How late-life remarriages complicate Social Security benefits

When a widow or widower, or a surviving ex-spouse, waits until age 60 or later to remarry, they preserve the right to collect Social Security benefits on their deceased spouse’s earnings record.

If they are entitled to their own Social Security retirement benefit as well, it presents some interesting planning opportunities to maximize lifetime benefits. But matters can get complicated when a new spouse enters the picture.

Heather Piskorz, a retirement income expert and vice president of advanced markets at GamePlan Financial Marketing, asked my advice about a complicated situation where a widow who is collecting her late husband’s Social Security survivor benefit recently remarried at age 62.

The newly remarried widow intends to continue collecting survivor benefits on her late husband’s Social Security record until age 70, when she will switch to her own retirement benefit — assuming it is larger than her survivor benefit.

A survivor benefit is worth up to 100% of what the deceased worker was collecting or was entitled to collect at the time of death — assuming the surviving spouse is at least full retirement age at the time of collection. Reduced survivor benefits are available as early as age 60, but they are worth just 71.5% of the deceased worker’s benefit compared to 100% if collected at age 66.

But survivor benefits are frozen in time. They never increase — other than by annual cost-of-living adjustments — beyond the deceased worker’s entitlement.

Retirement benefits, on the other hand, continue grow by 8% per year for every year one postpones collecting them beyond full retirement age up to age 70. So by waiting until age 70 to switch to her own benefits, the widow’s own benefit would be worth 132% of her full retirement age amount thanks to four years of delayed retirement credits.

“Her new husband, who is a year older than she, wants to file for half of her Social Security benefit at his full retirement age and then switch to his own benefit at 70,” Ms. Piskorz wrote. She said she suspected this strategy wouldn’t work, but wanted to confirm her suspicions.

“Your gut instinct is correct,” I replied.

I explained that the widow is receiving survivor benefits on her late husband’s earnings record. She is not collecting her own retirement benefit. Therefore, there is no spousal benefit for her new husband to collect at this time. He cannot collect a spousal benefit until she either files for her own benefit or files and suspends at 66 to trigger a spousal benefit for him. But if she took either of those actions, she would forfeit her survivor benefit.

Although I do not know the precise dollar amounts involved, I suspect she is better off collecting her survivor benefit now and allowing her own retirement benefit to grow to the maximum amount at age 70.

Looking at the couple’s Social Security claiming decisions from a household income perspective, it may be better for the new husband to claim his benefit at 66. If his new wife’s retirement benefit would be bigger than his when she begins collecting it at 70, her larger benefit would become the survivor benefit for whichever one of them survives.

Ms. Piskorz also posed a related question.

“Let’s say the survivor benefit that the remarried widow is receiving will always be higher than any benefit she receives under her own work record, so she never switches from the widow benefit to her own retirement benefit,” she hypothesized. “Then assume she dies at 71.

“Would her new husband be entitled to her age 70 benefit (assuming it is higher than his) or her full retirement age benefit amount?”

“He would be eligible for her age 70 benefit amount, assuming it was larger than his own benefit,” I replied. “However, if her retirement benefit were not bigger than his, he would continue receiving his own benefit. There would be no survivor benefit for him to collect.”

Frank Owen, a financial adviser at FR Owen & Associates in Charlotte, N.C., posed similar questions about one of his clients, a widow who remarried after age 60 and is still collecting survivor benefits of $1,150 per month on her first husband’s Social Security record. She is now 74.

Her current husband, 73, began drawing his Social Security benefit when he was 68. He receives about $2,500 per month.

“If she claimed benefits under her current spouse’s earning record, would her Social Security benefits increase?” Mr. Owen asked. “What would happen if her current spouse dies?”

Because her current husband claimed benefits about five years ago when he turned 68, his current benefit includes about two years’ worth of delayed retirement credits plus several years of cost-of-living adjustments. I suspect his full retirement age amount was about $2,200 per month. That means the maximum spousal benefit would be half of that amount — $1,100 per month — which is less than his wife is receiving from her late husband’s survivor benefit.

But if the current husband dies first, the newly widowed wife would step up to his larger benefit — $2,500 per month — as her new survivor benefit.

(Questions about Social Security? Find the answers in my ebook.)

Mary Beth Franklin is a certified financial planner.