Regarding Social Security Benefits, What Widows and Ex-Spouses Must Know

By Markets Fool.com

Social Security benefits are majorly important -- on that point everyone can agree.

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You may be a dualie, and you don't even know it. The problem with that lack of knowledge is that it could cost you tens of thousands of dollars in retirement when it comes to Social Security benefits.

What is a dualie? It's term coined by Andy Landis, a Seattle-based author ofSocial Security: The Inside Story.It stands for someone who's eligible for getting Social Security benefits in more than one way -- dual eligibility.

That means not only can you draw from benefits from your own work history, you're also eligible to draw from a spouse or former spouse who worked and earn benefits. That spouse may either be living or deceased.

Most people aren't dual eligible but that's because they don't take advantage of the opportunity and forgo the extra benefits many times without knowing it, Landis says.

"For a typical person it's not a big deal, but there are some people it would be a big difference for," Landis says. "Most people sign up for Social Security before they turn 66 and the most common claiming age is 62. When you do that, there's no special planning strategies available because if you are under 66 and eligible as a spouse, you have to file for both of them at the same time (and not receive the dualie benefits). But if you're a widow, married and have an ex-spouse and can wait until 66, you have some choices that other people don't have."

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In other words, the push to get people to wait to file for Social Security benefits is worth it when it comes to dual eligibility.

Landis says people may find out about what they're eligible before when they file for Social Security, but there's no guarantee of that. If they know the rules beforehand, they can do some planning and maximize their payments, he says.

"It might be too late when they go talk to Social Security," Landis says.

A dualie is eligible two different ways, Landis says.

For example, he says he talked to a woman last week who was eligible as a widow and as a worker. She has her own work record but her husband died 14 months ago, he says.

She was trying to figure out what her Social Security pathways were, and she has "a whole bunch of options" that a regular person would not have, Landis says. The same goes if you have a spouse who's worked or an ex-spouse who's worked. You can be eligible on your own work record or their work record, he says.

"I worked with an attorney who has high earnings, and she's also married to a guy with high earnings" Landis says. "Together they were both turning 66 and were going to continue to work. They planned on waiting until 70 for Social Security but they didn't realize one of them could take spousal payment for the next four years. For them, it was $60,000 that they were going to leave on the table and never get it if they did not explore that. That's a lot of money. That was about $1,300 a month for these highly paid people like attorneys."

Landis says you can lose your dualie status if you were eligible as an ex-spouse and you got married. That terminates the eligibility until the marriage ends. Also, if you were eligible as a widow and remarried before you reached age 60, then that marriage would block the widow eligibility.

"This women I talked to last week is working as a faculty member at a college," Landis says. "Her husband died 14 months ago. Widows are eligible for widow's payments at 60. She is 63. One thing widows can do is take the payment at 60 all the way until they're 70 and then switch to their own at 132 percent if it's a raise. Or the other way around as a widow is to take your own as early as 62 and then switch to the widow's payment at 66 when it maximizes if it's a raise."

What you need to do if you have eligibility like that is figure out which one is going to pay more when it maximizes, says Landis, who calls the strategy a "zigzag." A spousal or widow's claim maximizes at 66 whereas a worker's claim on own work record maximizes at 70. You want to compare the maximum of each and take the higher of the two later because you're probably going to live long enough that getting the higher payment is worth it, he says.

"That's the type of thinking a dualie has to do," Landis says. "If I'm eligible as a spouse or worker, you have to figure out which one do you take first and which one do you take second. You ask yourself how do you get the most out of the system."

Landis says he met a guy in Los Angeles who waited until 66 for his Social Security and two months later he realized he would be better off if he filed on his ex-spouse's record first and later take his own payments. He didn't realize that when he filed for Social Security and Social Security didn't explore it with him.

"He paid back the two payments he was paid and then he filed as an ex-spouse payments for the next four years," Landis says. "When he turns 70, he switches to his own payment but it's grown by 32 percent in the meantime. He will take a little less money up front to get more money after he turns age 70. He should come out ahead in the long run. If he didn't know he could file separately for his own and ex-spouse and didn't know the dual status, he would be missing out on money."

Among the important rules:

If you file for Social Security as a former spouse, you marriage must have lasted ten years and you must be unmarried, Landis says.

If you file for the widow benefit, your deceased spouse didn't have to get Social Security or be eligible at the time, Landis says. If you are divorced at the time your spouse dies, you must be at least 60 and the marriage needed to have lasted ten years, he says.

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