Boston University economist Larry Kotlikoff has been answering Social Security questions for PBS for over three years. His book (co-authored with PBS NewsHour’s Paul Solman and Money.com columnist Phil Moeller), Get What’s Yours: the Secrets to Maxing Out Your Social Security, was a New York Times bestseller. He is also the developer of Maximizemysocialsecurity.com, a Social Security benefit maximization tool. Here is Larry’s answer to this week’s ‘Ask Larry’ Social Security question. Please click on this link to pose your own questions and see Larry’s previous Q&As.
I’m 57 and employed full-time. I am divorced and a widow from a second marriage. Can I collect a widow’s pension [from Social Security] at 60 and switch to [a benefit from] my ex-spouse or my own Social Security at 62? 65?? And then take my highest Social Security retirement benefit at 70?
You can collect a widow’s benefit based on your deceased husband’s work record and you can do so as early as 60 (50 if you are collecting disability benefits).
Let’s first ignore your ex. You can collect a widow’s benefit based on your deceased husband’s work record and you can do so as early as 60 (50 if you are collecting disability benefits). Then you can wait until 70 to collect your retirement benefit at its highest value, which will be over 70 percent higher than if you take it at age 62.
But is this optimal? Maybe and maybe not.
First, if you have a low maximum age of life — say, age 80 — it could be best to take your widow’s benefit at 60 and your retirement benefit before 70, possibly as early as Full Retirement Age (in your case, that’s a couple of months after reaching 66).
Second, your retirement benefit at 70 may be lower than your unreduced widow’s benefit. In this case, taking your retirement benefit first, at age 62, will be best and then you’d take your widow’s benefit when it reaches its maximum starting value.
When is that? It’s when you reach your Full Retirement Age — provided your deceased husband didn’t take his retirement benefit early. If he did, your widow’s benefit will max out up to several years before you reach Full Retirement Age thanks to the widow’s “RIB-LIM” benefit formula; RIB-LIM is shorthand for the retirement insurance benefit limit.
Third, if between ages 60 and 66 you will still be working and earning enough to lose some or all pre-age 66 benefits under Social Security’s earnings test, things get even more complex. The earnings test could flip the advantage when the RIB-LIM applies of taking your retirement benefit first and your widow’s benefit second.
Figuring out what’s best in this case requires running precise Social Security benefit maximum software that takes full account of the earnings test, widow’s benefits, the RIB-LIM formula and Delayed Retirement Credits. Social Security doesn’t have any online software to help you with this.
The Divorced Part of the Equation
Now, let’s consider that you are divorced. If you were married for 10 years, you can collect an excess divorced spousal benefit if a) your ex has reached age 62 when you file for it and b) half of your ex’s full retirement benefit exceeds 100 percent of your full retirement benefit inclusive of any Delayed Retirement Credits (the extra money you get for delaying claiming Social Security between Full Retirement Age and age 70). If “b” is not the case, your excess spousal benefit is zero.
Why do I say excess divorced spousal benefit and not simply divorced spousal benefit? Under the new law passed in November, you were born too late to file for a divorced spousal benefit without simultaneously filing for your own retirement benefit.
And in cases such as yours, when you file for your divorced spousal benefit, you get your retirement benefit — reduced if you take it before Full Retirement Age or increased if you take it after — plus your excess spousal benefit, which will also be reduced. You can file for your retirement benefit first and your widow’s benefit second or vice versa.
The Ex-Widow’s Part of the Equation
So what to do in your situation in which you also have a dead ex? There are three cases to consider.
First, let’s assume your excess divorced spousal benefit is zero. Then you can forget about your ex unless he dies, in which case your divorced widow benefit or divorced excess widow’s benefit will come into play.
But let’s leave aside the possibility that your ex is about to become your dead ex and focus on the fact that you can’t ever receive an excess divorced spousal benefit. In this case, you’re in the same boat as not having an ex at all.
Now for case two — your excess divorced spousal benefit is positive, but only leaving out Delayed Retirement Credits. In this case, if could be optimal to collect your widow’s benefit at 60 and to wait until Full Retirement Age to collect your own retirement benefit plus your excess divorced spousal benefit. Or it could be optimal to wait until 70 to collect just your own retirement benefit, since at that point, your excess divorced spousal benefit will be zero.
Which is best depends on the size of the excess widow’s benefit and the size of your full retirement benefit.
Finally, case three – your excess spousal benefit is positive, even at age 70. In this case, taking your widow’s benefit at 60 and your own retirement benefit as well as an excess divorced spousal benefit at Full Retirement Age will be best.
The last case to consider is if your excess divorced spousal benefit is positive and the sum of your own retirement benefit at Full Retirement Age plus your excess divorced spousal benefit at 70 is positive, but less than your widow’s benefit when it maxes out. In this case, it will be best to take your retirement benefit as well as excess spousal at 62 and your widow’s benefit when it maxes out.
Running yourself through optimal Social Security software as a) widowed but not divorced and as b) divorced but not widowed should give you the information you need to sort this out. If not, contact my company at Maximizemysocialsecurity.com and we’ll help you sort this out with our Expert Review Service.
Sorry for the long answer, but Social Security doesn’t make our lives simple.
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