There are more than 2,700 rules listed in the Social Security Program Operations Manual System that govern benefits for retired and disabled workers, as well as their spouses, dependents and survivors. Although I haven't counted them up, sometimes I think half of those rules are exceptions to the regular rules.
For example, loyal
InvestmentNews readers know the general rules that allow a divorced spouse to collect Social Security benefits on his or her ex-spouse's earnings record. The marriage must have lasted at least 10 years, both spouses must be at least 62 years old and, to collect benefits as a divorced spouse, one must remain unmarried.
Assuming your clients meet the length-of-marriage, age and single-status test, they can collect Social Security benefits as if they were still married. The maximum benefit as a divorced spouse is equal to one-half of the ex-spouse's full retirement age benefit, also known as his primary insurance amount, if collected at full retirement age; less if collected earlier.
And if he or she waits until full retirement age, a divorced spouse can use one of the creative claiming strategies to restrict his or her claim to spousal benefits to collect half of their ex's benefit amount. In the meantime, his or her own retirement benefit will accrue delayed retirement credits worth 8% per year for each year they postpone collecting beyond full retirement age up to age 70.
The requirement that one must remain unmarried to collect benefits as a divorced spouse is written in stone, right? Well, not quite.
It seems there is an exception to the unmarried requirement. Social Security spokeswoman Dorothy Clark enlightened me about a little-known provision. Remember, Social Security benefits are gender-neutral. The example of an ex-wife, below, could just as easily apply to an ex-husband.
“If a divorced woman is receiving benefits on an ex-spouse's record and she remarries an individual who is receiving a widower's or divorced spouse's benefits, the divorced woman's benefits on the ex-spouse's record will not stop as a result of the remarriage,” Ms. Clark wrote in an e-mail.
So a word of caution to divorced spouses and financial advisers everywhere: take your time and pick your next mate carefully. Once you begin collecting Social Security benefits on an ex-spouse's earnings record, you can keep them if you marry someone who is also collecting benefits as an ex-spouse or as a survivor. Apparently, this rule doesn't apply if you marry someone who is collecting Social Security on his or her own earnings record. And as long as you wait until age 60 or later to remarry, you can collect survivor benefits if your ex dies — even if you are still married to someone else.
“Social Security disregards the remarriage of a surviving divorced spouse age 60 or over if the remarriage occurred after attainment of age 60,” Ms. Clark wrote. “Therefore, in this type of remarriage situation, a surviving divorced spouse who is currently married will not be precluded from receiving [benefits] on a former spouse's record.”
Of course, the ex-spouse who remarries can only collect one benefit — either the survivor benefit of her ex or the spousal benefit of her current husband — but not both. In most cases, the survivor benefit will be larger because it is worth up to 100% of the deceased ex-spouse's benefit compared to a spousal benefit that is worth up to 50% of a worker's primary insurance amount.
As long as we're talking about breaking rules, here's another one for financial advisers to tuck away.
In general, your client may be able to collect spousal benefits even if her ex has not yet collected his — as long as he is old enough to collect and they have been divorced for at least two years.
But Social Security will waive the two-year requirement if the divorced spouse is at least 62 at the time of the divorce. The minimum 10-year marriage rule and unmarried status still applies, said Mike Miller, managing director of Integra Shield Management in Plymouth, Minn.
“I have been teaching Social Security workshops for more than five years and I have a niche working with divorcees and retirees,” Mr. Miller said in an e-mail.
“I probably would have never known this if it weren't for my working in these niche groups and stumbled upon it about a year ago,” he explained.
So yes, it's important to know the basic rules about claiming Social Security benefits. But don't be surprised if there is an exception lurking in the shadows.
(Questions about Social Security? Find the answers in my new e-book - Maximising Social Security Retirement Benefits.)
