Your relationship means nothing to Social Security unless you’re married

Social Security rules are complicated and change often. For the most recent “Ask Larry” columns, check out

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 to Maxing Out Your Social Security Benefits,” (co-authored with Paul Solman and Making Sen$e Medicare columnist Phil Moeller) was published in February by Simon & Schuster.

Below, Larry explains the file-and-suspend and spousal benefit strategy to Paul, which got Paul and his wife an extra $50,000 in benefits.

Carmen — Bronx, N.Y.: My question is that my mother did not marry my father, but she was with him for 11 years before he died in a car accident. We, the children, all received Social Security check money. When we got older, we all had a few thousands dollars in the bank. But my mother did not get one cent even though she had seven kids, the youngest of which was born a few weeks after my dad’s death.

Larry Kotlikoff: This is another example of Social Security’s outrageously unjust practices. But there is nothing to be done. Unless Congress changes the law, which it surely won’t, the unwed will be treated just as its designers desired – as second-class citizens.

Anonymous – Columbia, Md. I viewed the Feb. 26 Making Sen$e segment and was informed, entertained, as only Paul can, and delighted to learn about the book and answers to Social Security benefit mysteries.

My question is: When one turns 65 and has to sign up for Medicare so as not to incur penalties, the Social Security Administration says to start your Social Security benefits so the Medicare payment can be drawn from the benefit. Can one pay their Medicare fees out of pocket until age 66 or beyond, as described on the Feb. 26 segment? Since someone can suspend their benefits after starting them, how would it work with Medicare going forward?


Pose Your Questions to Larry Here

Larry Kotlikoff: One of the gotchas in our book, “Get What’s Yours – the Secrets to Maxing Out Your Social Security,” concerns making sure you pay your Medicare premiums out of pocket if you suspend your retirement benefit and Social Security is no longer in a position to withhold these premiums each month.

From what I’ve been told by a very senior actuary at Social Security, if you suspend your retirement benefit and Social Security doesn’t receive a Medicare Part B premium payment from you, it will reactivate your benefit, withhold the premium, deny you the accumulation of delayed retirement credits, and, it seems, never tell you it’s doing any of this.

If this happen, when you restart your retirement benefit, say at 70, Social Security will give you the same benefit – no larger – that you were collecting when you suspended. So if you suspend at 66 and restart at 70, you’ll have lost four years of benefits and get nothing whatsoever back for it! Social Security can be a very nasty business if you aren’t careful. This is, in part, why we wrote the book – to protect people from the system’s extremely well hidden traps.

Eileen — Farmington Hills, Mich.: I will be 63 in April and am self-employed. My income has been increasing in the past few years. Will this make a difference to my Social Security benefits?

A second question: I am considering marrying (I have been divorced 20 years). Will my new husband be able to collect spousal benefits since I am a larger earner? And is there a grace period? If we do not file jointly, is he a dependent spouse?

Larry Kotlikoff: If you earn enough, your benefits will indeed be larger. Social Security recomputes your benefits each year to see if you have raised your Average Indexed Monthly Earnings (AIME).

This average is used to calculate your Primary Insurance Amount or PIA. Your PIA is used to calculate the retirement, spousal, divorcee spousal, child, child survivor, widower, divorcee widower, and parent benefits that you and your current and former spouses, your children, and even your parents can, potentially, collect off your work record.

Indeed, if you have a short work record, the extra future benefits you thereby generate for yourself and others may exceed the extra FICA taxes you pay. As we explain in “Get What’s Yours,” your AIME will automatically rise if you are over 60 and earn above the taxable earnings ceiling ($118,500 this year).

Your to-be new husband will be eligible to collect a spousal benefit off of your work record after you have been married for one year, assuming that he is at least age 62. For him to collect a full spousal benefit off of your work record, you’ll need to file for your retirement benefit and he’ll need to file just for his spousal benefit. He can only do this when he’s at or over full retirement age and under age 70. After age 70, there is no advantage for him not to also file for his retirement benefit.

So depending on his age and when you file for your own retirement benefit, he can indeed collect a full spousal benefit. For example, if he too is 63 and you wait until full retirement age to file for your retirement and then suspend it (which you can only do starting at full retirement age), he can, at that point, file a restricted application and get full spousal benefits for four years. You can then both collect you own retirement benefits starting at 70, when they will start at their highest possible starting value. Alternatively, you can potentially collect a full spousal benefit off of your new spouse’s work record.

But since you are divorced, be aware that if you were married for 10 years, getting remarried will eliminate your potential ability to collect a full or excess divorcee spousal benefit on your ex’s work record. In your case, getting married after age 60, does not, however, keep you from collecting a divorcee widow’s benefit off of your ex’s work record once he dies.

Larry — Austin, Texas: If you take disability from Social Security, are you permanently locked in to that benefit amount, or can you file and suspend at full retirement age (FRA) and wait until you are 70 to take the larger benefit? Is your benefit at 70 reduced for having taken disability?

And second, if a disabled spouse takes the spousal benefit from their spouse’s account before the first spouse reaches FRA, are their benefits permanently reduced, even if they wait until 70 to take their own benefits? If so, then is it best to wait until FRA to take the spousal benefit on your spouse’s account when he or she has already reached FRA?

Larry Kotlikoff: If you take disability, your disability benefit will convert into a full retirement benefit at full retirement age. At that point you are, indeed, able to suspend your benefit and start it up again at 70 inclusive of delayed retirement credits. (Just make sure you pay your Medicare Part B premiums by writing a separate check. Otherwise, Social Security may, without telling you, reactivate your retirement benefit to pay the premiums and, as a consequence, not provide you with delayed retirement credits.)

For those now reaching full retirement age (currently 66), the suspension means a 32 percent higher retirement benefit (above and beyond any inflation adjustment) when the benefit is restarted at 70.

I had thought, and even wrote in our new book, that disabled workers could, upon reaching full retirement age, withdraw their retirement benefits and file for a full spousal benefit. But as I wrote in a prior column, Social Security wiped out this possibility for millions of disabled workers in what I view as a truly malicious act of discrimination against the disabled. This action was taken on Dec. 23, after the book went to press.

Anyway, the answer to your first question is yes, you can file and suspend and no, your benefit at 70 is not reduced due to having taken Social Security. What is reduced — actually wiped out — is your ability to collect a full spousal benefit between full retirement age and 70.

Regarding your second question, if a disabled spouse files for a spousal benefit before full retirement age, he or she will get an excess spousal benefit that will be reduced due to his or her filing for it before full retirement age. And if he or she files for a spousal benefit at or after full retirement, he or she will get an excess spousal benefit that’s not reduced even if he or she has suspended his or her own disability benefit. This again is the effect of the Christmas Eve disability benefit massacre that I find absolutely outrageous.

My blood pressure rises just thinking about the decision of bureaucrats to wipe out this benefit when they apparently thought no one was paying attention. Their action was, I’m sure, triggered by my telling disabled workers in prior columns that they could collect full spousal benefits. And that, clearly, was what the Social Security regs permitted prior to their being rewritten virtually in the dead of night — likely in response to a disabled worker trying to withdraw the automatic conversion of her disability benefit to a retirement benefit and collect just a full spousal benefit.