One of the biggest decisions retirees have to make is, deciding when and how to claim Social Security benefits. Despite changes to two rules that took effect in 2016, there are still opportunities abound to maximize lifetime benefits for married couples, divorced spouses, survivors and dependents.
First, let’s go over what changed in 2016. Individuals who were at least 66 years old and who filed and suspended their benefits by the deadline, April 29, 2016, are grandfathered under the old rules. The one date you need to know about the new rules for married couples and divorced spouses: Jan. 1, 1954. Eligible individuals who were born on or before that date can still claim only spousal benefits when they turn 66 and collect half of their mate or ex-mate’s full retirement age benefit while their own retirement benefit grows by 8% per year. At 70, when the delayed retirement credits end, they can switch to their own maximum benefit. Also, the action triggered benefits for a spouse or dependent child, even if the family members become eligible for benefits after the deadline. Meanwhile, the worker’s own retirement benefit continues to grow by 8% per year up to age 70.
People born after Jan. 1, 1954 will never get the chance to choose to claim only spousal benefits. Whenever they claim Social Security, they will be “deemed” to file for all available benefits and be paid the highest amount to which they are entitled based on their age at time of claim, whether on their own earnings record or as a spouse. Even with the demise of the spousal-benefit-only strategy for future retirees, it is still important for married couples to coordinate their Social Security benefits. The spouse with the higher benefit should delay claiming up to age 70 to create the largest possible retirement benefit, which will translate into the largest possible survivor benefits for the spouse that remains.
Deeming rules do not apply to widows and widowers. Surviving spouses who are entitled to their own retirement benefits can claim one type of benefit first and switch to the other later, in either order, if it would result in a bigger benefit. Survivor benefits are worth up to 100% of the deceased worker’s benefits, but they do not earn delayed retirement credits. They are worth the maximum amount if claimed at full retirement age.
Ex-spouses who were married at least 10 years, divorced and currently single can collect on their ex’s Social Security record as if they were still married. Divorced spouses born on or before Jan. 1, 1954, can claim only spousal benefits — even if their ex has not yet claimed benefits — if both former spouses are at least 62 years old and they have been divorced at least two years. Ex-spouses born after that date must file for their highest benefits based on their age at time Normally, survivor benefits end when a widow or widower remarries. However, if a surviving spouse or surviving divorced spouse waits until age 60 or later to remarry, they can continue to collect survivor benefits on their late spouse or late ex-spouse even while married to someone else.
If a worker receives Social Security disability benefits, the worker’s spouse — or ex-spouse — may be entitled to spousal benefits worth up to half of the disabled worker’s benefit amount. Disability benefits automatically convert to retirement benefits at full retirement age, but the amount remains the same.
Minor children under age 18 or permanently disabled adult children may be entitled to dependent benefits worth up to 50% of the parent’s retirement or disability benefits and survivor benefits after the death of the parent worth up to 75% of the parent’s benefit amount. Each dependent’s benefits can be reduced if combined family benefits exceed maximum limits that range from 150% to 180% of a worker’s basic benefit amount.
Anyone who collects a Social Security benefit — as a retired worker, spouse, dependent or survivor — before full retirement age and continues to work is subject to earnings restrictions. In 2017, they would forfeit $1 in benefits for every $2 earned over $16,920 if they are under full retirement age for the entire year. Earnings limits do not apply to investments or pensions and disappear at full retirement age.
Social Security beneficiaries can change their mind and withdraw their application for benefits within the first 12 months of claiming them. But there’s a catch. They must repay all the benefits they have received and any family benefits collected on their earnings record. Later, they can restart their benefits at a higher amount based on their new claiming age.
If they miss that 12-month window, they can voluntarily suspend benefits — but not repay — to earn delayed retirement credits of 8% per year up to age 70. They cannot collect any benefits during the suspension period nor can anyone collect benefits on their record during that period