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Social Security Spousal Benefits After a Divorce

We’ve discussed many different factors about Social Security Spousal Benefits, but what happens to Spousal Benefits after the couple has divorced? We know that a divorcee can file for Spousal Benefits if the marriage lasted for at least 10 years – but only after a 2-year period has passed if the ex-spouse has not already filed for benefits.  The only other factors that must be in place are for the ex-spouse to be at least 62 years of age, and of course the ex must have a benefit record to calculate Spousal Benefits from. On the other hand, if a couple is divorcing and one of the spouses (soon to be ex-spouses) has already filed for his or her own Social Security benefits, the other spouse can file for Spousal Benefits either before or after the divorce is finalized with no waiting period, as long as they were married for […]

File and Suspend in the Crosshairs?

Apparently in the President’s recent budget documentation there is a brief mention of a desire to curtail the availability of File and Suspend as an option for Social Security benefit filing. The reason, it appears, is that the Obama administration views this option as one used only by high income folks to take advantage of the government with this valuable option. The problem with that viewpoint is that it is used by folks of all income levels, and in fact if it is taken away this could cause some big problems for folks who can least afford to lose benefits. As if anyone can afford to lose benefits, right? Here’s what happens with File and Suspend: a Social Security benefit recipient has a spouse and/or children that would be eligible for benefits based on his or her record when he or she files for benefits.  If he or she happens […]

Your Social Security Benefits: Are They Taxable?

If you’re receiving Social Security benefits, either for disability, retirement, or survivor’s benefits, when you file your tax return you will need to figure out if the benefits you’ve received during the prior year are taxable to you. You’ll receive a Form SSA-1099 from Social Security sometime in the first months of the year, showing what your benefits were in the prior year, as well as any deductions that were made throughout the year – including Medicare premiums (Part B and/or Part D) if applicable, and federal income taxes withheld. But are the benefits taxable to you?  At most, 85% of your benefit might be taxed – and it’s possible that none of your benefit is taxable, all dependent upon your total income for the year.  See this article for a detailed explanation of How Taxation of Social Security Benefits Works.  The IRS recently published their Tax Tip 2014-23, which […]

The Unmarried Penalty With Social Security (and the Divorce Advantage)

Okay, penalty probably is the wrong term for it – maybe the better term would be short-change. You’ve undoubtedly heard of the marriage penalty for income taxes – this is where it can be beneficial tax-wise for two people to remain single than to be married and be forced to file either jointly or separately.  The tax code contains several ways that this is true.  But did you know that there is a way that married folks might level the field versus singles in the Social Security law-scape?  Plus, divorced folks may also have an advantage over singles AND married folks who were never divorced (or who divorced after marriage of less than ten years)? The Marriage Advantage When a worker remains single over his or her working life, there is an inequality in benefits paid out based on his or her record when you compare it to that of […]

The Inequity of Spousal Social Security Benefits

We’ve covered a lot of ground talking about Spousal Benefits and strategies for filing, and other facts to know about Spousal Benefits.  But did you realize that there is a flaw in the process that shortchanges some couples when it comes to Spousal Benefits? Here’s a pair of example couples to illustrate the inequity: The first couple: Jane has worked her entire life and has earned a Social Security benefit of $2,600 per month when she retires.  Her husband Sam has been a struggling artist his whole life, as well as a stay-at-home Dad to their three kids when they were young.  As a result, Sam has never generated enough income on his own to receive the requisite 40 quarter-credits to have a Social Security benefit of his own. The second couple: Sid and Nancy have both worked and had earnings within the Social Security system over their lifetimes.  Sid […]

Social Security and the Non-Citizen Spouse

With our increasingly global society today, many married couples are made up of a US citizen and a non-citizen.  In some cases, the non-citizen spouse has never been covered by the US Social Security system – he or she may have been covered by another system in his or her home country.  In other cases, the non-citizen spouse may have worked in a Social Security-covered job while living in the US, and so may have generated a Social Security earnings record of his or her own. At any rate, it is important to know that your lawful spouse who is a non-citizen may be eligible for Social Security benefits based on your earnings. As long as other qualifications are met (length of marriage, age of the spouse, and your filing status with Social Security), your non-citizen spouse may qualify for Spousal Benefits based upon your record.  By the same token, your […]

Survivor Benefits Do Not Affect Your Own Benefits (and vice versa)

