Jason Parker interviews Kirk Larson who is the Western Washington Public Affairs Specialist regarding how Social Security Benefits work for people who have been divorced.
Below is the full transcript:

 Jason: Welcome to Sound Retirement Radio with host, Jason Parker. Sound Retirement Radio is also live streaming online at soundretirementradio.com. Also available for podcast on iTunes. Jason Parker is the president of Parker Financial, an independent, fee-based, investment advisory firm, specializing in retirement. Parker Financial is located in 9057 Washington Avenue, Northwest Silverdale, Washington. Parker Financial is licensed and regulated by both the Washington State Department of Financial Institutions and the Insurance Commissioner’s Office.

The information and opinions expressed here are believed to be accurate and complete for general information only. It should not be construed as specific advice for any individual and does not constitute a solicitation for any securities or insurance products. For more information, contact Jason Parker at 360-337-2701, online at soundretirementradio.com or parker-financial.net. Here’s Jason Parker.

Seattle, Tacoma, Olympia, Gig Harbor, folks from all around the world, thank you so much for tuning back into this little program. I can’t tell you just how much it teams to watch Sound Retirement Radio move up the ranks especially on iTunes. One of the great things about the internet is it really gives you an opportunity to measure how many people are tuning in. I think last time I looked at iTunes, if you did a search on iTunes, I think for retirement, Sound Retirement Radio was like the 4th or 5th podcast in the line up which pretty darn cool, really. We’re really making some head ways. We’re right up there with Morning Star and some of those other big names in personal finance.

That’s awesome. Thank you for helping make that happen. If you are so inclined to do a star review on iTunes or write a review and just tell us what you think about the program, that would be great. I’d appreciate it. I’ve got a little bit of a reputation here in my own community for being a little bit too serious. Frankly, I don’t know if you can be too serious with the work that we do because people’s retirements are on the line. It’s very important work.

That being said, in our office environment, we’re trying to lighten things up. Every Monday morning, we have a Monday morning meeting with my team. Every Monday morning, somebody is tasked with bringing in a new joke. I know all of our listeners out there loved the last couple of jokes I brought in so much that I thought I’d bring you another one. Here’s our joke from this past Monday morning. Are you ready? Jeremiah, do we get a drum roll or anything? Here it is. How do you communicate with a fish? Drop it a line, of course.

One of the most important things, this is especially true for baby boomers getting ready to retire today but one of the most important things that you need to think about as you’re preparing for retirement is your cash flow, what your income going to look like. Start with your budget, make sure you know how much money you need and then work on the cash flow. Make sure you understand where are those that income is going to come. A really critical component to that is your social security planning.

We have the good fortune of having Kirk Larson on the program with us this morning. Kirk Larson is the Western Washington Public Affairs Specialist for the Social Security Administration. We’ve had him on the program in the past many times. Today I’m excited because we’re going to talk about two pieces of social security that aren’t talked about a lot but they’re very important. One is how does social security work for people that are divorced. Then second is how does social security work for widows. Two really important components when you’re doing this type of planning. But Kirk Larson, welcome back to another round of Sound Retirement Radio.

Kirk: Thank you for having me.

 Jason: It’s always great to have you on the program. I know that whenever we get an opportunity to bring you on, you always like to take a couple of moments and share with our listeners new things that are happening with the Social Security Administration. Would you give us a quick update there?

Kirk: Certainly. A few interesting things is going on this particular time of year. I want to go ahead and start off with of course October 15th, just yesterday, we went into our Medicare open enrollment. This is the time period that if you’re on Medicare and you want to switch your medical provider, this is when you can go ahead and do that. You can change the Medicare Part D, prescription drug program you have. If you want to move from one Medigap insurance program to another, you can go ahead and do that. Open enrollment stretches from about October 15th through December 7th.

