Social Security rules are complicated and change often. For the most recent “Ask Larry” columns, check out maximizemysocialsecurity.com/ask-larry.
Boston University economist Larry Kotlikoff has spent every week, for over two years, answering questions about what is likely your largest financial asset — your Social Security benefits. His 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 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 new book, “Get What’s Yours — the Secrets of Maximizing Your Social Security Benefits,” (co-authored with Paul Solman and Making Sen$e Medicare columnist Phil Moeller) will be published in February by Simon & Schuster.
Imagine that each and every year that you work, you and your employer jointly contribute 12.4 percent of your pay in FICA taxes to the federal government. You’re now 70 and are walking over to the local Social Security office — in Dayton, Ohio, where you live — to file for your retirement benefits. You’ve waited until 70 to get the largest possible benefit thinking you might make it to 100.
Then tragedy strikes. As you walk, you open a letter from your doctor telling you your cancer test is positive and that you have six months to live. You’re horrified. But when you get over the shock of knowing you are about to die, you get really angry. You start thinking of all the money you paid to Social Security for the 50 years you spent working. Now you’ll get essentially nothing back.
GOT SOCIAL SECURITY QUESTIONS?
But then you realize your wife is going to collect widows benefits based on your work record, and since she earned very little on her own, your wife will get what you would otherwise have received.
You love your wife. You married her in Massachusetts years ago and are extremely concerned that she be financially secure when you pass. With your paid-off home in Dayton and her monthly widow benefit, your wife will be able to just get by.
You arrive at the local office, explain the situation, and start asking what your wife needs to do to collect widows benefits when you die. The Social Security staffer looks sheepish.
“Sorry, but your wife can’t collect widows benefits.”
“What do you mean she can’t collect widows benefits? I paid FICA taxes all my life. The Social Security rules are crystal clear. Widows and widowers of deceased spouses can collect survivor benefits as long as they are over age 60.”
“Yes, but you aren’t married.”
“What do you mean I’m not married? I can go get my marriage certificate. We got married in Massachusetts.”
“Yes, but you are living in Ohio?”
“Yes, I live in Ohio. But Social Security is a federal program. I paid a tax each year for 50 years that has the name federal on it — the Federal Insurance Contributions Act. Why does it matter that this is Ohio?”
“Because you are gay and Ohio doesn’t recognize same-sex marriages. Social Security condones Ohio’s judgement that you aren’t married even though you are married.”
“Are you kidding?”
“Unfortunately not. If you want your wife to collect a widows benefit, you’ll need to sell your house and move to one of the 35 states that do recognize same-sex marriage.”
“We can’t sell our house. My wife is disabled. We spent a ton of money fixing the house to accommodate her disability. And because of this, it has a very low resale value.”
“I’m sorry. But that’s Social Security’s decision.”
If Ohio recognizes same-sex marriages, the wife may be able to collect a lump sum benefit from whatever date the Ohio attorney general thinks is appropriate. A recent Social Security decision in Rhode Island, which recognized same-sex marriage last year, went down this way. The Rhode Island attorney general made the call.
Social Security follow the laws of the state in which the worker lives at the time he or she applies for benefits or while the claim is pending a final determination.
And now for some answers to readers’ questions.
Anne — Ind.: My husband died in 1992 when he was 40 and I was 35. At the time, our triplets were five years old, and I received the maximum family benefit until they graduated from high school, at which time all Social Security benefits ended. I have never remarried and will be 60 in another year. Can I expect any more widows benefits, since I already received the maximum family benefit while the kids were growing up? I haven’t been able to find anything online that addresses my question.
Larry Kotlikoff: The maximum family benefit is applied annually, so the fact that you reached the limit in the past doesn’t matter for collecting benefits when you reach 60 or in any year thereafter.
Please note that it may or may not be optimal for you to start taking widows benefits at 60. If you had a low earnings history, maximizing your lifetime benefits may entail taking your retirement benefit starting at 62 and switching to your widows benefit at full retirement age, which, in your case, is age 66 and two months. This will ensure that you’ll receive your largest possible widows benefit. Alternatively, it may be best to take your widows benefit at 60 and your retirement benefit at 70, when it will start at its highest possible value. In either case, you won’t run into the family benefit maximum.
Macrina — N.C.: I received Social Security benefits for disability for three years during cancer treatment. I returned to work for eight years, but then had to reinstate my disability in 2011. I attained full retirement age (FRA) Dec. 7, 2013. Social Security told me my disability automatically became my retirement benefit at my FRA at 66. They did not offer any other option. Reading your answers to some other inquiries made me wonder if I could have continued on disability had I elected to and wait until 70 for retirement, greatly increasing my benefits. I cannot live on my resources without the Social Security money even though I am able to work a little each month, earning less than the disability SGA teaching college online. Is there still anything I can do to increase my benefit? I am still disabled and I have been divorced since the early 80s (marriage was only three years).
Larry Kotlikoff: The only thing you can do now to raise your lifetime benefit is suspend your retirement benefit and restart it at, say, at age 70, when it will be about 24 percent higher due to the accumulation of delayed retirement credits. But I realize that you need the money to make ends meet and that this is probably not a real option.
Were you within one year of the automatic conversion of your disability benefit to your retirement benefit (you are now two days beyond that date) and were you married or divorced after a 10 year marriage, you could, I believe, withdraw your retirement benefit and, depending on a couple other conditions, collect a full spousal or full divorced spousal benefit.
Claude — N.J.: Can several ex-spouses (divorced wives) collect Social Security spousal benefits related to the same ex-spouse (ex-husband)? If they can, is the benefit amount each ex-wife can collect based on the pro-rata of their marriage duration?
Larry Kotlikoff: All your previous wives/husbands to whom you were married for 10 or more years can collect on your work record just as if there were no other previous wives/husbands. Conversely, one person can also cash in one multiple ex-spouses’ benefits.
Jim — Va.: Both my wife and I have worked all our lives and have maximized our Social Security benefit and are getting close to 62. What is the best strategy to maximize our benefit? There is not an immediate need for the benefit and we can wait until FRA or later.
Larry Kotlikoff: The best thing to do is purchase a low-cost, but highly accurate Social Security maximization software program. It will tell you in a second what’s the optimal strategy. It will surely involve one of you, whom I’ll call A, filing for his or her retirement benefit either early or at full retirement age in order to permit the other of you, whom I’ll call B, to file just for a spousal benefit. B will then wait until 70 to collect his or her retirement benefit. If A files early, A will suspend his or her retirement benefit at full retirement age and then start it up again at 70. If A files at full retirement age, A will immediately suspend his or her benefit and restart it at 70.