Laurence Kotlikoff is a professor of economics at Boston University who has been answering questions and writing columns about Social Security each week for the past two years on PBS NEWSHOUR’s website. OpenRetirement has asked Professor Kotlikoff to post a Q&A each day from those columns. He has also developed software, called Maximize My Social Security, to help retirees secure the highest lifetime Social Security benefits. You can find the software here: www.maximizemysocialsecurity.com
Question: We are newlyweds (both are divorced). I am 65 and my wife is 59. I am planning to file and suspend at 66, but I have two questions. First, can my wife file for spousal benefits at 62 and then claim her own benefits at 70? And second, as newlyweds, is there a minimum number of years you must be married before filing for spousal benefits?
Answer: You have to be married for a full year before your new wife can collect a spousal benefit based on your work record and nine months before she can collect a widows benefit on your record if you pass away.
She can file at 62 for her reduced spousal benefit because you will have filed for your retirement benefit. But she’ll be deemed to be also filing for her reduced retirement benefit. And what she’ll receive will be approximately the larger of the two benefits. (To be precise, she’ll get her own reduced retirement benefit plus her excess spousal benefit reduced based on the spousal-benefit reduction factor.) Her excess spousal benefit is the difference between half of your full retirement benefit and her own full retirement benefit — augmented by any delayed retirement credits she may accumulate if she, too, suspends her retirement benefit at full retirement age to let it grow by 8 percent per year (inflation adjusted) up through age 70 or at an earlier age if she reinstates her benefit before 70.
Given the progressiveness of the formula that relates a worker’s full retirement benefit (Primary Insurance Amount) to the worker’s Average Indexed Monthly Earnings (AIME), one half of your full retirement benefit may not exceed 100 percent of her full retirement benefit (again, inclusive of any delayed retirement credits). And even if it does, the difference may be very small. Hence, by having your wife file at 62, you will A) likely either fully or mostly wipe out her spousal benefit, and B) leave her with a permanently reduced retirement benefit (even if she suspends it at full retirement age, it will restart at a lower value than had it not been suspended). Also, if she has been a higher earner than you, you may reduce the size of the widows benefit you can collect on her record if she predeceases you.
You should also be aware that since you married after age 60, you can collect a widow(ers) benefit on your ex-spouse’s work record only if you were married for at least 10 years.
What’s your best strategy? It is very likely to be as follows: A) have your wife wait until full retirement age to file just for her spousal benefit and, thereby collect a full, not an excess spousal benefit — namely 50 percent of your full retirement benefit — and, B) wait until 70 to file for her retirement benefit. And if your ex or current wife dies, you should file for your divorced widowers benefit right away, while still waiting until 70 to restart your own retirement benefit.
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When it comes to personal finance, economics and our software care about one thing—your living standard. All questions in personal finance boil down to your living standard. Your decision about when and how to take Social Security can affect your living standard throughout your retirement.
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