I’ve had a few questions about this topic over the past several weeks, so I thought I’d run through a few examples and explain it. When you have access to a Social Security Survivor Benefit and a Social Security retirement benefit, you can maximize your lifetime benefits by coordinating the two and planning out your strategy for taking each benefit. As we’ve covered in other articles, it often is best to delay receiving your own benefit as long as possible.  This is because you will receive Delayed Retirement Credits (DRCs) for every month after you’ve reached your Full Retirement Age (FRA, which is age 66 if you were born between 1943 and 1954, and increasing gradually up to age 67 if you were born in 1955 or later).  This DRC amounts to 8% per year, or 2/3% per month. In addition, it can be beneficial to delay receiving a Survivor […]

Social Security Spousal Benefits versus Survivor Benefits

I’ve written a lot about Social Security Spousal Benefits and Survivor Benefits on these pages, but oftentimes there is confusion about how they are applied.  There are things about them that are common, but for the most part there are some real differences that you need to understand as you make decisions about applying for one or the other of these benefits. For one thing – Survivor Benefits and Spousal Benefits are benefits that you may be entitled to that are based on someone else’s record: your spouse (or ex-spouse) to be exact.  No matter what your own Social Security benefit might be, you have access to the Spousal Benefit and Survivor Benefit, if, of course, you have or had a spouse with a Social Security retirement benefit available on his or her record. In addition, it is important to note that Spousal Benefits and Survivor Benefits are mutually exclusive.  […]

Social Security Bend Points for 2014

When the Social Security Administration announced the Cost of Living Adjustment (COLA) for 2014, this also allowed for calculation of the bend points for 2014. Bend points are the portions of your average income (Average Indexed Monthly Earnings – AIME) in specific dollar amounts that are indexed each year, based upon an obscure table called the Average Wage Index (AWI) Series.  They’re called bend points because they represent points on a graph of your AIME graphed by inclusion in calculating the PIA. If you’re interested in how Bend Points are used, you can see the article on Primary Insurance Amount, or PIA.  Here, however, we’ll go over how Bend Points are calculated each year.  To understand this calculation, you need to go back to 1979, the year of the Three Mile Island disaster, the introduction of the compact disc and the Iranian hostage crisis.  According to the AWI Series, in […]

Social Security Figures Increase for 2014

Recently the Social Security Administration released the updated figures for 2014, including the wage base, earnings limits, and the increase to benefits. For 2014, the wage base for Social Security will rise to $117,000.  This is the maximum amount of W2 wages that are subject to the 6.2% employer- and employee-paid Social Security tax.  This amount represents an increase of $3,300 over the wage base of $113,700 in 2013. In addition to that increase, benefits to eligible recipients of Social Security retirement will increase by 1.5% in 2014.  This is slightly less than the 1.7% increase to benefits in 2013.  This brings the average monthly benefit for all retired workers up by $19, to$1,294 in 2014.  For the average couple who are both receiving Social Security benefits, the COLA increase is $31 per month, for an average benefit of $2,111 in 2014. Likewise, there was an increase announced to the […]

How Adding to Your Earnings Can Increase Your Social Security Benefits

Given the way that Social Security benefits are calculated, it should come as no surprise that increasing your income over time will make a difference in your eventual Social Security retirement benefits.  But how much of a difference does it make when your income is increased? Of course, this is going to depend upon what your current income is, and how many years you have left before you’ll begin receiving benefits.  Keep in mind how your benefits are calculated – see this article for information about Computing Your Social Security Monthly Benefit – it’s based on your average monthly income over your lifetime.  Increasing that average will increase your PIA, which will in turn increase your benefit. It’s definitely not a simple calculation to figure out what difference each increased dollar of income will have on your benefit.  Let’s walk through a few examples to see how it plays out. […]

Social Security Filing Strategies for Surviving Spouses

There are a couple of strategies for Social Security filing that surviving spouses can use to maximize benefits throughout their lifetimes.  The important factor to keep in mind for the surviving spouse is that filing for Survivor Benefits (based on your late spouse’s record) has no impact on filing for Social Security benefits based on your own record – other than the fact that you cannot file for both benefits at the same time. Coordinating these two benefits (Surviving Spouse benefits and your own benefits) can take a couple of different paths: you could file for the Surviving Spouse benefit first, allowing your own benefit to accrue Delay Credits up to as late as age 70; or you could file for your own benefit first, and then later file for the Surviving Spouse benefit. Sue’s husband Steve passed away when Sue was 61 years of age.  Steve had just turned […]

How Your Average Indexed Monthly Earnings is Determined

In order to calculate your Social Security benefit you need to know what your PIA (Primary Insurance Amount) is.  In order to calculate the PIA, you need to know what your Average Indexed Monthly Earnings (AIME) factor is.  So how is your AIME determined? During your working career, your Social Security-covered earnings were reported to the Social Security Administration.  When you reach age 60, an index factor is applied to each year of your earnings in order to adjust each year’s earnings for inflation.  After the index factor is applied, the top 35 years of earnings are totaled and then divided by 420 (the number of months in 35 years).  This produces an average… indexed… monthly… earnings… factor. If you haven’t had a full 35 years of Social Security-covered earnings, the AIME is still calculated using 35 years as the divisor.  This can result in a much lower benefit as […]

Can Both Spouses File a Restricted Application for Spousal Benefits Only?

