Mary Beth Franklin

Retirement 2.0blog

Mary Beth Franklin - also known as the 'client whisperer' - on what your clients really want when they talk about retirement.

Test how much you know about Social Security

See if you can answer the most common questions clients pose on their benefits

By Mary Beth Franklin

May 23, 2014 @ 12:31 pm (Updated 2:18 pm) EST

In case you missed my previous blog, let me recap. I've just returned from the annual InvestmentNews Retirement Income Summit, held May 12-13 in Chicago. It was a great opportunity to connect with my readers.

But as this was the fourth year that I have presented at the summit explaining basic Social Security rules and claiming strategies, I decided to change things up a bit. So instead of taking questions from the audience, I turned the tables and asked the audience questions.

(Click here to access Mary Beth Franklin's new e-book, "Maximizing Your Clients' Social Security Retirement Benefits)

It was a great success and several attendees asked me to share the questions and answers as real-life case studies of client situations. Here are the rest of the questions that were discussed during the session:

Question #6

Does claiming a reduced spousal benefit early affect the survivor benefit amount?

Answer #6

Not necessarily. Retirement benefits and survivor benefits represent two different pots of money. Even if you collect reduced retirement benefits early, survivor benefits will not be reduced if you are at least full retirement age when you collect them.

Question #7

Take a married couple where both spouses are 62 years old and neither has claimed Social Security. The husband dies at 62. The wife is still working and earns about $50,000 per year — substantially less than her late husband's earnings. Should she claim survivor benefits now?

Answer #7

Probably not. Although she can claim survivor benefits now, they would be reduced because she collected them four years early. Plus, she is subject to the earnings cap and could lose nearly all of her benefits. She may want to wait until she turns 66 when the earnings test no longer applies to collect full survivor benefits.

Question #8

Would collecting survivor benefits at 66 affect her ability to accrue delayed retirement credits on her own benefits at 70?

Answer #8

No. She could switch to her own benefit — worth 132% of her primary insurance amount or PIA at 70 — if that would produce a bigger benefit. Retirement benefits and survivor benefits are two separate pots of money.

Question #9

Assume both spouses are 62 and neither has begun collecting benefits. The higher-earning husband dies at 62. The wife works part time and earns about $15,000 per year. Should she claim survivor benefits now?

Answer #9

Because her personal retirement benefit is smaller than her survivor benefit, she may want to collect reduced retirement benefits now and hold off until 66 to collect full survivor benefits. That will lock in a larger benefit for the rest of her life. But she should not delay collecting survivor benefits beyond age 66 because they will never grow any larger, as survivor benefits do not accrue delayed retirement credits.

Question #10

Assume a 62-year-old father has a 14-year-old child. He wants to file and suspend to trigger benefits for his son while his own benefits continue to grow up until age 70. Can he do that?

Answer #10

No. If he wants to file and suspend, he must wait until his full retirement age of 66 to claim benefits. Given that the boy will be 18 by then and too old to collect dependent benefits, the father may want to claim reduced benefits early, assuming he is no longer working.

But if he continues to work while collecting Social Security, he will be subject to earnings cap restrictions, which could reduce his benefits and that of his dependents, too. Social Security will withhold $1 in benefits for every $2 earned over $15,480 as of 2014 for any year the recipient is younger than full retirement age for the entire year. A higher earnings cap applies in the year he turns 66 and disappears after his 66th birthday.

Question #11

Can a divorced woman, who was married for more than 10 years, collect benefits on her ex-husband's earnings record?

Answer #11

Yes, if they are both at least 62 years old, she can claim Social Security benefits based on her ex-husband's earnings record. If she is entitled to her own benefits, Social Security will pay those first. If her spousal benefit is larger than her retirement benefit, SSA would top off her benefit to bring it up to that larger amount, reduced for collecting before full retirement age.

If she wants to restrict her claim to spousal benefits only to allow her own benefits to continue to grow up to age 70, she must wait until 66 to claim. In addition, if she wants to claim benefits, but her ex-spouse has not yet collected his benefits, she must have been divorced for at least two years.

Question #12

A husband and wife are married for 20 years before they divorce. The husband remarries and later dies. The first wife does not remarry. Is the first wife entitled to survivor benefits from her ex-husband or does she have to share them with his widow?

Answer #12

As long as the first wife is unmarried, both she and the second wife are each entitled to full survivor benefits assuming they are both eligible. To collect survivor benefits, they must be at least 60 years old. Regardless of age, they can collect survivor benefits if they are caring for the deceased worker's child who is under age 16.

Question #13

If a surviving spouse remarries after age 60, can she keep her survivor benefits?

Answer #13

Yes, as long as a surviving spouse waits until age 60 or older to remarry, she can continue to receive survivor benefits. But she may also be entitled to spousal benefits based on her new mate's earnings record after one year of marriage. She can collect one or the other benefit, but not both.

Question #14

Assume both spouses are age 66 and want to defer collecting benefits until they turn 70. In the meantime, can they collect spousal benefits on each other?

Answer #14

I get this question all the time. The answer is no. In order to restrict a claim to spousal benefits beginning at full retirement age or older, the other spouse must have claimed benefits or have filed and suspended benefits. If neither claims benefits, there is no spousal benefit to claim.

Question #15

Assume a married couple where the 70-year-old husband is collecting Social Security but the 68-year-old wife is still working and plans to claim benefits at 70. She is leaving money on the table. What should she do?

Answer #15

She should immediately file a restricted claim for spousal benefits only and collect half of her husband's full retirement age benefit. Plus, because she is older than full retirement age, she can request a lump sum payment of six months of retroactive benefits.

Question #16

Normally lump sum payouts are limited to six months of retroactive benefits beginning no sooner than full retirement age. But there's an exception. What is it?

Answer #16

If you file and suspend at full retirement age or older and later change your mind, you can request a lump sum payout back to the beginning of the suspension period in lieu of delayed retirement credits. This can be a very valuable strategy for single individuals who plan to postpone benefits but later face a health or financial crisis where a lump sum payout would come in handy. In most cases, married couples would be better off accruing delayed retirement credits to maximize the eventual survivor benefit.

Question #17

A husband files and suspends to trigger spousal benefits for his wife. Once she begins collecting spousal benefits, he wants to file a restricted claim to collect half of her benefits. Can he do that?

Answer #17

No. Each person is entitled to one Social Security election. You can claim benefits, you can file and suspend, or you can file a restricted claim for spousal benefits. But once you make an election, you don't get a second choice. Don't be greedy!

Question #18

Your client claims reduced Social Security benefits at 62. Six months later, you convince him it's not a good idea. Can he change his mind?

Answer #18

Yes, within 12 months of first claiming benefits, he can withdraw his application for benefits by filing Form 521. He must repay all the benefits he has received — including any benefits paid on his record such as spousal benefits. Then he can start over again later, collecting a larger benefit based on his age at the time of the new claim.

If you're looking for a one-stop answer to your Social Security questions, you're in luck. My new ebook for financial advisers is now available.