A Novel Social Security Question

[rcsj]

This is an issue I haven't seen before on this board.

A friend of mine has the following situation: He is divorced and 65. He phoned Social Security to receive information about deferring his benefits until 70. During his conversation, the agent informed him that he could do so (defer his own payments until 70 with the increase in payments) plus receive 1/2 of his divorced spouse's benefits until he reached 70 and began drawing on his own. This is in effect a bonus of 1/2 of the benefits (of his divorced spouse) for deferring his own benefits and receiving the stepped-up amount at 70. A sweet, sweet deal. Is anyone in this situation?

I don' think this will work if the two of them are still married. Is this a secret plot by the government to encourage dissolution?

A review of the "socialsecurity online" has not proven helpful.

 

[dex]

Does the Divorced spouse have to approve? Does the divorced spouse get half of the SS when your friend turns 70?
It sounds as if there is a piece of the puzzle that is missing.

 

[rcsj]

Dex, the agent said nothing about his gaining his divorced spouse's approval. She indicated that he could merely apply for this benefit and receive the same. (without any reduction in his benefits when he reaches 70). The divorced spouse of course gets her own SS benefits when she decides to access them.

What makes this seem so farfetched to me is that I would suppose his divorced spouse could likewise claim 1/2 of his benefits, deferring her draw of her own until she reaches 70.

 

[ats5g]

See The Baby Boomer's Guide to SS - article from WSJ online:

Coolest strategies you've never heard of for claiming benefits

One way many couples can maximize Social Security benefits over their lifetimes is for wives to claim benefits at age 62, and for husbands to delay filing until almost 70, says Alicia Munnell, director of the Center for Retirement Research at Boston College. (That's based on a number of factors, including income levels, life spans and survivor benefits.) You can find Dr. Munnell's research in the June issue of the Journal of Financial Planning. (See fpanet.org/journal and click on "Past Issues and Articles.")

Of course, 70 is a long time to wait for Social Security. So, here's a way -- courtesy of Steve Potter, a retired public-affairs specialist at Social Security -- to avoid the wait and still get a sizable benefit at age 70.


The scenario: George, at his full retirement age of 66, expects a benefit of $2,000 a month. His wife, Martha, at her full retirement age of 66, expects a benefit of $1,000 a month.


The strategy: Martha files for a reduced benefit on her own at age 63, or $800 a month. George, at age 66, files for just a spousal benefit, based on Martha's earnings. He would get $500 a month as Martha's spouse. (Yes, Social Security allows George to get half of what Martha was projected to receive at her full retirement age.) Then, at age 70, George applies for benefits based on his earnings history. With the "delayed retirement credit" (the additional dollars one receives for waiting until age 70 to claim Social Security), George's benefit would be 32% higher, or $2,640 a month.


Social Security would stop George's spousal benefit of $500 a month because he's entitled to the $2,640, based on his own earnings, at age 70. Again, for this to work, George must wait until his full retirement age or later to file for a spousal benefit.


The nice part about this strategy is that George -- if he's trying to maximize his and Martha's combined benefits -- doesn't have to wait three or four years beyond his full retirement age for a paycheck; he can start collecting benefits at 66 based on Martha's earnings history -- and jump to a considerably bigger benefit at age 70. As far as the "break-even" point goes -- the age at which the accumulated value of benefits from this strategy will start to exceed the accumulated value from both spouses filing for full benefits at age 66 -- it's 79. Beyond that age, the 63-66 strategy yields a larger total return. (This example assumes George and Martha are the same age.)


Note: Some Social Security representatives we spoke with weren't aware of this strategy. If you try this at your local Social Security office -- and if the staff balks -- ask them to confirm the strategy with Social Security headquarters in Baltimore, which confirmed it for us.

- Alec

 

[jazz4cash]

I saw that article in the printed edition of WSJ. There was also a sidebar article that stated you COULD NOT get early access to spousal benefit. These scenarios are all very unique and depend on relative ages, incomes, etc. If you can get help from someone at that Baltimore SS office, I bet they have a lot of experience with this issue since that article appeared

 

[New Thinking]

Benefit

You need to be at least at your Full Retirement Age to make this work. If you file prior to your FRA, you are "deemed" to file for both your worker benefit and your spousal benefit. Once you hit your FRA, you may be "eligible" for your worker benefit, but you need not become "entitled" to it. You do not become "entitled" to it unless you file for it. Thus you can file ONLY for the spousal benefit. I confirmed this with the SSA. If you are still married, your spouse must have filed for her benefits for you to get spousal benefits off of her/his work record.

If you are divorced, you must have been married for 10 years to be eligible for a benefit. The scenario laid out above should work as divorced individuals do not have to have had the ex file for benefits for the spousal benefit to become available. This makes sense since divorced folks may not file to "spite" an "ex".

So this looks entirely possible for you to do if you are your Full Retirement Age..

