Social Security Q&A: Should I Collect Early on My Older Ex-Wife's Record?

by Laurence Kotlikoff

Source: Forbes

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 illustrates the potential effects of the spousal benefit eligibility rule and the deeming provision. It points to a potential strategy that avoids the deeming provision and earns delayed retirement credits.

Question: I recently divorced after 25 years of marriage. My ex-wife is seven years older than me. She is currently 65. I am going to be 58. At age 62, may I receive her Social Security benefit? Is it advisable to do so?

Answer: You can start collecting reduced spousal benefits at 62. But you will also be forced to take your retirement benefit early. A better strategy may be to a) wait until you reach full retirement age — 66 in your case — and take just your spousal benefit and then b) wait until 70 to take your own retirement benefit, when it will be as much as 76 percent higher than if you take it at 62.

The problem with your approach is that the spousal benefit you’ll receive starting at 66 will be half of your ex’s full retirement benefit (not necessarily half of what she actually collects as a retirement benefit, since she may take her retirement benefit early or late). If you take your spousal benefit before full retirement age — even a month before — it will be calculated at a lower rate for your entire life. It won’t be half of her full retirement benefit but instead what’s called your “excess spousal benefit” and be calculated as half of her full retirement benefit less your full retirement benefit. This amount could, in your case, be zero or even negative (in which case they set the excess spousal benefit to zero). Our Software, which costs $40, can help you see the trade-offs here and precisely what you’ll get under different scenarios.