Tom Mosley:

What is meant by the Social Security Breadwinner Provision?

Hey, welcome to the E.A.S.E. Into Retirement show. I’m Tom Mosley, your host. Give me about five to 10 minutes and I’ll do my best to increase your financial knowledge. Want to talk about the breadwinner with Social Security, and that’s particularly talking to people who are married. Now, if you’re single, hang on. At the end, I’m going to give some information that might be really pertinent to you, but first of all, let’s talk about the breadwinner. What is meant when the Social Security or when somebody’s talking to you about Social Security and they talk about the breadwinner? Well, you know what that term normally means. That normally means the person who makes the most money is called the breadwinner. Well, don’t get all out of whack because of who it is, because one person’s generally going to have a higher Social Security in a marriage than the other.

I’ve been a financial advisor for 27-plus years, and the closest I’ve ever seen was people were $2 apart. One was just $2 higher than the other in a husband and wife combination. Doesn’t matter. The one that was higher is the breadwinner. Now, here’s why it’s important when two become one, and that’s at the end of life when one passes away. Most of the time it’s going to be the man, because ladies, you normally marry a man two or three years older than you are, and we live about five to seven years shorter as an average than you do as ladies, so you’re probably going to be alone. If you’re married, you’re probably going to be the one that survives. Doesn’t matter when it comes to Social Security. Whoever’s the breadwinner Social Security, when one of you passes away, the lower amount goes away and the breadwinner stays. Really important for you to understand that.

Now, what are some tactics that might help you in maximizing your Social Security, especially as a marriage couple? Well, when you first retire, maybe you don’t need all the income from both Social Securities. You say, what do we do, Tom? Well, maybe you can draw from an IRA, from a 401k. Maybe you turn on your pension at a certain time, and you really don’t need all of the income of both Social Securities. My recommendation generally, you got to make sure that it’s specific to you, but my recommendation generally is you allow the breadwinner Social Security to stay and go and take the lower Social Security and turn it on. Most of the time, that will supplement your income to the point that you’re able to make it, and then as that Social Security breadwinner continues to grow, by the time you get to 70, it’s got all of the increases that it can legally have, then turn the breadwinner on.

Why? Again, then 10 years, 12 years, 15 years down the road when there’s only one of you, the lower Social Security that you turned on earlier when you needed that money goes away and the higher breadwinner is the one that stays with the surviving spouse. So, make sure you understand that you don’t have to turn them both on at the same time unless you need it, but if you don’t need it, it’s best to turn on the lower Social Security first, in most cases. Let the breadwinner grow because that’s the one that’s going to stay when two become one at the end of life. Now, here’s what we talked about. It doesn’t matter who passes first. The larger Social Security … The lower Social Security goes away, the larger Social Security stays, and just to mention a couple of things that are connected because they’re husband and wife connected, there used to be a provision called File and Suspend. There are a lot of advisors who are still running around the country, they’re still telling people, Hey, you can do File and Suspend.” You can’t do File and Suspend after May the 1st of 2016.

So, unless you’ve got a way to rewind the world and go back in time, maybe you’ve got a DeLorean, try it, but other than that, you’re not going to be able to File and Suspend. There are also some limitations as to restricted spousal benefits that they have done away with, again, May the 1st of 2016. Don’t be listening to somebody give you financial advice on Social Security that hasn’t stayed up to date with the training. Now, I want to talk about the impact of divorce and remarriage on spousal benefits. If you were married and you were married at least 10 years, just listen to each one of these things have to be there, and you got a divorce after 10 years, and a lady came to me one time, “We were married nine months, nine years and eight months.” It’s not 10, okay? 10 years. You were married at least 10 years and you never remarried after you got the divorce. You could draw Social Security benefits based on a spouse even though you divorced, even if they’ve remarried, you could draw Social Security on that spouse if it’s advantageous to you and you could draw half of their Social Security.

One lady came in one time and she said, “You mean I can draw half of his?” Yes. “You mean you mean even though I’m not married to him anymore?” I said, “Yes.” She said, “But it won’t hurt him in any way?” I said, “No.” She said, “Rats,” because she really wanted to put it to him, but it won’t hurt his or her Social Security. If they have an awesome amount of Social Security and you have less than half, they’ll bump your benefits up to half of what that divorced spouse has for a benefit if you were married at least 10 years and you never remarried, so check it out. They’re not going to knock on your door and come say, “Hey, don’t you want to get this extra benefit?” No, they’re not going to do that. You’re going to have to pursue it. It’s your money. Go get it.

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