Tips and Strategies for Divorced Women
According to the Social Security Administration (SSA) if you are divorced, but your marriage lasted 10 years or longer, you can receive benefits on your ex-spouse’s record (even if he or she has remarried) if (1) you are unmarried, (2) you are age 62 or older, (3) your ex-spouse is entitled to Social Security retirement or disability benefits, and (4) the benefit you are entitled to receive based on your own work is less than the benefit you would receive based on your ex-spouse’s work.
Your benefit as a divorced spouse is equal to one-half of your ex-spouse’s full retirement amount (or disability benefit) if you start receiving benefits at your full retirement age (FRA) if:
- You remarry, you generally cannot collect benefits on your former spouse’s record unless your later marriage ends (whether by death, divorce or annulment).
- Your ex-spouse has not applied for retirement benefits, but can qualify for them, you can receive benefits on his or her record if you have been divorced for at least two years.
Some women sign divorce decrees relinquishing their rights to Social Security on their ex-husband’s work record. If you were married at least 10 years, those clauses in divorce decrees are worthless and are never enforced.
If you meet the requirements listed above, were married more than once and each marriage lasted ten years or longer, and you have been divorced for at least two years, you may receive benefits from the spouse you select if you are not now married again. (Make sure to inform the SSA of all your marriages that qualify you for ex-spousal benefits.) Larry Kotlikoff of Boston University provides this example, let’s say that the low-earner ex-spouse is over 62 and the high-earner ex-spouse will be 62 in several years. You could claim ex-spousal benefits on the low-earner ex-spouses work record, then when the higher earner ex-spouse turns 62 switch to the higher earner ex-spousal benefits and increase the amount of monthly benefits you receive.
All you Need is to Know Your Social Security Number
Have you lost your Social Security card? Do you need a new Social Security card? You probably don’t—as long as you know your number. For all intents and purposes, your number is your card. Usually providing your number and identifying information is enough. In the event that you really do want or need a replacement card, for yourself or for a child, you can find all the details you need at the “Social Security Number and Card” page at www.socialsecurity.gov/ssnumber. This page provides information on how to obtain a replacement card and what specific documents you need to provide. Check it out if you really need a new card. But keep in mind: You may just need to know your number. Your card is already in your head. Note: Some businesses offer Social Security name changes or cards for a fee. The Social Security Administration (SSA) provides those services for free. Do not pay for something the SSA will give you free of charge.
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Today the Social Security Administration (SSA) announced that they wanted to honor the 79th Anniversary of the Social Security Act. Carolyn W. Colvin, Acting Commissioner of Social Security, invites everyone to celebrate the first National my Social Security Week. From August 17 through 23, 2014, Social Security will host numerous events to highlight the many benefits of a my Social Security account, a personalized online account people can establish at www.socialsecurity.gov/myaccount beginning in their working years and continuing throughout the time they receive Social Security benefits.
With a my Social Security account, individuals of all ages can take control of their future by accessing their online Social Security Statement, which is a great financial planning tool that provides workers age 18 and over with their complete earnings history and estimates for future retirement, disability and survivors benefits. The Statement allows workers to verify the accuracy of their earnings each year. This is important since earnings are the basis for determining future retirement benefits.
Individuals who currently receive benefits can sign up for a my Social Security account to get an instant benefit verification letter, change their address and phone number, and start or change direct deposit of their benefit payment.
To date, over 13 million people have established an account. Events during my Social Security week include a Twitter chat on “my Social Security and Planning for Your Financial Future;” my Social Security sign-up events nationwide at local churches, libraries, federal government agencies, large employers, youth centers/organizations, senior centers, and colleges and universities; social media outreach including a Thunderclap campaign, and a National radio media tour.
Apply Only for Spousal Benefits
Spouses have “dual entitlement”. This means that a spouse who has not worked, has low earnings, or plans continue working after Full Retirement Age (FRA) can can be entitled to as much as one-half of the spouse’s retired worker’s full benefit. If you are eligible for both your own retirement benefits and for benefits as a spouse, the Social Security Administration (SSA) will always pay your own benefits first. If your benefit as a spouse is higher than your retirement benefit, you will get a combination of benefits equaling the higher spouse benefit. For example, if your spousal benefit is $1,200 per month and the benefit on your own work record is $1,000 per month. You will receive $1,200 per month ($1,000 per month in benefits from your own work record and $200 per month on your spouse’s work record.)
