I'm often contacted by CBS MoneyWatch readers regarding questions they have about retirement and Social Security benefits. Recently I heard from Mary, about the benefits she might expect to receive based on her former husband's earnings. If you're in this situation, the answer I gave her may help you understand your options.
"Would you please explain how this works: My ex-husband has earned and paid the maximum amount into Social Security for his entire career. He was born in 1950, and I was born in 1951. I have struggled economically for the past few years, as many have. I was a stay-at-home mom for a number of years, and although I'm seeking work now, I'm currently unemployed. I would really like to know what Social Security benefits I could expect to receive based on his benefits.
Also, I'd like to know if I'm able to work to supplement my income and still collect Social Security?"
If you were married for 10 years or more and then got divorced, you're entitled to receive an income from Social Security that is based on 50 percent of your ex-spouse's Social Security benefits. The exact amount you'll receive depends on your age when you start drawing benefits.
To estimate the Social Security income Mary's ex will receive, I used the Quick Calculator on the Social Security Administration website. According to this calculator, the monthly income for someone born in 1950 who has always paid the maximum into Social Security will be about $2,450, starting at that person's Full Retirement Age (FRA), which is age 66.
The monthly income Mary will receive is 50 percent of that amount -- $1,225 -- starting at her FRA, which is also age 66. She can start her income as early as age 62, but in that case, her income would be reduced permanently by 30 percent, resulting in an income of about $858 per month. FYI, there's no increase for starting the spouse's benefit after age 66.
Note that the above monthly amounts are in today's dollars; they will be increased for future cost of living adjustments (COLAs).
But how do you decide if you should start your Social Security spousal benefits at age 62 or delay them until age 66? Here's the pure financial answer: If you think you'll live until age 78 or later, you'll get more income over your lifetime by delaying until age 66. If you need the money now to make ends meet, however, you might decide to start your Social Security income as soon as possible.
Mary's second question was this: Can she work to supplement her Social Security income without affecting her Social Security benefits? For all of us, the answer depends on our age. Once we've attained our FRA, we can earn as much additional income as possible and not reduce our Social Security income. However, if we're collecting Social Security income before our FRA, Social Security applies the earnings test. If our annual income from wages is more than $14,160, then our Social Security income is reduced by $1 for every $2 that our wage income exceeds $14,160. The earnings test doesn't depend on the age at which you started your benefits; if you start benefits before your FRA, the earnings test only applies before your FRA, and it doesn't apply after attaining your FRA. There's a more complicated test for the year in which you attain your FRA. The earnings test is another reason to delay Social Security benefits until age 66.
Here are a few more things to be aware of:
- If your own wage earnings produce a larger benefit than the spouse's benefit, then you'll receive your own benefit instead of the spouse's benefit. You can't collect both.
- The fact that you collect a spouse's benefit on your ex's earnings record does not impact his benefit in any way. In fact, he can remarry and his wife can receive a Social Security spouse's income as well.
Mary, thanks for your questions. Answering them helps other readers learn more about their own income from Social Security. While it's most likely you'll need the wage income to supplement your Social Security, those benefits can help you make ends meet. And good luck with your job search!
Image from iStockphoto contributor Kameleon007
More on MoneyWatch:
- Planning Your Retirement: How to Take Spousal Benefits
- Retirement: What You Need to Know About Social Security
- Boost Your Social Security Payout by $100,000
- Yes, Social Security Will Be There For You