Claiming benefits on an ex can speed collection of
benefits on a new spouse
I stumbled upon another nuanced
exception to the myriad Social Security rules that affect divorced clients
thanks to the astute question of an InvestmentNews reader.
Think of this as the Social Security edition of Trivial Pursuit, a game that
taxes players' memory and retention of minutiae. This question certainly tested
mine.
An adviser from Chicago asked me for
help crafting a Social Security claiming strategy for two of her currently single
clients who plan to marry each other. The soon-to-be bride is 62 and single.
Her future husband is 68 and divorced. Neither of them has claimed Social
Security yet.
"If they got married, it would
make sense for her to take her own benefits and for him to claim a spousal
benefit on her earnings record until he reaches age 70," the adviser
wrote.
I agree, assuming the 62-year-old
wife is not working. Otherwise, she would be subject to earnings restrictions that
could temporarily reduce or even eliminate her benefits, as well as those of
her new spouse claiming benefits on her record.
Once they marry, the new husband
would be a likely candidate for using a valuable claiming strategy that would
allow him to collect half of his new wife's full retirement age benefit while
his own retirement benefit continues to grow by 8% per year up until age 70. At
70, he would file for his own maximum retirement benefit, which would be worth
32% more than his full retirement age benefit amount.
Anyone who was born on or before Jan.
1, 1954, is eligible to file a "restricted claim for spousal
benefits" once their mate claims Social Security. But the window for using this
strategy is closing. The last group of people eligible to
use it turn 66 this year, although they can exercise this claiming strategy at
any time between their full retirement age and age 70.
At age 68, the soon-to-be groom would
be eligible to claim spousal benefits once he and his new wife marries and she
claims her benefits. The only rub? Normally, you must be married at least one
year to claim benefits as a spouse.
At that point he would be 69 years
old and would only be able to claim spousal benefits for one year before
switching to his own larger retirement benefit at 70.
The Social Security rules defining eligibility for spousal benefits state
that "the claimant must be married for at least one continuous year
immediately before the claimant's application is filed."
But there are two exceptions to the
one-year-of-marriage duration rule. One allows the natural mother or father of
the worker's child to satisfy the requirements to collect benefits as a spouse
without being married for at least 12 months (even if the child is not alive at
the time).
The other exception is the one cited
by the adviser.
"I read that the requirement
[for spousal benefits] is met if in the month before marriage, you were entitled to benefits as a spouse
or divorced spouse," the adviser wrote in an email.
Does that mean that the man could circumvent the normal one-year waiting period
if he files for benefits on his ex-wife's earnings record now before he
remarries, she asked?
Yes, I said, after consulting with
Jim Blair, a former Social Security administrator for 35 years and co-founder
of the National Social Security Association certificate and training program
for financial advisers.
Mr. Blair confirmed that if the man
filed a restricted application for spousal benefits on his ex-wife's earnings
record before he remarried, it would eliminate the normal 12-month waiting
period of his new marriage.
"First of all, he should look
into the possibility of filing a restricted application as an independently
entitled divorced spouse," Mr. Blair said. As long as his prior marriage
lasted at least 10 years and the couple have been divorced at least two years, the
man would be eligible to claim benefits on his ex-wife's earning record as an
independently entitled divorced spouse — even if she has not yet claimed Social
Security.
This is an advantage that divorced
spouses have over married couples. In the case of married couples, one spouse
must claim Social Security to trigger a spousal benefit for the other.
By claiming benefits on his ex's
earnings record before he remarried, the man could bypass the 12-month waiting
period to switch to benefits on his new wife's earnings record.
"Since the ex-spouse benefit
will end the month he marries, the new spousal benefit begins that same
month," Mr. Blair explained.
Mr. Blair noted that anyone who had claimed
auxiliary benefits on someone else's earnings record — whether as a spouse,
divorced spouse, widow, widower or surviving divorced spouse — in the month
before they remarried, would not have to meet the one-year duration of marriage
requirement to collect spousal benefits on their new mate's earnings record.
No comments:
Post a Comment