benefits.
Gray, Maine: Can you receive a lump sum payment of your Social Security?
Larry Kotlikoff: If you are over your full retirement age and file for a benefit of any kind, you can collect up to six months of that benefit in arrears for months after full retirement age. You’ll get a lump sum check for these back benefits. But taking retirement benefits in arrears will reduce your delayed retirement credit and leave you with permanently reduced retirement benefits.
If you suspend your retirement benefit, which you can do after full retirement age, you can, at any point, request receipt of all suspended benefits in a lump sum. But this too will deprive you, going forward, of the delayed retirement credits you earned between the time you suspended and the present.
Mike — Metairie, La.: My wife (Stephanie) just turned 63, and we just set up her Social Security account and received her benefit statement, which says she is eligible for $773 at full retirement. She is older than I and brings in less income as a school teacher.
I (Mike) just turned 57 and received my Social Security statement: at full retirement, I am eligible for $3,217. I still have a good eight years to work and raise my income and my Social Security 35-year earnings average. I am younger than my wife and bring in a much higher income. We are in great health.
What is a good Social Security strategy to maximize the survivor benefit, but also to provide my wife with some Social Security spending money when she does retire from teaching in three years? We did not plan to take any Social Security income early at 62.
Larry Kotlikoff: Maximizing your household’s Social Security benefits likely entails your wife taking her full retirement benefit early and having you file and suspend your retirement benefit when you reach full retirement age. This allows you to wait until 70 to collect your own retirement benefit, inclusive of delayed retirement credits, and permits your wife to start collecting a spousal benefit on your earnings record when you reach your full retirement age.
Jay — St. Louis, Mo. My son is disabled with Down Syndrome and has been collecting Supplemental Security Income benefits since he turned 21. My understanding is that he will be able to collect Social Security benefits based upon my work record when I start collecting Social Security or when I die. Is his Social Security benefit amount dependent upon when I take benefits — at age 62, full retirement age, or age 70? Does his SSI payments also continue?
Larry Kotlikoff: Your son’s child benefit is half of your full retirement benefit when you are alive and 75 percent of your full retirement benefit when you die. So the child benefit doesn’t depend on when you collect your retirement benefit. But you do need to have filed for your retirement benefit in order for your son to collect a child benefit and you do have to die in order for your son to collect a child survivor benefit. His SSI payment may be reduced if he starts receiving child benefits.
David — Conroe, Texas: I just turned 62 in May 2014. My wife turns 62 in December 2016. When and what do we need to file?
On the few calls we have made to Social Security advisers or the Social Security Administration, we don’t seem to get straight answers. I would like to work until 64-65 just for the medical insurance. I have other investments and a 401K, but want to get the most possible out of Social Security. My wife does not work any longer; she is a stay-at-home wife primarily to take care of her mother. I just want to make the right decisions to maximize our retirement earnings and make sure I/we apply for Social Security and Medicare at the right times.
Larry Kotlikoff: There are some great technical experts at the local Social Security offices, but sometimes getting advice from Social Security can be tricky, especially if you’re not exactly sure what information you’re looking for. Plenty of people have written me about wrong advice they’ve received, so make sure to check your answers with several different advisers.
Your best strategy is, I believe, to file for your retirement benefit when you reach full retirement age and suspend its collection. When you reach 70, you’ll start collecting your retirement benefit. This will permit your wife to file just for her spousal benefit at her full retirement age and also wait until 70 to collect her retirement benefit. By filing at your full retirement age, you give yourself the option to collect all suspended benefits in a lump sum check in the case of an urgent need for cash. Requesting suspended benefits will, however, mean you will lose the delayed retirement credits for all the months during which you suspended your benefit.
If your wife was a much higher earner when she worked, it’s possible (remotely possible) that your best strategy is for her to file early (before full retirement age) to enable you to collect just your spousal benefit until you reach 70, when you’ll flip onto your retirement benefit. She’d collect a reduced retirement benefit and then suspend it at full retirement age and start it up again at 70.