The complexities of social security planning unfortunately do not end with the over 2,700 rules which govern retirement benefits or with knowing the 567 possible filing strategies available to a typical couple. Assuming you have survived this mine field of complexity you still have to contend with fully understanding social security terminology. Failure to do so could cost you tens of thousands or even hundreds of thousands of lost benefits that you may have been eligible for.
One clear example is knowing the difference between being "eligible" versus "entitled" for benefits. These terms certainly sound similar but they have a significantly different meaning in the social security world, a strange and confusing world indeed!
One example of where the the difference between "eligible" versus "entitled" could have a profound effect is in divorce benefit planning. For example, if a woman divorced her husband she may be eligible for ex-spousal benefits off of her former husband's benefit amount. She could receive up to 50% of his full retirement age benefit or 100% of his benefit amount if he pre-deceased her. To qualify for these benefits they had to have been married for at least 10 years and both ex-spouses would have to be at least 62 years old when filing for benefits.
If, however, the ex-wife were to get re-married she would no longer be eligible for ex-spousal benefits. As a general rule, re-marriage will nullify receipt of any benefits from your ex-spouse. There are a couple of exceptions to this rule (which I will write about in a future blog) but today I want to focus on an example of how getting re-married and being "eligible" versus being "entitled" to ex-spousal benefits could also profoundly affect your benefits.
Assume a divorced woman is age 66 and collecting ex-spousal benefits off of her ex-husband. Her boyfriend is age 64 and is still working. He too is divorced and is "eligible" to collect ex-spousal benefits off of his ex-wife. He can't do so now because his income is too high and, because of the earnings test, he would not be paid any ex-spousal benefits. He plans to file for these benefits when he turns age 66 and the earnings test no longer applies.
They both, however, would like to get married now but if they did so she would no longer be "entitled" to collecting her ex-spousal benefits and he would also no longer be "eligible" for ex-spousal benefits. As a general rule, re-marriage nullifies ex-spousal benefits. What can they do, if anything?
Here's a possible solution. If they wait until the boyfriend turns 66 and then files for his ex-spousal benefit he will be deemed to be "entitled" to benefits and no longer just "eligible" for benefits. By actually filing for benefits he will become "entitled" and not just "eligible".
Therefore, with both of them now "entitled" to ex-spousal benefits, they could then marry each other and still retain the benefits they receive off of their ex-spouses! This is indeed an important exception to the re-marriage rules.
Here's the code section reference from Social Security POMS "RS 00202.045 Remarriage of a Divorced Spouse- Policy":
"The marriage of a divorced spouse will terminate entitlement to such benefits unless the marriage is to an individual "entitled" to widow(er)'s, mother's, father's, CDB, divorced spouse's, or parent's benefits".
Clearly, knowing the myriad of social security rules and numerous filing strategies is not enough. You also have to be knowledgeable regarding social security terminology in order to maximize social security benefits. Even the most sophisticated social security planning software is not equipped to handle all the nuances and complexities which govern social security planning. Working with a qualified social security specialist may be your best option to ensure you obtain all the benefits you are eligible to receive.
Ash Ahluwalia, NSSA, CCSCA, MBA