Social Security Loopholes Explained
As previously mentioned, Social Security benefits are designed to replace the income lost when a wage earner retires, becomes disabled, or dies. To achieve income adequacy goals for lower- and middle-class workers, Congressional intent was that spousal benefits would supplement retirement income for retired couples with one primary earner not provide a bonus benefit that high-income couples could manipulate to their financial advantage. Unfortunately, the latter scenario ended up happening in several different ways:
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Your benefit would be even less than half if you claim Social Security early. If you started collecting at 62, as soon as youre eligible, youd only receive 32.5% of your ex-wifes full benefit. You also cant earn 8% delayed retirement credits each year should you hold out past full retirement age. Your benefit would cap out at 50% of your exs primary insurance amount.
Fortunately, you dont need to make this into a guessing game. When you apply for Social Security, you can ask them to calculate both your retirement benefit and your spousal benefit. Youll get whichever benefit is more. You can also use Social Securitys online calculators to estimate how much youd get from retirement benefits vs. spousal benefits.
When its time to apply, Social Security will need to locate your ex-wifes record. This process will be easier if you still have her Social Security number. Otherwise, you may need to provide her date of birth, where she was born, and the names of her parents. Also be prepared to provide a copy of your marriage certificate and divorce decree.
The bottom line here is that your exs Social Security doesnt deserve to occupy any real estate in your brain. Focus on getting the maximum benefit for yourself, whether its through your own benefit or your exs.
Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. Send your tricky money questions to .
Documents You Need To Apply
Please select the benefit you will be applying for from the list below to see what information and documents you may need when you apply:
If you dont have all the documents you need, dont delay applying for Social Security benefits.
In many cases, your local Social Security office can contact your state Bureau of Vital Statistics and verify your information online at no cost to you. If we cant verify your information online, we can still help you get the information you need.
Mailing Your Documents
If you mail any documents to us, you must include the Social Security number so that we can match them with the correct application. Do not write anything on the original documents. Please write the Social Security number on a separate sheet of paper and include it in the mailing envelope along with the documents.
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How Much Will My Spouse Receive
If your spouse qualifies for benefits on their own record, we will pay that amount first. If the benefit on your record is higher, they will get an additional amount on your record so that the combination of benefits equals that higher amount.
If they begin receiving benefits:
If your spouse will receive a pension for work not covered by Social Security such as government employment, the amount of their Social Security benefits on your record may be reduced.
at any age
Benefits paid to your spouse will not decrease your retirement benefit. In fact, the value of the benefits they may receive, added to your own, may help you decide if taking your benefits sooner may be more advantageous.
Delay Starting To Collect Your Benefits
Next, consider delaying starting to collect your benefits. You can start as early as age 62 youll collect smaller checks, but more of them than if you wait. Somewhere between age 66 and 67, youll reach your full retirement age, at which point youll be eligible to collect the full benefits to which youre entitled. Delay beyond that point, and youll fatten your benefits up by about 8% for each year that you delay, until age 70.
The table below shows how much of your full benefits you can expect to collect, depending on when you turn on the spigot:
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Start Collecting at: |
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Data source: Social Security Administration.
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You Can Work And Claim Benefits Just Watch What You Earn
Theres no rule that says you cant continue working while receiving Social Security benefits. You just have to be mindful of how much youre earning if youre under full retirement age.
For 2019, Social Security recipients who have not yet reached full retirement age can earn up to $17,640 without dinging their benefit amount. If your earnings exceed the limit, your Social Security benefits will be reduced by $1 for every $2 youre over the limit. In the year you reach full retirement age, the reduction becomes $1 for every $3 earned over the limit.
The good news is that once you reach full retirement age, you can earn as much as you like without your benefits being penalized. But keep an eye on the impact that your earnings amount might have on your tax liability.
You Can Shop Around For Better Benefits
Its easier than ever to apply for Social Security benefits online. But it may be worth your time to visit your local Social Security office and apply in person. Thats because workers at Social Security offices may use their own discretion when interpreting the guidelines for determining benefit amounts. Visiting multiple offices could give you a range of benefit amounts for which you may be eligible.
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Who Is Eligible For Spousal Social Security Benefits
In general, you may be eligible if you are married, divorced, or widowed and your spouse was eligible for benefits.
