Q&A: Spousal benefits get complicated by ex delaying retirement credits
Q: I am currently collecting $1,678 per month in Social Security disability insurance. I was also married for more than 10 years and I understand that if I was married for this amount of time, I can receive half of my ex-husband’s Social Security if it exceeds $1,678. For example, if he receives $4,000 per month, I can receive $2,000 instead of $1,678. I believe my husband earns enough to receive the maximum allowable benefit. My question: Is this true? If so, do I have to wait until I am 67-years-old when I am disabled and not able to work due to my
disability? – Deanna Papastrat, New York
A: So, let’s start the numbers. The maximum allowable benefit for someone retiring at full retirement age (FRA) in 2016 is $2,639. That benefit amount, however, is only payable to someone who had maximum taxable earnings for at least 35 years. In your case, we don’t know if your husband had maximum taxable earnings for 35 years, but we’ll use that number to illustrate which benefit is greater.
If you claim your 50% spousal benefit you will receive $1,319.50, which is about 20% less than what you are receiving now, said Kathleen Sindell, author of Social Security: Maximize Your Benefits.
And if your ex-spouse, given the same circumstances, retired not at FRA but at 62 his maximum benefit would be $2,102 and your spousal benefit would decline to $1,051. “In this scenario, you will receive 37% less than what you’re currently receiving,” says Sindell.
So, it appears as if you are currently receiving the highest benefit possible.
It also appears that your ex-husband has not applied for Social Security benefits and may be collecting delayed retirement credits or DRCs. “This strategy, however, will not impact your payments because DRCs are not included in spousal benefits,” says Sindell.
Bottom line: Your financial situation seems to be somewhat complex, and Sindell suggests that you meet with a fee-only financial adviser to discuss your next steps with Social Security Disability Insurance and Social Security. “Most fee-only advisers do not charge for the first hour of consulting,” she says, noting that good place to start searching is at the National Association of Personal Financial Advisors website, http://www.napfa.org/.
Q: I'm 63 and planning to retire. I've read all the recommendations for working another three years, but men in my family aren't known for longevity. My wife has 21 years in jobs covered by Social Security and 14 years in the Teacher Retirement System of Texas (TRS) so it's clear that should she become widowed, her survivor's benefit will be reduced by both the government pension offset (GPO) and the windfall elimination provision (WEP). I have 36 years in covered employment that is a combination of private and city government. However, I also have another six years in city government in which I didn't pay into Social Security, but continued to pay into the same statewide pension system for local governments. I receive an annual Social Security Administration benefit report that provides an estimated monthly benefit amount that looks good, but it doesn't address WEP. My question: Will my Social Security benefit be reduced by WEP for the six years that I worked for a city that didn't withhold for Social Security even though I have over 35 years of covered employment? – Stephen Jenkins, Texas
A: Good news, says Ted Sarenski, CEO of Blue Ocean Strategic Capital and author of The CPA’s Guide to Social Security Planning. “You have 36 years of covered employment for Social Security benefit computations,” he says. “You are correct that you have sufficient coverage that WEP will not apply to your Social Security benefits. Your best 35 out of 40 years are all with covered wages.”
The next item is direct from the Social Security’s website: If you paid Social Security tax on 30 years of substantial earnings you are not affected by the WEP. Learn more at Retirement Planner: Windfall Elimination Provision (WEP).
Robert Powell is editor of Retirement Weekly, contributes regularly to USA TODAY, The Wall Street Journal and MarketWatch. Got questions about money? Email rpowell@allthingsretirement.com.