Today’s column won’t focus on a single topic. Instead, I’ll just reach into the mailbag (well, really my email inbox) and pull out a hodgepodge of questions.
Q: I was a minister for many years. I never paid into Social Security while serving my church. But about eight years ago, I left the ministry, and I have since worked at a series of jobs where Social Security taxes have been withheld from my paycheck. I am now 60. My 64-year-old wife has worked all her life and paid into Social Security. Her estimated full retirement benefit is $2,200 per month. Is it worth it for me to continue at these jobs to build up my own Social Security record?
A: If you are working because you like your job or because you need the income, well, then of course you should continue to work. But if you are working just to build up your Social Security account, then I suggest you quit tomorrow. And that’s because you will always get more money as a dependent husband on your wife’s Social Security record than you would ever get on your own account. I’ll explain.
You need 40 Social Security credits (some people call them “quarters of coverage”) to be eligible for Social Security retirement benefits. You earn four credits per year. In other words, you need 10 years of work to qualify for your own Social Security. It sounds as if you’d have those 10 years by the time you are 62 years old. But someone who ends up with that bare minimum of one decade’s worth of credits qualifies for a very small monthly Social Security check. My guess is what it would be about $100 per month.
On the other hand, once your wife retires, you will be due anywhere between one-third and one-half of her age-66 retirement benefit rate (depending on your age at the time your wife retires). It sounds as if that will be about $700 to $1,100 per month. And that is way more than you would be due on your own account.
Let me put that another way. Let’s say you were to get your 40 credits and end up with a Social Security retirement benefit of $120 per month. And let’s further say that you were to be due $1,100 in husband’s benefits. What would happen is that you would get your own $120 and then get $980 in husband’s benefits, for a total of $1,100. Whereas if you were not to have the 40 credits and end up with no Social Security benefit of your own, you’d still end up with $1,100 in husband’s benefits. That’s why it wouldn’t pay for you to work just to build up your own Social Security.
Q: My wife and I own a successful small business. We both delayed our Social Security payments until 70. I am now 76 and receive $2,797. My wife is 71 and receives $1,632 on her own account. All of our current business income, about $120,000 a year, flows to me. And that extra income boosts my Social Security check by about $20 per month. Would it make sense for my wife to take some of that as her salary and let it boost her Social Security check?
A: I’m not a financial planner or a tax specialist. You’d have to consult that type of person to get a proper opinion. But from solely a Social Security perspective, it makes the most sense to continue on your present course. In other words, keep building up your Social Security check. Why? Because of the potential benefit it will have for your wife in future widow’s benefits. Chances are you are going to die before she does. And when that happens, she’ll start getting widow’s benefits. Her own benefit will be supplemented by up to 100 percent of whatever you are getting at the time of your death. For example, let’s say you died tomorrow. Your wife would get her own $1,632, and then she’d get an additional $1,165 in widow’s benefits to take her up to your $2,797 rate. So again, the higher your benefit goes the more she will get in widow’s benefits when you are gone.
Q: My 88-year-old wife recently died. We were married for 12 years. She was married before and was getting widow’s benefits on her first husband’s Social Security account. Can I get her Social Security benefits now?
A: I’m not sure what you mean by “her” Social Security benefits. If you are asking whether you can get the widow’s benefits she was receiving on her first husband’s record, then the answer is no. But if your wife had her own Social Security account, you are due widower’s benefits if the amount of those benefits exceeds what you are currently getting on your own record.
Q: In a recent column, you talked about a maximum amount of Social Security that is payable to a family. My wife and I are both about to turn 66 and plan to file for our respective Social Security benefits. According to Social Security Administration estimates, I will be due $2,550 and she will be due $2,480. Will we be impacted by this maximum amount you mentioned?
A: No, you will not. The “family maximum” I discussed in a recent column applies only to Social Security accounts involving benefits for children. If, for example, you had minor children (and surprisingly, more than a few retirees still have young kids at home), there would be a limit to how much money could be paid to those children. Those “family maximum” rules are too complicated to explain here. But that’s OK, because they don’t apply to you and your wife anyway.
Speaking of maximums, however, you and your wife might want to consider the “file and restrict” maximizing strategy that I have discussed hundreds of times in this column. That is a procedure with which you, for example, could apply for husband’s benefits on your wife’s Social Security record and then, at 70, switch to 132 percent of your own benefit. Or you could turn that around. Your wife could file for wife’s benefits on your account and then, when she turns 70, start getting 132 percent of her own benefit. Give that some thought.