Those who apply for spousal benefits must have been married for at least one year. Your spouse must also have begun receiving Social Security benefits unless you are widowed. In the latter case, you may be able to receive the full amount of your late spouses benefits as opposed to the spousal benefit, assuming their benefit is higher than yours. However, you will not be eligible to receive your late spouses benefit if you remarry.
Even ex-spouses can file based on your earnings. The requirements for claiming benefits based on your ex-spouses work record include:
- You must have been married at least 10 years.
- You must have been divorced from the spouse for at least two consecutive years.
- You are unmarried.
- Your ex-spouse must be entitled to Social Security retirement or disability benefits.
- The benefit you would receive from your work record would be less than this spousal benefit.
In theory, a person could marry someone new every 10 years and give them a spousal benefit as a parting gift, says Russell D. Knight, an attorney in Chicago. Its better than nothing.
But its not like that money comes out of your monthly benefit check, so rest easy.
How Much Do Widowed Spouses Receive
Social Security survivors benefits are especially important to women , because wives tend to earn less than their husbands, and they also typically outlive their husbands. When a retired worker dies, the surviving spouse receives a benefit equal to the deceased workers full retirement benefit.
Depending on the widows or widowers circumstances, however, this benefit may substantially reduce her monthly household income because only one Social Security benefit is now arriving , not the two benefits that the couple received before the spouses death. Women who had worked and earned their own Social Security benefits, in particular, may find themselves struggling to meet the rising fixed expenses that come with aging.
For more information on Social Security and survivor benefits, please visit the Social Security Administration at ssa.gov/benefits/survivors/.
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A Couple With Shorter Life Expectancies May Want To Claim Earlier
How it works: Benefits are available at age 62, and full retirement age is based on your birth year.
Who it may benefit: Couples planning on a shorter retirement period may want to consider claiming earlier. Generally, one member of a couple would need to live into their late 80s for the increased benefits from deferral to offset the benefits sacrificed from age 62 to 70. While a couple at age 65 can expect one spouse to live to be 85, on average, couples who cannot afford to wait or who have reasons to plan for a shorter retirement, may want to claim early.
Example: Carter is age 61 and expects to live to 77. He earns $70,000 per year. Caroline is 59 and expects to live until age 76. She earns $80,000 a year.
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The Best Time To Claim Social Security Spousal Payments
So, when is the best time to claim spousal benefits? Generally, the best time to claim spousal benefits is upon reaching full retirement age assuming that your spouse is already receiving benefits. Waiting past retirement age will have no effect on spousal benefits. You cannot accrue delayed retirement credits and increase your spousal benefit amount.
If your spouse is not already collecting benefits, then you must wait until they are collecting benefits to start your spousal benefits. In some cases, it might make more sense for your spouse to wait until age 70 to start benefits, even if this means delaying your spousal benefits for a couple of years. If you have any questions about the best way to maximize your Social Security benefits, you should consult an experienced financial planner in your area.
How Are Your Social Security Benefits Calculated
Social Security uses your highest 35 years of earnings, indexed to a national average wage index, to calculate your primary insurance amount If you have fewer than 35 years of earnings, each year with no earnings will be entered as zero. You can increase your Social Security benefit at any time by replacing a zero or low-income year with a higher-income year.
There is a maximum Social Security benefit amount you can receive, though it depends on the age you retire. For someone at full retirement age in 2022, the maximum monthly benefit is $3,345. For someone filing at age 70, the maximum monthly amount is $4,194. And for someone retiring early, at age 62, the maximum monthly benefit is $2,364.
To estimate your benefits, use the Social Securitys online Retirement Estimator.
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Social Security Spousal Benefits
Spousal benefits provide for the spouse who stayed home during a marriage instead of working. By claiming Social Security spousal benefits, you can ensure that your retirement years are not severely limited by a lack of income. For more than 80 years, Social Security retirement benefits have helped the quality of life for millions of American retirees.
A recent Social Security study showed that roughly 2.3 million Americans received at least some part of their Social Security retirement benefits as the spouse of a qualified taxpayer. If youve ever been married, you may qualify for Social Security spousal benefits. These benefits are an important income supplement for many retirees.
What Happens If Your Ex
If your ex-spouse dies, you may qualify for what’s known as a death benefit, which is worth up to 100% of the monthly checks they received. Again, the 10-year marriage rule applies in this case.
