By Russell Gloor
AMAC and AMAC Foundation
Dear Rusty: I turned 65 earlier this year, and I still work full time. I was divorced four years ago after 38 years of marriage, but my ex-husband has been collecting Social Security for at least 10 years now. Can I start collecting Social Security and still work full time? And can I collect my ex-husband’s amount if it is more than mine (and what is the best way to achieve this)? When I went to my local SSA office, they said they had no way of knowing that.
Credit: Unsplash/Neel
-Signed, Working Divorcee
Dear Working Divorcee: Although you are eligible to claim Social Security at age 65, because you are working full time you may wish to wait a bit longer to do so. That’s because Social Security has an “earnings test” which applies to anyone who collects benefits before full retirement age, and you have not yet reached yours.
The earnings test imposes a limit on how much you can earn before SS takes away some of your benefits. If you exceed the annual earnings limit ($22,320 for 2024), Social Security will want back $1 in benefits for every $2 you are over the limit and you will need to repay that, usually by having future benefits withheld. If you significantly exceed the limit, you may even be temporarily ineligible to receive SS benefits until you either earn less or reach your full retirement age (FRA) of 66 years and 8 months. So, if your earnings from working will significantly exceed the annual earnings limit (which changes yearly), it’s likely that your wisest move would be to wait longer to claim your Social Security. As a bonus for doing so, your monthly payment will have grown and will be higher when you claim later. The earnings test no longer applies after you reach FRA.
Regarding benefits from your ex-husband, you cannot collect his instead of yours. What you may be able to do, when you claim your own benefit, is to get an additional amount which brings your monthly payment up to 50 percent of his. In order for that to happen, you would need to satisfy the following criteria:
• You are not currently married.
• The personal benefit you are entitled to at your FRA must be less than 50 percent of your ex-husband’s FRA entitlement.
If the above are true, when you claim your own SS retirement benefit you will also get a “spousal boost” to bring your payment up to what you’re entitled to as an ex-spouse. The amount of the spousal boost, if you claim Social Security at your FRA, will be the difference between half of his FRA entitlement and your FRA entitlement. If you claim your benefit before your FRA, not only will your own benefit be reduced for claiming early, but the amount of your spousal boost will also be reduced (benefits claimed before FRA are always reduced).
Whenever you decide to claim Social Security, you will be automatically deemed to be filing for benefits from your ex-husband as well (you shouldn’t need to apply separately). You’ve already satisfied the basic criteria of at least 10 years married to get benefits from an ex-spouse and, if you satisfy the above criteria as well, you will be entitled to a spousal boost when you claim. But your current earnings from working full time will likely affect your eligibility to collect Social Security benefits at this time, so waiting until your full retirement age to claim may be your best choice.
If Social Security will be a major part of your retirement income, then waiting to get a higher monthly benefit may be a prudent strategy for you.
If you will only slightly exceed the annual earnings limit you can consider claiming earlier, as long as you are comfortable with receiving a permanently reduced amount, and the prospect of not getting benefits for a number of months if you exceed the earnings limit (the number of months you will go without benefits depends on how much you exceed the limit by).
Dear Rusty: I am 64 years old and having difficulty working due to my arthritis, but I can continue part time as a podiatrist. I do not know the best way to determine when to retire. What is the formula or a way to determine which is a better choice?
–Signed, Undecided
Dear Undecided: There is a difference between deciding when to retire from working and deciding when to claim your Social Security benefits. For the former, you should consult with a certified financial advisor, but I’ll provide you with how Social Security fits into your personal circumstances. In deciding when to claim Social Security, you should look at your financial needs, your life expectancy, your work status, and your marital status. There is no one formula right for everyone because everyone’s circumstances are different, but here are some things to help decide what is right for you:
• Social Security has an “earnings test” which applies to anyone who collects Social Security before reaching their full retirement age (FRA). Your FRA is 66 years and 8 months, and that is the point at which you get 100 percent of the SS benefit earned from a lifetime of working. If you collect SS before your FRA and continue to work, there is a limit to how much you can earn without jeopardizing your benefits. For example, the earnings limit for 2023 is $21,240 and, if that is exceeded, SS will take away benefits equal to $1 for every $2 you are over the limit. They “take away” benefits by withholding future payments until they recover the penalty for exceeding the limit. If your earnings are substantially over the limit, you will be ineligible to collect Social Security until either your earnings are less, or you reach your FRA.
• If you claim SS before your FRA your benefit amount will be permanently reduced. If, for example, you claim SS to start at age 65 your monthly benefit will be about 89 percent of what it would be at your FRA. That reduced benefit would not change thereafter except for Cost of Living Adjustments (COLA) usually granted annually.
• If Social Security will be a major part of your retirement income, then waiting to get a higher monthly benefit may be a prudent strategy for you. The longer you wait to claim the more your benefit will be. Your SS benefit will continue to grow until you are 70 years old, and at 70 your monthly benefit will be about 27 percent more than it would be at your FRA. Your maximum SS benefit will be attained at age 70 but waiting until age 70 to claim is only prudent if you anticipate a long life expectancy.
• Life expectancy is a very important factor in deciding when to claim SS. If you claim at age 70 instead of at your FRA, you will need to live until you are about 83 to breakeven moneywise. If you live even longer than that, then waiting until 70 will yield the highest monthly amount and the most in cumulative lifetime benefits. But if your anticipated life expectancy is less, claiming earlier may be a better choice.
• If you are married and expect your wife to survive you, consider that the benefit your wife can get as your widow will be based on your SS benefit when you die, thus the longer you wait to claim the more your wife’s benefit as your widow may be. If you predecease your wife, her benefit will be based on the amount you were receiving at your death if that is more than her personally earned SS benefit.
So, as you can see, deciding when to claim Social Security Is a decision to be made after carefully evaluating your personal circumstances as described above. I hope this provides what you need to make an informed decision, but if you have further questions, please contact us at SSAdvisor@amacfoundation.org, or at 1 (888) 750-2622.
Russell Gloor is the national Social Security advisor at the AMAC Foundation, the non-profit arm of the Association of Mature American Citizens.
This article is intended for information purposes only and does not represent legal or financial guidance. It presents the opinions and interpretations of the AMAC Foundation’s staff, trained and accredited by the National Social Security Association (NSSA).
NSSA and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity. To submit a question, email ssadvisor@amacfoundation.org.