This is also the time period when seniors will notice that the amount of mail coming into their mailbox will double or triple as various companies reach out and try to get your business. Very important thing to do, we do recommend at Social Security that people review their medical coverage every year and see if the medical program, the Medigap insurance program you have is still meeting your needs. This is also the time when you to evaluate your prescription drug needs.

I also like to point out that Social Security does have a special program called the Medicare Part D, extra help program, that if you’re getting prescription drugs through Medicare Part D, and you have low income and low resources, there’s a special program that can help you cover the cost of all your prescription drug needs. This is a particularly good time to go ahead and take that into consideration. If you think you might qualify, just call our 800 number and you can file the application or you can go online to our website and file the application.

 Jason: What’s that 800 number, Kirk? Do you have it on you?

Kirk: That’s 800-772-1213 and our web page is www.socialsecurity.gov. Can go to either one of those two spots and file the application, simple 15 question application. Could be worth up to about $4,000 a year in savings if you qualify.

 Jason: Wow. That’s a big deal. They search for when they get to the Social Security Administration, Extra Help, that’s what the name of that program is.

Kirk: Exactly, yes.

 Jason: Good. Thank you. That’s a great tip.

Kirk: Another thing that’s going on that just took place is the … I’m sure all your listeners have received a social security statement in the mail in the past. That’s that statement that comes out and says, “This is your work history. When you reach retirement age, this is how much you’ll get. If you were to pass away, this is what your survivors could get.” Different things like that. That statement has now gone online so people can access that statement anytime they want just by going to our website and right now, over on the left hand side of our website, there’s a little new button there and it says get your Social Security statement online.

We are discontinuing the distribution of that form. If you want to get this information and I do encourage everybody to review that form at least once a year to make sure all the money that you’ve earned in your lifetime is properly documented on that. If you want to get that, you’ll need to go to our website and get that information right there. That is the place to go. It’s quick. It’s easy and now you’ll be able to access it anytime that you want and not have to worry about having the form sitting around for someone to take. it’s lot more secure.

 Jason: Just a little bit of clarification on that because I know this can be a little bit confusing for people that are coming in. They say, “I used to get the statement. We didn’t get one.” Is this true for everybody, Kirk? Is everybody not going to get a statement? I thought I heard at one point just people at a certain age weren’t going to get a statement but is it nobody’s getting a paper statement anymore?

Kirk: At this point, we’ve actually suspended it for everybody. They may. They have looked at the idea of possibly continuing that for people over the age of 60 but right now it is completely suspended.

 Jason: Bottom line is if you want that report, and I signed up for this, our listeners should know that it’s a little bit of a process. You guys have security really nailed down on this thing and you actually send out a card or a piece of mail with a verification number. It’s not like you can just get on and have instant access. There’s a couple of week delay before you get the card in the mail.

Kirk: You do need to go through a very detailed authentication process. There’s a series of questions that are asked and you do need to answer those correctly. It’s above and beyond the normal what is your name, Social Security number, date of birth type thing.

 Jason: Now I know in the past, it was not allowed for third parties to go on and request that information. In other words, as a financial adviser, I was not allowed to go on for a client to help them do that. Is that still the case? The individual themselves has to go on and request it, nobody can do it for them?

Kirk: That is correct. The individual themselves does need to go in there and request it themselves. After you’ve obtained it, after you’ve gotten your security code, if other people potentially wanted to do that, you could give that to them. But once again, you always answer the question, “I am this person,” because you need to put in your name and date of birth and social security number. You do answer the statement under penalty of perjury that you are the person entering end of this to get the information. You do need to be that person to access it.

 Jason: Bottom line is if you’re doing planning and working with an adviser, print it off and bring it into the adviser’s office.

Kirk: Exactly.

 Jason: It will make their life a lot easier.

Kirk: Actually, the print version looks just like the form that we used to receive in the mail. Just go ahead and print it up and it will look just like the text that you’ve been used to seeing over the course of many years there.

 Jason: How much money is it saving the Social Security Administration?

