Social Security Q&A: My Ex And I Are Both Approaching 65, What Do I Need to Consider?Commentary by Laurence Kotlikoff
August 12, 2014
Social Security may be your largest or one of your largest assets. How you manage it, by deciding which benefits to collect and when, can make an absolutely huge difference to your lifetime benefits. And those with the highest past covered earnings have the most to gain from maximizing their Social Security.
I’ve been answering questions and writing columns about Social Security each week for the past two years on PBS NEWSHOUR’s website. The editors at Forbes asked me to post a Q&A each day from those columns. To see all my columns, please go to my software company’s site, www.maximizemysocialsecurity.com, and click More Press below the WSJ quote.
Today’s question points to considerations about early receipt of benefits based on an ex-spouse’s record. Early receipt can not only lower your divorced spouse’s benefit, it can also reduce your retirement benefit (assuming no ameliorating action is taken).
Question: My ex-husband will be 65 in August, and I will be 65 in June. I am still working. Can I draw off of his SS now, and would it be a percentage of his full amount? When I turn 66, if my benefit is higher, would I switch to draw mine or leave it until I turn 70? Also, when you say “survivor’s benefit,” would I collect this along with my SS if he dies? Thank you.
Answer: I’m going to assume, in my answer, that you were married for 10 or more years and that either your ex is collecting his retirement benefit or that you have been divorced for two or more years. Under these assumptions, your best strategy is likely to be to wait until your full retirement age, 66 in your case, and then collect just your spousal benefit based on your ex’s earnings history.
This will be the full spousal benefit, equal to half of his full retirement benefit. Then, at 70, you apply for your own retirement benefit, when it will start at its largest possible value.
If you apply for your divorcee spousal benefit now, at age 65, you’ll be hit with the “deeming” provision of Social Security that says: if you are divorced and your ex is 62 or older and you apply for your spousal benefit at an age under full retirement age, you’ll be forced to take not just a reduced spousal benefit, but a reduced retirement benefit.
Furthermore, the reduced spousal benefit will be the product of a reduction factor times what’s called your “excess spousal benefit.” Your excess spousal benefit is the difference between 50 percent of your ex’s full retirement benefit and 100 percent of your full retirement benefit. If this difference is negative, it will be set to zero.
In short, if you go for your spousal benefit right now at 65, you’ll be forced to also go for your retirement benefit right now. Both benefits will be reduced and the spousal benefit, because it’s computed as the excess spousal benefit, may be computed to be zero! This is the worst of all worlds! You get no spousal benefit and have to take a reduced retirement benefit forever.