In the wake of my post last week, Can Both Spouses File and Suspend?, I received multiple iterations of the same question, which is the topic of today’s post: Can Both Spouses File a Restricted Application for Spousal Benefits Only? Unlike the original situation where technically it is possible to undertake but the results would not be optimal, in this situation it’s not technically possible. (The one exception is in the case of a divorced couple. For the details on how it works for divorcees, see this article: A Social Security Option Strictly for Divorced Folks.) The way the restricted application for spousal benefits works is that there are three rules that must be met: You must be at or older than Full Retirement Age (FRA) Your spouse must have filed for his or her own retirement benefit – does not have to be actively receiving benefits, he or she […]

Can Both Spouses File and Suspend?

This question continues to come up in my interactions with readers, so I thought I’d run through some more examples to illustrate the options and issues.  The question is: Can both spouses file and suspend upon reaching Full Retirement Age, and collect the Spousal Benefit on the other spouse’s record, allowing our own benefit(s) to increase to age 70? Regarding file & suspend and taking spousal benefits, although technically both of you could file and suspend at the same time, only one of you *might* receive spousal benefits at that point. The reason is that once you file (regardless of whether you suspend) the spousal benefit is then limited to the amount over and above your own Primary Insurance Amount (PIA), up to 50% of your spouse’s PIA. (Remember, PIA is the amount of benefit that you would receive at exactly Full Retirement Age.) For example, if you and your […]

Social Security Spousal Benefit at or After FRA

Some time ago I wrote an article on the Social Security Spousal Benefit Before FRA, and an astute reader (thanks, SD!) pointed out the obvious to me: I hadn’t written the complementary piece on calculating the spousal benefit at or after FRA.  So let’s get right to it! When you wait until Full Retirement Age to file for spousal benefits, there is no reduction of that portion of your benefits.  In other words, the spousal benefit will be based on 50% of your spouse’s PIA minus your own PIA, and then this amount will be added to whatever retirement benefit that you’re receiving on your own record.  This additional benefit can’t increase your total benefit to a point greater than 50% of your spouse’s PIA. Here are some examples: Started own benefits early Alice and Terry are both age 66.  Alice started her own benefit early, at age 62.  Her […]

A Good Reason to File and Suspend: Back Benefits

We’ve discussed the file and suspend option in the past as it relates to enabling your spouse or dependents to begin receiving benefits based on your record while you delay filing to accrue the delay credits.  But there’s another reason that you might want to file and suspend at Full Retirement Age (FRA) – and this one has little to do with a spouse, even single folks can take advantage of this. When you file and suspend, what you have done is to establish a filing date notation on your record. By establishing a filing date notation, as mentioned before, your spouse and dependents can file for benefits based upon your record.  In addition, since there is a filing date on your record, you are eligible to change your mind about delaying your filing to a later date and receive your benefits retroactively from that point to the point when […]

Be Careful When Using Your Social Security Statement for Planning

Recently I received an interesting email from a reader (thanks, JRT!) that illustrates one of the problems with interpreting your statement from Social Security on a regular basis.  Part of the email follows: I am just reaching 66 and have been self employed for many years.  I have worked continuously for 30+ years reaching $100,000 or so per year  but have been slipping into retirement and last years income dropped to $70000. SS has already reduced my monthly payment estimate.  It appears that if I postpone beginning taking my SS retirement I will lose in the long term because each year I have reduced income before retiring my SS distribution will be less. For instance if I defer to 70 and have 4 years with zero income won’t I be hurting myself??? In the situation described above, what the reader is describing is the amounts he is seeing on statements […]

A Few Things for a Single Person to Consider When Planning Social Security Filing

The decision of when to begin receiving Social Security benefits can be a bit daunting, because there are many things to take into account when making this decision. The basic concept of the lifetime value of benefits taken at various ages is the most common thing to consider, when this is really not as important as you might think.  This is especially true for single person – since the benefit reduction and increase factors are designed to achieve a similar lifetime result for the average lifespan. In other words, if you are an average person with an average lifespan, it won’t make much difference at what age you file for benefits, as you’ll receive approximately the same amount by the end of your average life, whenever you begin receiving the benefits. However. Another factor that you need to keep in mind is how Social Security benefits are treated, tax-wise.  At […]