Where do you fit in Social Security’s 4 claiming categories?
April is Social Security education month. So, let’s learn more about this crazy-complicated, but oh-so-important program that will become the foundation to your retirement income.
To help you get your arms around Social Security, I’ll post “Did You Know” articles periodically. Did You Know #1 gives you some insight into what’s available on the Social Security website so please check it out.
Did You Know #2… that Social Security looks at you in only one of 4 claiming categories to determine your retirement benefit? Plus, you might start in one category, but move to another one later as life takes twists and turns.
It can be rather complicated to figure out if you meet the rules of the categories and how much your benefit amount will be. The good news is that the Social Security Administration is all about the numbers. The program does not care if you are male or female, husband or wife. It doesn’t care which category you fall under. It only cares whether you meet the rules of a category and which category will give you the largest benefit.
Let’s look at the 4 claiming categories for how the SSA considers your retirement benefit:
An individual worker.
If you’ve been working for a company that pays into Social Security (those pesky FICA taxes), you may be eligible for retirement benefits. You must have worked long enough to earn 40 credits (you earn 1 credit each quarter that you have paid into FICA) over your entire career. Once you have these “chits in the Social Security bank”, you will receive a benefit. How much you’ll get depends on your highest 35 years of earnings once they’ve been indexed for wage inflation. You’ll get a payment called the “Primary Insurance Amount” or PIA, if you claim your benefit at your Full Retirement Age. You’ll receive this payment every month as long as you live.
If you are married, this should be an obvious category, but not so fast. Sure, the usual husband-wife married couple are considered spouses, as are same-sex married couples. But, there are other situations where you are considered a spouse if you meet certain civil union definitions. These are “common law” marriages and domestic partnerships. And, it gets more complicated from here. You’ll receive your own retirement payment if you are/were:
- An at-home spouse who did not earn 40 credits – you’ll get up to half of your spouse’s primary insurance amount.
- A part-time or full-time working spouse who earned 40 credits, but your own individual benefit is less than 50% of your spouse’s – you’ll get your own benefit (see #1 above) plus a “spousal top-up” so that your total payment equals half of your spouse’s primary insurance amount.
If you are a spouse whose own Primary Insurance Amount is greater than 50% of your spouse’s PIA, you are not entitled to a spousal payment. Your Social Security retirement income will be based on your own record.
If you were married, then divorced, and now remarried to your current spouse, your benefit will be determined in relation to your current spouse so long as you both are alive.
See what I mean? This stuff gets really complicated really fast!
The complexity increases if you are entering retirement as a divorced spouse. As in you were married at one time, but are not married now. The rules are similar to the spousal rules in terms of you getting to claim up to 50% of your ex’s Primary Insurance Amount. However, there are extra rules you have to meet in order to qualify for ex-spouse benefits:
- You and your ex had to have been married for 10 years or longer (proof will be required)
- Each of you has reached age 62
- You have not remarried (it does not matter if your ex has remarried)
- Your divorce occurred 2 years ago or longer; or, your ex is already claiming benefits
If you meet all of these conditions, you’ll set up an appointment with the SSA. They will help you determine how you get the higher benefit amount – – on your own record, on your ex’s record, or a combination of both. This is a confidential meeting between you and the SSA. Your ex is not involved and will not know that you are getting a benefit on his or her record.
Despite all of the complexities of an ex-spouse situation, it’s most important that you take away that you are indeed entitled to benefits on you ex’s earnings record, if you were the lower-earner.
A surviving spouse.
This is exactly what it sounds like. If you are married and your spouse predeceases you, you become a widow or widower. It does not matter if you were the husband or the wife, or if you were in a same-sex marriage. When your spouse dies, you become the surviving spouse. If your spouse was the higher earner, and receiving a higher retirement payment, you’ll step into his or her shoes and receive their higher payment. You lose your smaller check, but get to keep the larger check.
Today, funeral home directors are supposed to notify the SSA that your spouse has died so that his or her payments stop right away. But, that doesn’t always happen. If it does not, you will need to make sure that payments stop by calling or visiting a local SSA office to have your payments adjusted. The SSA will require some documentation, so ask in advance what you need to bring. In general, you will need to bring original copies of your marriage certificate and the death certificate.
Interestingly, the same rule applies if your ex-spouse predeceases you. In this case, you can step into his or her shoes if that would give you a larger payment. Again, you have to meet some rules: your marriage lasted for 10 years, you are single or you remarried after age 60. It will be up to you to find out if your ex-spouse predeceases you; you will not be notified by the SSA. You’ll need to contact the SSA to make an appointment and be sure to ask what documents are necessary. Expect to bring in documentation such as your divorce decree and the death certificate if you happen to have a copy or can get a copy.
If you have questions about how your Social Security benefit may be calculated, or which category you fall in, let me know. I’m happy to answer questions. Or, if there is another topic you’d like help with, send me a message or comment and I’ll try to cover that information in a future blog post.