Kirk: $60 million.

 Jason: When we first met, I made this recommendation to you guys. I don’t know if you remember that or not but I said, “Why don’t you digitize these things?” Do I get a cut or anything?

Kirk: Kind of a finder’s fee for the idea. That was actually one of the things that was suggested by a number of different people and a number of different Social Security employees. The thing that we needed to make sure that before we did it was to make sure that we had the security measures completely in place to make sure that only the right people got a hold of their private information. Once we’re able to secure that, the savings to the Social Security Administration were just so huge that we said we got to move forward with this.

 Jason: That’s awesome. For the listeners out there too, you mentioned the part D Medicare, Medigap plans and the options there, if our listeners have never been to Medicare’s website, medicare.gov, they’ve got a really wonderful interactive calculator where you can plug in all of your medications and they can show you, based on the formulas that are available and how the plans are changing, what’s going to be your best bet, it really does make a lot of sense for some people who can make a big difference and how much they spend every year by taking 10 or 15 minutes to go through that process.

The flip side to that Mr. Larson, my grandfather, he’s in his mid-80’s and he was going through this process of trying to figure this stuff out. Man, the internet is so foreign to him that it’s just totally impossible. Fortunately, in his community, he told me he went down to his local insurance agent’s office and they knew how to do it for him. It really saved him a ton of money. That’s just a wonderful resource that Medicare has on their website.

Kirk: Yes, it’s called the plan finder. If you go to the Medicare website, you could just type in plan finder, and it will take you right through that process. It’s very good. Also here in the State of Washington, we actually have a group called Shiba which is part of the State Insurance Commissioners Office which actually they have volunteers throughout the state of Washington that if you go there and call them, they will actually pair you up with a volunteer that is very experienced in using the plan finder and having lots of other information and make them come to your home sometimes or meet up with you at a senior center and help you go through that process.

 Jason: That’s a great service too. Thank you for reminding our listeners. Lets transition into social security benefits for folks who are divorced. Tell our listeners a little bit more about how that program works.

Kirk: Well, one other thing, I just wanted to mention and this goes in to benefits. Today was announced that the cost of living increased which I’m sure something all your listeners are very interested in. The cost of living increase was announced today and Social Security benefits for next year will be going up 1.7%.

 Jason: Wow, 1.7%. They’ll be happy that they’re getting something. 1.7% is certainly a lot better than zeroes that we’ve had in the past.

Kirk: Yes. Now, this is one of the lower increases that we’ve had in history. But you’re right. With the effects of inflation, thank goodness inflation is staying relatively tame. The increase was only marked at 1.7%. Last year of course, we got a bigger increase with 3.6% but this year, or next year I should say, it will be 1.7% increase on people’s Social Security benefits.

 Jason: Boy, that’s hard to believe that inflation staying tame. I mean, I think, when I just saw that my gas tank, what, $4.50 or 60 cents a gallon or some ridiculous amount of money, I mean, to me it sure looks like it’s getting a lot more expensive out there but I know you guys have that formula. In fact, that was the question that one of the people I met in our community wanted to ask you about was two pieces actually, the formula for determining inflation and also how you guys look at life expectancy and how often you change life expectancy. But before we get to those two things, we need to take a quick commercial break and we’ll be right back and ask you some more questions.

Hey folks. Jason Parker, president of Parker Financial in Oldtown Silverdale. Quick question for you. Are you 55 years or older and have at least $250,000 of investible assets? If so, this message maybe beneficial for you. Are you confident that you’ll be able to retire and not run out of money? Are you concerned about higher inflation, higher taxes and what market volatility will do to your portfolio? If you answered yes to any of these questions, then I encourage you to take advantage of this offer.

I am offering a free complimentary retirement analysis report so that you can have the confidence heading into retirement to know that the numbers are going to work. My telephone number is 360-337-2701. Call and request your complementary report at 360-337-2701. Again, I’m Jason Parker at Oldtown Silverdale. The name of my firm is Parker Financial. I’m looking forward to meeting you.

