Social Security and your ex-spouse. How to put more money in your pocket.

There are lots of rules and regulations when applying for social security. However, benefits from a former marriage can put more money in your pocket if done right.  Sharon Olson discusses what you should know to make the most when collecting Social security on your ex-spouse’s work record.

How can I maximize my social security benefit?

Here’s the short answer. Full retirement age (FRA) varies from age 65 to age 67 based on the year you were born.  If you file before reaching your FRA, your benefit is reduced. If you wait until age 70 to collect your own benefits, the government pays you an 8% bonus called the “Delayed Retirement Credit” for the years between your full retirement age and when you reach 70.

For example, if your FRA is 66, you can increase your monthly check by a minimum of 32%!  That means that if your earnings record says you’re eligible for $1000 once you reach FRA, you’ll actually receive $1,320.00 if you wait until age 70.  Plus, your delayed benefit earns annual cost of living increases during this window of time so your benefit is even greater.

Am I eligible to collect an ex-spousal benefit?

In November 2015, new social security laws went into effect. If you were born on or before January 1, 1954, after you reach FRA you can choose to receive only the spousal benefit by filing a restricted application. This applies even if the ex-spouse is deceased. This will allow you to delay receiving your own retirement benefits based on your earnings record until a later date.

If you were born after January 1, 1954, you are not able to restrict your application and only receive spousal benefits.  You must file for both benefits, and Social Security automatically gives you the larger of your own benefit or an ex-spousal benefit. You cannot choose which to get unless you are a widow or widower – then special rules apply.

A restricted application for social security can be a windfall for ex-spouses who qualify. You can collect up to 50% of the amount of your spouse’s social security benefit as calculated at their FRA.  This restricted application option is not available if you file before your full retirement age.

However, there are a few other requirements to consider.

  • You must have been married over ten years.
  • You generally cannot collect if you are re-married. But you can collect from your current spouse after one year.
  • If your ex-spouse is deceased, you can collect a survivor’s benefit as early as age 60 or if you remarry after age 60.
  • The only way to find out for sure what your Social Security benefit based on your ex-spouse’s record would be is to ask them what their Primary Insurance Amount (PIA) is. The PIA is the benefit amount that they would receive at their FRA. The Social Security department cannot tell you.
  • Collecting benefits from your ex does not reduce their benefits.
  • If your ex-spouse is younger than you, you can collect your own benefit first (wait until your FRA or this benefit will be permanently reduced) and switch to collecting on theirs once they reach age 62.
  • Your ex does not have to file for benefits for you to be eligible but they must be at least age 62 and have worked enough to be eligible.

Is my ex-spouse eligible to collect Social Security benefits?

Your ex-spouse must either be: 1. Receiving Social security disability benefits, or 2. Someone who has earned a minimum amount of income from at least 10 years of work in jobs where s/he had Social Security (FICA) tax taken from paychecks.

For example, police officers contribute to the state employee’s retirement plan (PERA) instead of Social Security.  Consequently, s/he is not eligible for benefits as a divorced spouse.

However, I recently met with my client to go over her retirement options and here’s her story.

I was nearing my full retirement age but maximizing my own Social Security until I
reached age 70 was critical to my financial freedom.  I also had a 15-year old car
that was on its last legs and a breakdown on the freeway was a real concern.

I was married 20 years to a police officer who contributed to PERA so I assumed
that I wasn’t eligible for social security benefits from my ex-spouse.  Sharon asked
me if he ever had worked part-time jobs during employment or after he retired
from the police force. He would have contributed some to FICA Tax.

We checked out his FICA income record and I found out that I was eligible for a
monthly benefit of $350.00. This discovery lifted a huge weight from my mind
and I purchased the new car that I needed.

In summary, if you apply for your own benefit before your FRA, your social security benefit will be permanently reduced. Also, if you apply early and you continue to work and receive earned income, you may owe some of the Social Security benefits back. It pays to wait, and ex-spousal benefits can greatly help to make this more manageable.

Please call us if you have any questions about Social Security benefits from either your current spouse or your ex-spouse.  As market-leading specialists in wealth management, our holistic approach applies to all areas of your financial wellbeing.  With wise counsel and clear strategies, we steward the process to build and preserve wealth that supports the freedom to pursue what is most important to you.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. No strategy assures success or protects against loss.

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