Serial spouse has several Social Security claiming options

With gray divorce on the rise among American couples who are 50 and older, it’s important for financial advisers to be aware of the complicated Social Security rules regarding claiming options for ex-spouses and surviving ex-spouses.

One reader recently asked for advice on his mother-in-law’s Social Security claiming options. She's 64 and doesn't have the minimum of 40 quarters of covered earnings needed to claim Social Security benefits on her own earnings record. But his mother-in-law was married twice and divorced twice, which gives her several ways to tap into her exes’ Social Security benefits and enroll in Medicare.

“She is looking to retire in the next one to two years,” the reader wrote. “She was married to her first husband for over 10 years and remarried at the age of 49 to her second husband for 12 years, from whom she has since divorced. Her first husband remarried, but he is now deceased. She is trying to claim ex-spousal benefit, but we are not sure which spouse to claim it from and how to get started.”

There is certainly a Rubik’s cube worth of Social Security rules to unpack in this scenario: married, divorced, married, divorced, widowed.

Because both of her marriages exceeded the minimum requirement of at least 10 years of marriage to be eligible to claim Social Security benefits as a divorced spouse, she can collect benefits on either ex-spouse. A divorced spouse can apply for benefits on a former spouse’s record even if he or she hasn’t retired, as long as the couple has been divorced at least two years before applying.

Normally, if you remarry, you lose the right to collect benefits on your former spouse’s record unless your later marriage ends by annulment, divorce or death. Since her second marriage ended in divorce, she is now free to claim survivor benefits on her first ex-spouse. And even though her first ex remarried, she can still claim survivor benefits and it won't affect the amount of survivor benefits that his second wife receives.

Because retirement benefits and survivor benefits represent two different pots of money, the woman in this case can choose to collect reduced spousal benefits first and switch to full survivor benefits at her full retirement age.

Spousal benefits are worth 50% of a working spouse’s full retirement age benefit amount if the spouse claims at her full retirement age or later. Survivor benefits are worth 100% of what the deceased spouse was receiving or entitled to receive at the time of death — assuming the surviving spouse is at least full retirement age.

Both spousal and survivor benefits are available earlier — as young as age 62 for spousal benefits and age 60 for survivor benefits — but in both cases, benefits are permanently reduced if claimed before full retirement age.

But even if she claims reduced spousal benefits first, and those retirement benefits are permanently reduced for claiming early, it will have no impact on her survivor benefits if she waits until her full retirement age to claim them.

There’s another wrinkle. Some people who were born in 1955 or later have different full retirement ages for retirement benefits and survivor benefits. Assuming the reader’s mother-in-law was born in 1957, her full retirement age for receiving retirement benefits as an ex-spouse is 66 and 6 months, but her age to receive full survivor benefits is 66 and 2 months.

So her optimum strategy would be to collect reduced spousal benefits now and switch to full survivor benefits later. But if she is still working, she would be subject to earnings restrictions that could reduce or even eliminate her benefits if she earns more than $18,960 this year. In that case, she should wait until she retires in the next year or two to collect reduced spousal benefits when she would no longer have to worry about restrictions on earned income.

Later, she could switch to full survivor benefits on her other ex-husband’s record when she reaches her full retirement age for survivor benefits of 66 and 2 months. And if her second ex-husband dies, and his survivor benefits are bigger than those of her first ex-husband, she could switch again.

Finally, because she is an eligible divorced spouse, she can enroll in Medicare at age 65 on her ex-husband’s earnings record.

For information on what you need to apply for a divorced spouse’s benefits, see www.ssa.gov/forms/ssa-2.html.

(Questions about new Social Security rules? Find the answers in Mary Beth Franklin’s new ebook at Maximizing Social Security Benefits)