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September 01, 2021 at 02:36 PM
What You Need to Know
- Welcome to the fourth installment of Connecting the Dots, the column where Marcia Mantell discusses real-life decisions around Social Security claiming and retirement.
- A husband walks out, leaving his wife, who is 10 years older, with nothing.
- She has to go back to work, and he can't claim benefits for years.
We get married thinking we will have a wonderful life. Some couples do, but others find themselves in difficult situations.
Regardless of a client’s marital situation, a common thread is that Social Security decisions from one spouse can have dramatic implications on the other. Add in a divorce and the rules get more complicated.
In the case of “Tammy,” who wrote to me recently, her financial life was turned upside down when her husband of 32 years suddenly left and froze their accounts.
A Particularly Difficult Situation
Just months before turning 62, Tammy’s husband, 10 years younger, left their house and never returned. She found out quickly that their credit cards had been canceled and the bank account emptied.
This was a shock to Tammy. She had retired a year earlier and now had no income. She knew she could access Social Security at age 62 and needed to tap her benefits early.
It took well over a year for the divorce to settle. By age 65, she was barely hanging on financially and decided working full time was necessary. Today, she’s 69 and still working.
Paying Into Social Security When Receiving Benefits
Tammy’s first question was why she had to keep paying Social Security and Medicare when she’s receiving benefits.
As long as Tammy earns wages at a covered employer, the employer is required to pay FICA taxes. There is no exemption when working and collecting benefits.
Since reaching her full retirement age (FRA) in 2018, she can earn any amount of income and still receive her reduced benefit with no clawbacks, though payroll taxes reduce her paycheck.
