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Today’s column addresses delaying till 70 or filing now to try to lock in benefits amounts even if they’re lower, potential availability of divorced spousal benefits, earnings Social Security credits, and when spousal benefits may and may not be available in conjunction with retirement benefits. Larry Kotlikoff is the founder and president of Economic Security Planning, a company that markets Maximize My Social Security, a Social Security benefits calculator referred to in this post.
See more Ask Larry answers here.
Ask Larry about Social Security:
Should My Wife File For Social Security Retirement Benefits Now Or Delay Till 70?
Larry, I am 68 and started collecting my Social Security retirement benefit at 64. My wife collects spousal benefits and wants to wait three more years to collect her retirement benefit at 70. Although we are fine from a financial standpoint in terms of retirement savings and her teacher pension, we disagree on whether her delaying until age 70 makes sense. If Congress does nothing to strengthen Social Security’s finances, I am concerned about a potential reduction in benefits by 2033. What do you feel is the better strategy: for her to wait three years or for her to collect now at 67? Thanks, Adam
Hi Adam, That depends in large part on your wife’s current spousal rate versus her potential retirement rate on her own record. However, assuming that her own retirement rate will be higher than her spousal rate if she waits until 70 to start drawing, then it might very likely be best for her to wait until then to switch to her own record as long as she’s in reasonably good health.
I can’t predict the future, but I don’t think changing filing decisions based on concerns about the future viability of Social Security makes much sense. Social Security has been around for more than 80 years now, and congress has always seen fit to continue funding it. You can use an expert Social Security benefits calculator as described in other answers to help her decide what to do. The software will allow her to compare and gauge the long term effects of her various options and so make a more informed decision about when to file. Best, Larry
When I’m Retirement Age Can I Collect On My Ex-Spouse’s Record Even If He’s Not Yet Retirement Age?
Hi Larry, I am six years older than my ex. When I reach full retirement age, can I collect my divorced spousal benefit based on his Social Security record even though he will not have retired yet? He makes more than three times the amount I make. Thanks, Jeanne
Hi Jeanne, You won’t be able to collect your divorced spousal benefit unless your ex is receiving his benefits early due to disability. In order for you to potentially qualify for divorced spousal benefits, your ex must either be at least age 62 or receiving benefits on his own record. Also note that if you file for your divorced spousal benefit before your full retirement age (FRA), you’ll be deemed to have also filed for your retirement benefit and both will be reduced. You may want to run an expert Social Security benefits calculator, such as my company’s software or another very precise and comprehensive program, to find the strategy that works best for you. Best, Larry
Can I Purchase The Credits Needed To Qualify For Social Security Benefits?
Hi Larry, I worked in a company and paid six years of Social Security taxes. After that, i started my own business and have not paid into the Social Security system. I am 66 now and I heard I can possibly purchased the remaining four years in lump sum. Is that true? Also, can I qualify for Medicare based on social security payments? Thanks, Dan
Hi Dan, You cannot voluntarily make Social Security tax contributions in order to become insured for benefits. The only way to earn quarters of coverage (QC) is by working for wages or having net earnings from self employment. Anyone who is a U.S. citizen (or legal alien admitted for permanent residence for at least five years) can qualify for Medicare coverage at 65, but if you don’t have at least 40 QCs or qualify on the record of a spouse or ex-spouse, you would have to pay for the Part A (inpatient hospital) coverage that is otherwise premium free for people who are insured for Social Security benefits. Also, since you are over 65, you could likely only sign up for Medicare during general enrollment periods that occur annually from January through March. Best, Larry
If My Wife Files Before I Do, Can She Later Claim Spousal Benefits On My Record?
Hi Larry, I am one month older than my wife. Her FRA benefit is a little less that half of mine. We will both be 64 and the end of the year and I am retiring next June. I’ve already made too much this year so I would lose any benefit. I’d like to have my wife claim her retirement benefit on her record next January. I’ll delay filing for my retirement benefit until my FRA. Would she be able to claim her spousal benefit based on my earnings when I claim my retirement benefit? Thanks, Tomas
Hi Tomas, Yes, but in that event she’d keep the reduction in her own benefit rate and she’d be deemed to be filing for spousal benefits as soon as she qualifies for those benefits. So if you file for your benefits before your wife’s full retirement age (FRA), her spousal rate would also be reduced.
For example, say Jane has a Primary Insurance Amount (PIA), which is equal to her full retirement age (FRA) retirement benefit amount, of $900 but files at 64 and receives a reduced rate of $780. Jane’s husband has a PIA of $2,000 and he files for his benefits one month before Jane reaches her FRA of 66. Jane’s unreduced spousal benefit would be calculated by subtracting her PIA from 50% of her husband’s PIA, which in this example would be $100 (i.e. $2,000 / 2 – $900). Jane’s spousal rate would then be slightly reduced to $99 because she started drawing one month prior to FRA, and her spousal rate would then be added to her own reduced rate giving her a combined benefit amount of $879 (i.e. $780 + $99). Best, Larry
If My Wife Waits Until 70 To Claim Her Own Benefits Could She Still Get Spousal Benefits?
Hi Larry, My benefit amount at full retirement age is $2,000. My wife’s is $900. If she delayed claiming her benefit until 70 so that her benefit increased to $1,188, would she still receive the spousal benefit in addition to the higher benefit amount. Thanks, Alton
Hi Alton, Your wife wouldn’t be paid any spousal benefits in that scenario. The increase in her own benefit rate resulting from delayed retirement credits ($288) would be subtracted from her spousal rate, leaving her with a spousal rate of zero. If your wife was born prior to 1/2/1954, she could potentially file just for spousal benefits only at her full retirement age and then switch to her own record at age 70. However, you would have to be drawing your retirement benefits in order for your wife to be able to receive spousal benefits. You may want to run an expert Social Security benefits calculator, such as Maximize My Social Security or other extremely careful software, to compare your various possible filing strategies in order to determine what’s best.
To learn more about your Social Security options, visit Economic Security Planning, Inc.