“Someday in the future, should your ex-spouse die, there may very well be access to a significant benefit for the rest of your life,” Freitag said.
Certain other rules must also be met here, as well. For example, if you remarry after age 60 that will not affect your eligibility for survivor benefits on your ex-spouse’s record.
Notably, if you qualify for these strategies, it’s best to assume that you will have to bring it to the attention of the Social Security Administration.
“When there’s this much money potentially available, I think you have to be your own advocate,” Freitag said.
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Social Security And Your Spouse
Social Security will provide benefits to your spouse if you are receiving the retirement benefit. This is regardless of whether your spouse has worked or not. In some cases, even ex-spouses can claim. To qualify, your spouse must be at least 62 years old. Additionally, you need to apply for the Social Security benefit first.
Spousal Social Security Benefit Basics
Spousal Social Security benefits are not available to everyone. So to know if this applies to you, check you and your spouses full retirement age benefit amount. If one of those benefits is less than half of the other, then you will be able to apply for spousal benefits.
For example, if your full retirement age benefit is $1,800 per month and your spouses is anything less than $900, then this applies to you.
And that is because with Social Security, you are entitled to receive the greater amount of either:
- Your Full Retirement Age amount. Again, this is just what you can easily find on your statement.
- Or, half of your spouses full retirement age amount.*
Theres an asterisk here because it is not necessarily that simple, well get into the details later. But if you do everything right you can get a spousal benefit up to 50% of your spouses benefit.
Then there are 2 basic requirements to qualify for spousal benefits:
- You must be at least age 62 and have begun your own benefits to be eligible to receive spousal benefits.
- And, your spouse must be receiving their benefits for you to get spousal benefits from them.
Again, these were the changes that we talked about in the first slide. They have not always been requirements, but these are the rules as of now.
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How Is Social Security Impacted If Your Former Spouse Dies
The scenario changes if your ex-spouse has passed away. If you meet specific conditions, you can apply for full retirement age for survivors isn’t necessarily the same age that applies for retirement benefits.
You may be able to apply for survivor benefits if you’ve been collecting spousal benefits or if you’ve been drawing retirement benefits from your own work record. To qualify for surviving divorced spouse benefits, you must meet these conditions:
- Your marriage lasted at least 10 years.
- You are not married, or you remarried after you turned 60 .
- You are at least 60 years old .
- If you’re entitled to benefits on your own work record, the amount must be less than you would receive based on your ex-spouse’s record.
- If you are caring for a child of your former spouse who is under 16 or is disabled and entitled to benefits, age and length-of-marriage requirements don’t apply.
Basic Rules Must Be Met
So long as some basic rules are met, you may be eligible to claim a higher retirement benefit based on your ex’s work record. This applies to both ex-spouses, whether you are the ex-wife or the ex-husband, and also for divorced spouses in a same-sex marriage.
The basic rules
- You and your ex must have been married for 10 consecutive years or longer, even if the marriage ended 30 years ago.
- Both you and your ex must be at least age 62 before you can claim as an ex-spouse.
- To collect on an ex’s record you must not be remarried.
- You and your ex must be divorced for two years or longer, or your ex must already be claiming retirement benefits.
Full Retirement Age
This is the month and year when you reach a specific age for Social Security benefits. It is based on the year you were born. If you were born from 1943 to 1954, your FRA is 66. Later birthdays have a later FRA. Find your FRA at Social Securitys website.
If you qualify as an ex-spouse based on these criteria, your retirement benefit would be half of your ex’s primary insurance amount, or PIA, so long as you claim at your full retirement age . The PIA is the benefit a person would receive if he or she elects to begin receiving retirement benefits at his or her normal FRA. You can claim as early as 62, but you will get less than half the amount you would get at FRA.
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Should You Take Your Ex’s Social Security
Whether you’re claiming on your record or theirs, be aware of the consequences of starting Social Security early. You can only qualify for 50% of their benefit if you wait until your full retirement age. If you start benefits at 62, your checks will only be 32.5% of their primary insurance amount.
If you meet the eligibility requirements for taking your ex-spouse’s benefits, it’s certainly worth having Social Security calculate both benefits so you can get the maximum amount. You won’t affect their benefits, and you won’t even have to contact them.
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