This article first appeared on the PBS NewsHour's website.
Larry Kotlikoff's “34 Social Security Secrets You Need to Know Now,” “A Few More Social Security Secrets,” “11 Social Security Mistakes People Make” and “10 of the Worst Social Security Gotchas” have prompted so many of you to write in to PBS NewsHour that we now feature "Ask Larry" every Monday on the NewsHour website. We are determined to continue it until the queries stop or we run through the particular problems of all 78 million baby boomers, whichever comes first. Kotlikoff's state-of-the-art retirement software is available for free, in its "basic" version. His considerable output is available on his website.
Here is a recent question Kotlikoff received about Social Security benefits for divorced and single people, followed by his answer.
A. Price: One or two of us Americans are single or divorced [and we are also] eligible for Social Security benefits now or in the near future. Are you ever going to address the questions of this "fringe" population?
Kotlikoff: Glad you asked. I've addressed Social Security's treatment of singles, but you're right. Questions about married couples have taken up most of the space.
Older America's single population is anything but "fringe." Some 30 percent of men and 52 percent of women over 60 aren't married. Past age 75, the number increases to almost 70 percent of women, the majority of them widowed.
These figures also tell us that many currently "non-fringe" married people, particularly women, are likely to end up single or on their own. Hence, it's important for almost everyone to understand Social Security's treatment of single people and how they can get Social Security's best deal.
If you were never married, the way to maximize your lifetime benefits is simple: Just wait until 70 to start taking benefits at their highest possible value. They will be as much as 76 percent higher than if you begin receiving benefits at age 62.
But most of you on the "fringe" were married at some point. It is to you that the rest of this answer is addressed.
2 Types of Benefits for the Divorced
If you are single and divorced and were married for 10 years, you and your ex are entitled to a pair of benefits: spousal benefits and survivors benefits. Both are based on the other spouse's Social Security earnings record.
There are a variety of different options for claiming Social Security, depending on the ages of the ex-spouses and their earnings records. For example, you can wait until 70 to take your own retirement benefits, but each of you, upon reaching full retirement age (65 to 67, depending on when you were born), can apply for a spousal benefit and receive half of your ex's full retirement benefit. If your ex is a high earner, this spousal benefit could amount to $15,000 a year for four years while waiting to take your own retirement.
Indeed, it's this Get-A-Free-Spousal-Benefit strategy that led to the "Ask Larry" column not long after I explained it several years ago to this page's supposedly sophisticated proprietor, Paul Solman (PBS NewsHour’s business and economics correspondent). He was eligible, but amazed that he knew nothing about this benefit. He realized that his audience would be similarly in the dark.
Here's the rub. You need to get your ex's past and projected future covered earnings record to make a proper decision about when to take your own retirement and spousal benefit. Unfortunately, Social Security doesn't give divorced people access to the earnings records of their exes.
This is really unfair, since the knowledge is so important in making a sound decision. Perhaps the men who no doubt created this no-access-to-the-ex's-earnings-records-rule were worried that revealing this information would affect alimony payments. As well it should! So, I hereby urge all readers of this column to push their members of Congress to make this information available to divorced people so they can make informed choices.
Social Security Advice for Widowed People
You can start collecting survivors benefits as early as age 60 and, as noted, the amount will be based on your deceased ex's Social Security earnings record.
Widowed people have to decide when to take their own retirement benefit and the best time to claim the survivors benefit. The path to maximizing your lifetime total is simple in theory, more difficult in practice: take one benefit before the other, based on which will ultimately be the highest.
For example, if you start receiving your survivors benefit at age 60, you'll get a reduced version, but your own retirement benefit will grow by up to 76 percent, assuming you wait until 70 to take it. Once you begin collecting both benefits, however, you'll only get the larger of the two.
So if your survivors benefit, even at its reduced level, exceeds your largest possible retirement benefit (what you can collect if you wait until 70), waiting to collect your retirement benefit will be pointless.
Instead, you'll be stuck for the rest of your life with a reduced survivors benefit. In this case, it would likely be better to take your retirement benefit early and wait until full retirement age to take your survivors benefit, when it will be at its largest possible value.
One Last Thought
My final thought is offered in jest — and to make a point about the unintentional perversities of the Social Security system.
If you're older and single, you could theoretically arrange a Social Security marriage of convenience. That is, you could get married to someone in a similar situation and within just one year, you'd both become eligible for spousal benefits on the other's earnings record. You can't both collect spousal benefits at the same time, though.
Moreover, once you have been married for only nine months, you could collect survivors benefits on your new spouse's earnings record as well, which raises the macabre possibility of the ultimate Social Security "gold digger" strategy: Marry someone who is on his or her last legs.
Like I say, I'm not actually recommending this. But it does reveal one of the many loopholes in the system.