Today’s column addresses questions about how divorced spousal benefits are calculated, how state pensions can affect spousal benefits and whether COLAs apply to widow’s benefits taken years after the record holder’s death. Larry Kotlikoff is a Professor of Economics at Boston University and the founder and president of Economic Security Planning, Inc.
See more Ask Larry answers here.
Have Social Security questions of your own you’d like answered? Ask Larry about Social Security here.
Are Both Spouse’s Records Used When Calculating Social Security Ex-Spouse’s Benefits?
Hi Larry, In calculating benefits for an ex spouse, are both earnings records of the two spouses used to determine the monthly payments?
Or is only one used? For example if 50% of the ex’s benefit amount is more than the PIA on the primary claimant’s earnings record, is the final payment calculated based on both earnings records, e.g. $400 monthly on the primary claimant’s record and $75 from the ex’s earnings record, for a total of $475? Thanks, James
Hi James, If a person is drawing just divorced spousal benefits and not a combination of their own Social Security retirement benefit and divorced spousal benefits, then the divorced spousal rate would be calculated solely based on the earnings of the spouse whose record the divorced spousal benefits are paid on.
However, if a person files for their own Social Security retirement benefits and if they qualify for additional divorced spousal benefits, then earnings on both spouse’s records would be used. Their earnings histories would not be combined in any way, though. Instead, each spouse’s earnings history would be used to calculate their individual retirement benefit rates, and any divorced spousal benefits would be calculated using those individual rates.
For example, say Amy files for her benefits this year at 62. Amy’s primary insurance amount (PIA), or full retirement age rate, based on her earnings history would be $800, but Amy’s rate is reduced for age to $570. Amy’s ex is drawing his benefits, and based on his earnings history his PIA is $2,000.
Amy’s unreduced excess spousal rate would then be calculated by subtracting her PIA from 50% of her ex’s PIA. In Amy’s case, that amounts to $200 (i.e. $2,000 / 2 – $800). However, since Amy is only 62 when she becomes eligible for divorced spousal benefits, her divorced spousal rate is reduced to $132.
That amount is then paid in addition to Amy’s own reduced rate of $570 to give her a combined rate of $702 (i.e. $570 + $132).
My company’s software — Maximize My Social Security or MaxiFi Planner — accurately calculates the amounts of benefits in these and other situations so you may want to consider using it to find the strategy that yields the highest lifetime household benefit and also lets you model alternative what-if strategies to see how they compare. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry
Can I Receive Spousal Benefits Even If I Collect A State Pension?
Hi Larry, I am 67 and collect a state pension. I did not earn enough quarters to qualify for Social Security benefits. My wife is 72 and has been receiving Social Security benefits for seven years. Can I receive spousal benefits on her record even though I collect a state pension?
I tried applying twice and both times SSA stated I did not earn enough credits to qualify. But I am applying for spousal benefits so its confusing. Thanks, Rory
Hi Rory, You can apply for and potentially qualify for spousal benefits if your wife is collecting Social Security retirement benefits, but assuming that your state pension is based on your earnings that were exempt from Social Security taxes, your spousal benefits will almost certainly be offset by 2/3rds of the amount of your state pension.
In that case, if your potential spousal benefit rate is less than 2/3rds of the amount of your state pension then your spousal rate will likely be reduced to zero. The reason for such an offset is the Government Pension Offset (GPO) provision. Best, Larry
Will The Amount Of My Widow’s Benefit Be Adjusted To Account For The COLAs Occurring Until I Reach Retirement Age?
Hi Larry, My husband died at 47. We received child survivor benefits until our daughter graduated high school. Each year she got the COLA increase. I have my husband’s SSA’s estimate of benefits for the year before he died that has the amount of benefits for the spouse who reaches full retirement age.
Is that likely very close to the amount I will be eligible to receive at retirement age or is that amount adjusted to account for the COLA each year until I reach retirement age thus likely making it considerably higher? Thanks, Elizabeth
Hi Elizabeth, I’m sorry for your loss. All Social Security cost of living increases (COLA) occurring after your husband’s death will be credited when calculating your widow’s rate. There are actually two different methods of calculating widow’s benefits though, and Social Security will use the method that results in the highest rate for you. Best, Larry