 

[rcsj]

Thanks everyone for all the valuable insights!

 

[mathjak107]

so now im totaly confused. if my wife files at 63 for her reduced benefit , i think i can take spousal benefits of 1/2 her regular amount not her reduced amount at that point?

i then file at 66 or 70 and switch to my own full benefits at that time

 

[New Thinking]

Mathjak

Mathjak - You cannot file for a spousal benefit based on your wife's record until:

1. She files for her own worker benefits.
2. You reach your full retirement age.

We may have a calculator available sometime within the year if I can make it work from an economic standpoint. EVERYTHING out there is either wrong or, if not wrong, means retirees are leaving money on the table.

 

[Tadpole]

Mathjak - You cannot file for a spousal benefit based on your wife's record until:

1. She files for her own worker benefits.
2. You reach your full retirement age.

We may have a calculator available sometime within the year if I can make it work from an economic standpoint. EVERYTHING out there is either wrong or, if not wrong, means retirees are leaving money on the table.

I don't think I can play this game. DH will retire at age 62 and live to be 98. I retire at age 66 and live to be 65.99 years old. His SS is almost exactly 1/2 of mine according to the projections.

So everyone has a new goal after FIRE - live to be 70 years old.

 

[old woman]

I was married to a man for 17 years then divorced and haven't remarried. He died in 1994 I don't know if he filed for SS he was born in 1931. So if I wait until 66 I could collect half of his until 70 then get mine if I understand this correctly. I was thinking of taking mine at 62 or maybe 65 but it might be worth the wait.

 

[Moemg]

I was married to a man for 17 years then divorced and haven't remarried. He died in 1994 I don't know if he filed for SS he was born in 1931. So if I wait until 66 I could collect half of his until 70 then get mine if I understand this correctly. I was thinking of taking mine at 62 or maybe 65 but it might be worth the wait.

Actually you could get a portion of his at 60 and then switch to your benefit later .

 

[clifp]

I don't think I can play this game. DH will retire at age 62 and live to be 98. I retire at age 66 and live to be 65.99 years old. His SS is almost exactly 1/2 of mine according to the projections.

So everyone has a new goal after FIRE - live to be 70 years old.

Remember there is an even better idea. Take your retirement early, but save the money, then when you get closer to age 70. Repay all of your social security benefits (no interested needed) refile for the higher benefit at age 70.

 

[OAG]

New Thinking I would like to see that calculator. If you have kept up with this and related threads on this forum you know I am very close (at age 67 (born in 1940)) to repaying what I have drawn in SS since 62 along with the increased amount my DW received based upon my record and then letting her revert to her recalculated benefit (she will be 70 next month 1/08). My plan was to repay, wait until I either needed the money or reached age 70, draw my benefit and have DW recalculated based on my record again. I thought I had this figured out correctly but, you, or someone else, has thrown in a new wrinkle which is to do what I anticipate but between the time I repay and reapply under my own record (a period of 34 months, to age 70) to apply for spousal benefits based on DW record (would not be much; maybe $6.2K total for 34 months). My current plans would leave the $6.2 on the table if what I have read is correct; that amount sould pay the Medicare Premiums for those 34 months.

Clifp: That is what I plan to do although I will do it before age 70.

 

[pfpelican]

I don' think this will work if the two of them are still married. Is this a secret plot by the government to encourage dissolution?.

uh...actually is does.

I start receiving 1/2 my spouses FULL benefit going back to june 07, when I reached full ss age. Applied today.

We have been married 43+ years. Still are.

She took her benefit at age 62 (reduced).

I don't plan to take mine till I reach 70.

 

[pfpelican]

so now im totaly confused. if my wife files at 63 for her reduced benefit , i think i can take spousal benefits of 1/2 her regular amount not her reduced amount at that point?

i then file at 66 or 70 and switch to my own full benefits at that time

Right. That's what I'm doing.

 

[mathjak107]

Right. That's what I'm doing.

well noooo wrong. according to whats being said i can't apply for spousal benefits unless my wife is full retirement age and files. i can't be 63 and get 1/2 hers while holding off filing for my own until 66 or 70

 

[pfpelican]

Sounds like my situation is a little bit different from yours....

I am full retirement age....my wife is 64........and I will be getting 1/2 of her FULL benefit, even though she started receiving hers at 62. Confirmed by the lady who processed my application for spouse benefits...and that is what was said in the NY Times article referenced in another thread about this...here: http://www.early-retirement.org/forums/f28/another-clever-ss-scheme-31551.html

 

[lazygood4nothinbum]

is this serious? str8 couples get social security benefits after divorce but gay families can't share benefits even while coupled? how hateful is that?

 

[tightasadrum]

A trophy bride?

Now I see the downside of taking on a trophy bride.

I thought I was being so-o-o clever robbing the cradle for my DW.

But DW of 32 years will qualify for full retirement forty-five months AFTER I reach seventy.