Ex-wives not X'd out of Social Security survivor benefits

I dug into my mailbag today to share an interesting question about Social Security benefits from a financial adviser in Colorado Springs. Alan writes: “I have a female client age 56. She was married for over 10 years, divorced, and her former husband has died this month. Is she eligible to collect a survivor benefit? Or are survivor benefits only paid to spouses?” Great question! Because she was married for at least 10 years, she is entitled to survivor benefits based on her ex-husband's earnings record--but not yet. To collect survivor benefits as a divorced spouse, she must be unmarried and at least 60 years old. So assuming she doesn't remarry in the next few years, she could qualify for survivor benefits, which are worth up to 100% of what he collected or was entitled to collect at the time of death. (There's an exception if she remarries after age 60: she can still collect on her ex's survivor benefit or spousal benefits of her current mate, but not both). However, she still must jump through some hoops before she decides how and when to collect Social Security benefits.

Reductions may apply

The adviser doesn't mention the ex-husband's age or whether he had begun collecting Social Security benefits. I'm going to assume he was the same age as his ex-wife—56 years old—and had not yet begun collecting Social Security retirement benefits . So let's imagine the ex-husband could collect $2,000 per month at his full retirement age. Assuming they were both born in 1956, their normal retirement age for full benefits is 66 years and four months. But here's an interesting tidbit I discovered while researching the answer to this question: the normal retirement age for full survivor benefits is different! Anyone born from 1945 through 1956—including the ex-wife in this example-- is entitled to full survivor benefits at age 66 . Although the ex-wife could collect survivor benefits as early as age 60, her benefit would be reduced by .396% for every month she claimed before her normal age for full survivor benefits of 66. So if she collected at 60, she would be entitled to 71.5% of her ex's full benefit or $1,430 per month. If she waited until 62 to collect, she would be entitled $1,620 per month, which is 81% of his full benefit. Hold off until 66 to claim survivors benefits and she could collect the full $2,000 per month. But if she continues to work and collects Social Security benefits before her normal retirement age of 66 and four months, she will be subject to the earnings test. In 2012, a Social Security beneficiary loses $1 in benefits for every $2 of earnings that exceed $14,640 per year. A more generous earnings cap applies in the year you reach your normal retirement age and disappears completely once you cross that threshold. .

Two separate benefits

One final point to remember is that survivors benefits and retirement benefits represent two different pots of money. In many cases, a widow or widower, including divorced spouses, can begin receiving one benefit at a reduced rate and then at full retirement age or later, switch to the other benefit at an unreduced rate. For example, the ex-wife may want to collect reduced survivor benefits initially, subject to earnings cap restrictions, and then switch to her own retirement benefits at age 70. Why? The maximum survivor benefit will be based on her ex's maximum benefit at the time of death and will not grow if she delays collecting beyond her normal retirement age (but will be reduced if she collects early). However, her own retirement benefit will increase by 8% per year between her normal retirement age and 70. Her adviser would need to crunch the numbers to see how and when it would be more advantageous to claim benefits. One final note: even if her ex-husband had remarried, the divorced spouse is still entitled to survivor benefits and so is his widow. They do not share the benefit. They each will receive the full amount to which they are entitled.