You’re not the only loser when taking Social Security early

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

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.

Greg — Minn.: I will be 63 in October, and my wife turned 63 in May. She quit work in 2012, while I plan to retire in January 2015 when we are both going to start taking our Social Security payments along with my pension. My question is, if I die before her, what Social Security benefit does she continue to receive — mine or hers? My monthly Social Security payment is almost twice what hers is. In the event of my death, she will continue to receive my pension.

Larry Kotlikoff: ​Before answering your specific question, I need to caution that with you both taking your retirement benefits early — at age 64, not age 70 — you will A) both receive permanently lower retirement benefits, B) forego having one of you (your wife would be best) take a full spousal benefit starting at full retirement age while letting her own retirement benefit continue to grow until 70, and C) permanently reduce the widows benefit that she’ll receive once you pass away.


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Depending on your earnings histories, doing what you have in mind can mean the loss of tens, if not hundreds, of thousands of dollars in lifetime benefits. If you can keep working or can tap other resources like retirement accounts to get closer to the Social Security benefit-collection strategy that maximizes your lifetime benefits, consider doing so.

To see what’s at stake you need to run your situation through a highly detailed and accurate Social Security lifetime benefit maximization program. The free online programs, like AARP’s, which I’ve written about in the past, won’t always give you the right answer. They can be misleading, I presume, because their hosts think you don’t have the time to collect and enter the right data and get the right answer and don’t care about potentially leaving huge amounts of money on the table by following the wrong strategy. Another possibility is that they don’t have the technical and software engineering knowledge to make the right calculations.

Now to your specific question. If you take your benefit, as you plan, before full retirement age (specifically at age 64), your wife’s widows benefit will be calculated based on a special and highly complicated widows benefit formula called the RIB-LIM formula, which I discussed in a prior column. But given your situation and assuming you pass away after your wife reaches full retirement age, she will, indeed, receive a widows benefit equal to the retirement benefit you were receiving. But the retirement benefit you were receiving will be lower than it would otherwise have been were you to wait to collect it.

So, to repeat, your taking your retirement benefit early not only lowers your own lifetime retirement benefits, it also lowers your wife’s lifetime widows benefits based on whatever date you die.

Keith — Palm Desert, Calif: I started collecting Social Security at age 65. I was born in 1944. My wife has never worked and is 60 years old. I earn $2,170 per month. If my wife starts taking spousal benefits at 62, how much will she receive and when can she apply for Medicare?

Larry Kotlikoff: Your spouse, if she has no work record on her own, will collect around $820 per month. This is her full spousal benefit (which equals half of your full retirement benefit), but reduced by 30 percent because she will be taking her spousal benefit four years before full retirement age.

However, if your wife did have her own work record, she would, when she filed for her early spousal benefit, be deemed to be also filing for her retirement benefit. In this case, she’d get what amounts to roughly the larger of the two benefits. Hence, she might not receive any spousal benefit whatsoever. But if she waited until full retirement age, deeming would no longer apply, and she could file just for her unreduced spousal benefit.

Then, at 70, she could file for her own retirement benefit, which would be 76 percent larger (after inflation) than were she to collect her retirement benefit at 62. If her age-70 retirement benefit exceeded her unreduced spousal benefit, she’d collect it since it’d be the larger of the two. If it’s less, she’d just continue, after reaching age 70, to collect her full (unreduced) spousal benefit.

Dawn — Penn.: I am 60-and-a-half years old and will need to take some form of Social Security as soon as possible because I desperately need the money. I work part time. I was married for over 10 years and am now divorced. My ex-husband took his retirement at 62. Do I have to take my own Social Security first, or can I take some of his first and then let mine accumulate for later? Also, if I take mine now and he dies, can I then take a widows benefit, and what percentage would that be?

Larry Kotlikoff: Unfortunately, thanks to Social Security’s nasty deeming provision, if you take a reduced early spousal benefit, you’ll be forced to take your own reduced early retirement benefit and will just get what is, roughly speaking, the larger of the two reduced benefits. To be precise, you’ll get your own reduced retirement benefit plus your divorced excess spousal benefit reduced by the spousal benefit reduction factor. The excess spousal benefit (equal, if positive, to half of your ex’s full retirement benefit, less 100 percent of your own full retirement benefit) could well be zero.

In this case, you won’t collect a divorced spousal benefit and will have to wait until your ex passes away to collect a widows benefit on his earnings record (provided the widows benefit, subject to its own reduction if it’s taken before full retirement age, exceeds your own reduced retirement benefit). The size of the widows benefit will potentially depend on whether you take it before full retirement age. It will be calculated based on the complex RIB-LIM formula I discussed in a prior column. If, for example, your ex dies after you reach full retirement age, you’ll most likely receive a widows benefit equal to 82.5 percent of his full retirement benefit (adjusted for inflation), which is somewhat — about 8 percent — more than he is now receiving.

Donna — Wis.: I will be 60 at the end of September 2014 and understand that I will be eligible for survivor benefits at that time. My husband of 22 years, who is in home hospice and not expected to live through this year, has been receiving Social Security benefits (he is 66) that had been converted from Social Security Disability Insurance (SSDI) payments.

I was an office worker for many years, but stopped working to take care of my ill husband about 10 years ago. Additionally, I was married previously for 14 years to a professional who made substantially more money than I did. He is still alive, but was granted SSDI before he turned 62 last year. I may have more options for drawing Social Security benefits, but how can I plan my finances going forward when I can’t explore my options until I’m actually planning a funeral?

Larry Kotlikoff: Extremely sorry to hear about your husband’s condition. If your husband passes away, you will, indeed, be able to collect a reduced widows benefit. There are two alternative strategies to consider. First, consider taking your reduced widows benefit immediately. Then, at your full retirement age, file just for your divorcée spousal benefit on your ex’s work record, and at 70 take your own retirement benefit. Or second, consider taking your retirement and divorcée spousal benefits at 62, then fil​e ​for ​your ​unreduced widows benefits at​ full retirement age​.​

Also, once your ex passes away, you can collect widows benefits on his work record. Unfortunately, I don’t know of any software program that handles multiple marriages, but my and other companies can make special calculations for you.