TRICKY LITTLE DIVORCE LOOPHOLE CAN ALTER SOCIAL SECURITY BENEFIT
Q:
I was married almost 13 years to my previous husband. He claimed Social Security when he turned 62 and then passed away seven months later in 2012. I have remarried. If I divorce my husband when I am 59, claim my late husband’s Social Security at 60 and then remarry my husband after that, will that work? I am currently 52. My current husband will take his Social Security next December when he turns 62. — Teresa Wheeler, Shoreacres, Texas
A:
Technically, your plan will work, says Andy Landis, author of Social Security: The Inside Story, 2016
Edition. “As you know, you are ineligible to get surviving divorced spouse benefits because of your remarriage,” he says. “The exception is if you remarry after you turn 60.”
Landis reports the SSA’s Program Operations Manual System simply says you must be “unmarried … or have remarried but the marriage can be disregarded.” It explains that a remarriage can be disregarded if it occurred “after attainment of age 60.”
“The bottom line is that it appears your plan will work,” says Landis, who is quick to add a note of caution. “Be sure your divorce is final before you remarry, or SSA might consider it the same marriage.”
Note, too, these related issues, Landis says: One, before your full retirement age (67 in your case), your payments would be reduced, and work income could further reduce your payments. Two, taking your own Social Security could reduce or eliminate your widow’s payments. Three, run your plan past a Social Security claims rep before you commit.
Q:
If I claim Social Security at age 62 but continue to work, do my earnings factor toward the 35 years where I earned the most? Also, I understand that if I’m younger than full retirement age and earn more than certain amounts that my benefit will be reduced. Are those benefits lost or reimbursed later at full retirement age? — Ken Gee,
Belmont Calif.
A:
“Social Security uses the highest 35 years of Social Security earnings to calculate your retirement ben-
efit,” says Stephen Stellhorn, author of Navigating the Maze of Social Security: Claiming Strate
gies for Fifty Shades of Grey. “This is irrespective of how many years you have contributed into Social Security. So if the earnings you are now receiving after age 62 are higher than any of your previous 35 years, Social Security will substitute those new earnings into their calculation — dropping the lowest year’s earnings — and adjust your future benefits.”
As for your second question: “Some of your earnings may be subject to Social Security’s earnings cap restriction,” Stellhorn says. “This could reduce or completely eliminate your retirement benefits, depending on the amount of wages you earn. The earnings cap restriction applies only to gross wages and does not include other income such as other government benefits, investment earnings, interest, pensions, annuities and capital gains.”
If you are under full retirement age for the entire year, Uncle Sam deducts $1 from your benefit payments for every $2 you earn above the annual limit. For 2016, that limit is $15,720.
In the year you reach full retirement age, Uncle Sam deducts $1 in benefits for every $3 you earn above a different limit. In 2016, the limit on your earnings is $41,880, but the Social Security Administration only counts earnings before the month you reach your full retirement age.
Stellhorn gave this example: Let’s assume you plan on earning $45,000 in 2016. This is $29,280 over the 2016 limit of $15,720. Your loss in benefits would be $14,640 ($45,000 - $15,720 = $29,280 /2 = $14,640) for all of 2016. So, if your reduced monthly retirement benefit from Social Security is $1,220 or less each month, you would receive no Social Security payments because of the earnings cap.
Now, if your Social Security payments are either reduced or lost completely, do you lose this money?
“Don’t worry,” Stellhorn says. “The answer is no. Those dollars are deferred. Social Security will recalculate your benefits once you reach your full retirement age to account for those deferred benefits from previous years.”
“Social Security uses the highest 35 years of Social Security earnings to calculate your retirement benefit.”
Stephen Stellhorn, author of Navigating the Maze of Social Security: Claiming Strategies for Fifty Shades of Grey