If you have reached your FRA, are eligible for a spouse’s or ex-spouse’s benefit and your own retirement benefit, you may choose to receive only spouse’s benefits and continue accruing delayed retirement credits (DRCs) on your own Social Security earnings record. You then may file for benefits later and receive a higher monthly benefit based on the effect of the DRCs. (Which are generally an 8 percent increase per year).
You should apply for Social Security retirement benefits three-months before your FRA birthday. Complete the online application form. State that you want benefits to start as soon as possible without any permanent reduction to your FRA benefit. In the section of the online application titled, “When to Start Retirement Benefits” answer Yes to this question, “If you are eligible for both retirement benefits and spouse’s benefits, you may choose to delay receiving your own retirement benefit and receive only the spouse’s benefit for now”.
If you make this selection, the SSA may contact you to verify details. You will receive a written confirmation of the SSA’s decision after your online Spousal Only Benefits application has been processed.
Note: If you are receiving a pension based on work where you did not pay Social Security taxes, your spouse’s benefit may be reduced. For additional information on pensions from work not covered by Social Security see http://www.ssa.gov/pubs/EN-05-10035.pdf
Filing and Suspending is a New Way to Maximize Benefits for Singles
When I present ways to maximize Social Security retirement benefits, I always feel badly for singles. It seems that the only maximization strategy for singles is to determine the optimum time to retire. Thanks to Kurt Czarnowski, a former Social Security Representative, there is a new maximization strategy for singles.
Let’s say that you are single with a full-retirement-age (FRA) of 66 and you plan on working until you are 70 years old. Kurt Czarnowski suggests that when you reach FRA you file for Social Security benefits and suspend your application. This will allow you to accrue delayed-retirement-credits (DRCs) until you actually retire at 70. (DRCs are about 8 percent per year. If you work until 70, you can increase your FRA, you will increase your benefits by 32 percent.)
The advantage of filing and suspending at FRA is this. If for some reason you need to claim Social Security before 70 you can claim benefits all the way back to your FRA. In other words, you can claim up to four years of benefits. If you do not file and suspend, and claim benefits before 70 you can only claim benefits for the previous six-months after FRA.
Thank you Kurt Czarnowski for a great claiming strategy for singles!
Applying for Social Security Benefits at the Right Time
Applying for Social Security benefits at the “right time” has always been an important personal finance strategy. Estimates indicate that many American do not apply for Social Security at the right time. Many people apply for early Social Security retirement benefits leaving about $120,000 of lifetime benefits on the table. Each year this adds up to $25 billion that could have been collected by retirees. This prompted the Government Accounting Office (www.gao.gov) to gain a better understanding of the circumstances faced by those who claim early Social Security retirement benefits.
The GAO Study provides several new insights about what makes people apply for early retirement Social Security benefits:
- Physically-demanding blue collar jobs may influence when someone claims Social Security benefits. According to the recent GAO study (http://www.gao.gov/products/GAO-14-311) individuals in physically-demanding blue collar jobs were 55 percent more likely to claim benefits prior to full retirement age (FRA) compared to those in all other occupations after controlling for other factors. See Figure 1.0 for details.
- Individuals who are out of the workforce for an extended time period of time or had longer work histories often take early Social Security retirement benefits. According to the GAO study (http://www.gao.gov/products/GAO-14-311) people who are out of the work force for a prolonged time, had long work histories or expected a shorter longevity (such as not living past age 75) are likely to claim Social Security benefits early.
The GAO study goes on to investigate what makes individuals apply late for Social Security retirement benefits
- Those who claim delayed retirement credits (DRCs). According to the GAO (http://www.gao.gov/products/GAO-14-311) people who wait to claim Social Security retirement benefits tend to have a higher income (about 45 percent after claiming benefits) than those who claimed early, and 33 percent higher at age 72. Additionally, for both early and delayed claimants, Social Security benefits accounted for an increasing share of total income as they aged.