All right folks. Welcome back to another round of Sound Retirement Radio. I’m Jason Parker, your host. It is my good pleasure to have Kirk Larson on the program with us. Kirk is the Western Washington Public Affairs specialist. This guy knows more about Social Security than anybody I’ve ever met. I feel so fortunate that we have him as a resource to bring him into the community over the program and share his wisdom and insight with you. Mr. Larson, we’re just talking about cost of living increases and life expectancy and how Social Security goes about determining those things. I really want to get to these divorce benefits and widows benefits. What do we know about that?

Kirk: Well, for the cost of living increase, the COLA, it’s actually been an automated process since about 1976. At that point, congress decided that they would just go ahead and make it an automated process so they created something called the CPIW which is actually calculated by the Bureau of Labor Statistics which is part of the Department of Labor. Basically, it takes a basket of goods and that the average urban worker would purchase, food, rent, utilities, things like that, it takes that basket of goods and compares it year by year and that’s how it determines what the inflation is.

It does take into account a number of different products and items that the average urban wage earner would purchase during a year. It looks at that basket of good from year to year and as they see the increase, that’s how they determine what that cost of living is going to be. That same basket of goods, if you look at it back at the … basically, they look at the inflation area of effect in the final quarter of each fiscal year which is July, August, September. If you look at that basket of goods this year, in July, August, September, compared to the prior July, August, September in 2011, basically that basket of goods cost 1.7% more.

Now then this is on a nationwide basis which is sometimes you were talking about gasoline earlier. Unfortunately, here in the state of Washington, we pay one of the highest gasoline cost in the nation. They don’t look at it geographically. They look at it as a nation effect on inflation and where costs are. That’s how they basically calculate that and determine what the increase is going to be.

 Jason: How about on this topic of life expectancy? How often do you guys update life expectancy numbers? Do you pull that from IRS tables or how is that?

Kirk: Well, we basically track that but that doesn’t necessarily affect the amount of benefits that a person is going to get. We just track it as more of a side not, just noting how many people at a particular age are receiving benefits. Also, we actually have a life expectancy calculator on our website. For instance, you could go in and if you were a, let’s say a male that lived till the age of 65, you could put in your date of birth, you’d put in your male or female, and it then gives you an estimate on average what’s your life expectancy to be.

For instance, you are age 82, you’re a male, you’ve lived to the age of 82, you have a better than 50-50 chance of making it till about 68. Of course, that varies from when you were born, your sex, different things like that. We have it very basic in that respect but we do not base people’s benefits on that. We don’t say, “The average life expectancy for someone born in 1960 is X and therefore that affects how much benefits they’re going to get.” We based the benefits on how much a person earns and works and pays into the Social Security System.

 Jason: Before we transition to this question about divorcee benefits, what did you think about my joke this morning, Mr. Larson?

Kirk: That was pretty good. I don’t talk to a lot of fish but if I did, that’s exactly how I would communicate with them. I’d drop them a line.

 Jason: I was asked this question. Jeremiah’s losing it over here in the booth. I know you’ve had the good fortune to meet Jeremiah. He’s a good guy but he’s cracking me up. Divorce benefits, specific scenario I want to ask you because I promised somebody in the community that I’ll ask this question when we were on the phone but she had been married to a gentleman for about 25 years and then they divorced and then she remarried. Today, she has been married for 20 years. What’s created a little bit of confusion for her is when her ex-husband filed for his Social Security benefits in another state, the Social Security office called her and said, “Are you interested in applying for benefits on your ex-husband’s record?” Her question is, can she qualify for any benefits on her ex-husband’s record based on the fact that she’s been remarried for the last 20 years?

