Social Security Claiming: Ex-Spousal Benefit
An ex-spousal benefit is calculated the same as a spousal benefit. For divorced couples who may not have an amicable relationship, the Social Security Administration will provide the earnings history for an ex-spouse if given identifying information, including SSN, birth place and date, date of marriage and divorce, etc.
Case Study #1: Cathy had been married for 14 years, divorced for over 2 years and was currently single. Due to those circumstances, she was eligible to collect an ex-spousal benefit as early as 62, if that benefit was greater than her own retirement benefit.
Cathy’s work history included 28 years at a city that paid into the Public Employees Retirement System (PERS), but not into Social Security. She had also worked for other employers who did pay into Social security, however, she had only accumulated 37 of the required 40 “credits”, or quarters of coverage from that employment to make her eligible to collect Social Security.
Since she was planning to work part-time for several years, she would be able to reach the required 40 credits. However, due to the fact that she had a low number of years and earnings during which she had paid into Social Security, it was possible that her spousal benefit (50% of her ex-spouse’s PIA) might be the higher of the two benefits.
Because Cathy would be receiving a pension of $4,200 per month from the city, her Social Security benefit amount would be reduced by the Windfall Elimination Provision (WEP) rule. In addition, the Government Pension Offset (GPO) rule would apply to her ex-spousal benefit. That rule states that spousal and/or survivor benefits are reduced by an amount equal to 2/3 of the pension being collected.
Cathy’s analysis revealed that although she was entitled to an ex-spousal benefit of approximately $800, due to the GPO it would be reduced to $0. By waiting to claim her own WEP reduced retirement benefit until age 70 she would receive a cumulative Social Security lifetime income of $46,286 (present value) or $3,250 per year (today’s dollars).
If she claims at age 66 her annual income would be $2,462 (today’s dollars) for a total of $43,780 (present value) over her lifetime. Cathy now has the information she needs to make an informed decision for her claiming strategy.
Case Study #2 : John reached out to me several years ago when he was 64, almost 65. Since 65 is the age that Medicare eligibility begins, many people also believe that this is their FRA for Social Security. In fact, 65 was only the FRA for those who were born in 1937 or earlier. For most retirees today, born between 1943 and 1954, the FRA is 66. See the complete FRA explanation and table here: https://www.ssa.gov/planners/retire/retirechart.html
John was aware that waiting as long as possible to claim his Social Security benefit was the best strategy, but he didn’t realize that he was also eligible for an ex-spousal benefit. Like Cathy, he met the eligibility requirements for collecting an ex-spousal benefit since he had been married over 10 years, had been divorced for at least 2 years and was currently single.
Although John was 64, his ex-spouse was only 60 at that time and therefore he was not able to collect an ex-spousal benefit until she was eligible for Social Security at age 62. John’s analysis indicated that he should indeed file for an ex-spousal benefit at age 66 ½ when she turned 62. He would collect approximately $8,500 per year for 3 ½ years until his 70th birthday.
At age 70 John would then switch over to his own retirement benefit which would have grown by 32% from his PIA of $2,410. He felt his life expectancy was 85. John would therefore be collecting approximately $38,160 per year (today’s dollars) for a cumulative lifetime benefit of $572,400 (present value).
John evaluated his anticipated retirement expenses, income and assets available in order to determine how his retirement financial picture looked. He was surprised, as many people are, at how significant his Social Security income would be and relieved to see a good outlook on his retirement finances.
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