- How the Affordable Care Act affects early retirees: According to the GAO study (http://www.gao.gov/products/GAO-14-311) “In 2014, some early claimers, especially those without access to health coverage, may benefit from certain provisions of the Patient Protection and Affordable Care Act (PPACA) intended to improve the availability and affordability of health coverage. GAO estimates that nearly a million early claimers did not have government or employer-sponsored health insurance before 2014. Of these, 14 percent may be newly eligible for Medicaid in 2014 due to expansion in 25 states and the District of Columbia and 58 percent could be eligible for tax credits that reduce the premiums for coverage purchased through the new health insurance exchanges. However, GAO estimates that 10 percent of these early claimers had incomes below the federal poverty level but lived in states that did not expand Medicaid and had incomes too low for federal exchange tax credits.”
To sum it up, those that take early Social Security retirement often need Social Security to supplement their income due being out of the work force for an extended period of time, physically unable to keep up the work tempo or faced with longevity issues. One a positive note, the Affordable Care Act allows individuals to take early retirement with greater health security. For those in good health and / in occupations that allow them to work until 70, they will gain a 32 percent increase in the amount they would have received if they had retired at FRA. (Compared to a 25 percent decrease in the FRA benefit, if the claimant takes early retirement at age 62.) There is one thing that is common to early, FRA and delayed Social Security retirees, as these individuals increase in age Social Security retirement benefits will account for an increasing share of their total income.
The Danger of Using the “Chained” CPI to Calculate Benefits is Off the Table for Now
The debate to switch to a “Chained Consumer Price Index” (Chained CPI) to determine Social Security Cost-of-Living Adjustments (COLAs) has recently eased. According to the Center for Economic and Policy Research (www.cepr.net) using the Chained CPI will result in cuts to already modest Social Security benefits, not truly be an accurate measure of the inflation rate seen by seniors, and lead to income tax increases for working Americans.
Defining CPI-U (Chained CPI)
The Chained CPI is calculated by the Bureau of Labor Statistics (BLS) and is the Consumer Price Index (CPI) to gauge inflation by measuring changes in the prices of goods and services that Americans purchase each month (for more information please see www.bls.gov/cpi/cpisupqa.htm). The nickname for this CPI is CPI-U and it is often used for income tax calculations
Social Security claimants receive annual cost-of-living increases based on the Consumer Price Index for Urban Wage Earners and Clerical Workers. COLAs ensure that benefits keep up with inflation. For more information see www.ssa.gov/OACT/STATS/cpiw.html. The nickname for this CPI is CPI-W and it is often used to determine the annual change in Social Security and veterans benefits. .
How Chained CPI will Reduce Your Monthly Social Security Benefit
The Social Security Administration (SSA) estimates that the average annual benefit in 2013 was $15,528 (www.ssa.gov/pressoffice/basicfact.htm ). This modest benefit will take a direct hit if the SSA changes to the Chained CPI.
The CEPR calculates that if the SSA were to use the Chained CPI (see www.socialsecurity.gov/retirementpolicy/projections/summary.html for details) over time this would result in substantial cuts in benefits and a three percent benefit reduction after 10-years.
Thank you for attending this event!
Kathleen Sindell, Ph.D. was featured in the DC Library Monthly Author Talks on Saturday, June 7, 2014, 10:00 to 12:00 AM ET at the West End Neighborhood Library, 1101 24th Street, NW. Washington, DC 20037 (202-724-8698). Thank you for attending her presentation on “Social Security: Maximizing your Benefits”.
It’s Not Too Late for a Little Tax Planning
Tax season is right around the corner. Here are some Social Security tax tips from the Social Security Administration (SSA) that may help you.
- If your total income, including Social Security, is $25,000 as an individual or $32,000 as a couple filing jointly, you’ll need to pay tax on some of your benefits.
- If you get Social Security and don’t receive your 1099 from us by the end of January, request one at www. ssa. gov/1099.
- Have children? Your child needs a Social Security Number to be claimed on your tax return. Learn more about getting one at www.ssa. gov/ssnumber.
- You’ll want to let Social Security know if you changed your name in the past year, due to marriage, divorce, or any other reason.
- Check your W-2s and tax paperwork to make sure your name and Social Security number are correct.