Kirk: Very at point. Number one, I’ll start off with to be eligible for divorced spouse’s benefit, you need to be at least married to somebody for 10 years and have divorced them. If you’re married to somebody for 10 years, you are potentially eligible to get benefits on that prior spouse’s record. If you were married to three different people for 10 years a piece and you reach the age of retirement, theoretically, we would look at all three records and you could claim benefits off the highest of the three different spouses. You can’t get benefits from all three of them but you can, we would look at all three records and let you take benefits off the highest of the three ex-spouses.

Now then, typically that’s what the Social Security agent would do. When that individual’s ex-husband went into the office, we ask a series of questions to gain information to find out if there could be other people out there that might be eligible for benefits. When this person went into the office, they said, “Yes, I’ve married to somebody. We are married over 10 years. Here’s their name. Here’s their date of birth,” maybe even have the Social Security number. That agent, after they complete the application with that person, they then have the responsibility to basically tie up all the loose ends and contact people especially if they go online and they see they’re not getting benefit but they’ll contact people and just basically say, “Would you be interested in filing for benefits? You are potentially eligible.”

Now then, you did hit the nail on the head though. Since she is remarried to somebody else, she is not eligible to get divorced spouse’s benefits. If you’ve remarried somebody else and that person is potentially eligible for retirement benefits as well, you cannot file for divorced spouse’s benefit. The person was just closing off the lead had her client said, “Oh yes, I’m interested in potentially filing.” The question out of their mouth would have been, “Are you currently married to somebody else?” If they said yes, then they’d say, “Okay, you cannot file for benefits on your prior spouse’s record. However you may qualify for benefits on your own Social Security record and you may qualify for spouse’s benefit off your current husband’s record.” Then they would explore those options with them.

 Jason: When trying to maximize benefits, let’s say you’ve been divorced for the 10 years or you had been married for 10 years, you’re now divorced, you’re 62 years old and your spouse has filed for their benefit, their full retirement benefit, is it possible to use some of these strategies to maximize your Social Security benefits like the restricted application or file and suspend or anything like that to maximize benefits for divorcee?

Kirk: There are a number of different strategy you can use to maximize your Social Security benefit. However, almost all of them deal with you waiting to file at your full retirement edge in order to get those. I’ll give you a quick scenario. Let’s say I was married to somebody for 10 years. We’ve divorced. My ex-spouse has now filed for benefits. Since I was married to them for over 10 years, I am potentially eligible to get up to 50% of their record. However, that 50% that I get off their record is reduced by anything I’m going to get on my own record.

If my ex-spouse was going to get let’s say $2,000 a month and my own social security record, the most I could get would be $500 a month, well then basically I would get $500 off my record and an extra $500 off my spouse’s record bringing me back up to that 50% level. That’s all it’s designed to do, to get you up to the 50% level. If I was going to get $900 off my own record and my spouse is eligible for $2,000, 50% of that is 1,000, I would get 900 off my own record, I would get 100 off their records, gets me back up to the guaranteed level. That’s all the spouses benefits are designed to do. Now, that’s assuming that under for retirement age.

Let’s say now I’m also 66 years old. Using that scenario again, I could get $900 off my own record, but my spouse, I could get 50% of theirs. I have a very interesting option. At age 66 and once again you can only do this at your full retirement age or above, I go ahead and rather than taking the $900 off my own record, I say, I’m going to go ahead at age 66 and take 50% off my spouse’s. I’m not going to touch my own. Only at 66 or above do I get the option of saying I’m not going to touch my own. If I was younger, under 66, I’d have no choice and I’d have to file for my own first and then get any extra off of my spouse.

At 66 or above, I can say I’m going to take 50% off my spouse’s, $1,000 in this example, and I’m not going to touch my own $900. Now then, this is why I’d want to do that. If you don’t take your own benefits at age 66, your own benefits continue to earn an 8% bonus per year all the way up till age 70. If I waited then, if I drew the $1,000 off my spouse’s record at age 66, drew that for four years, and then at age 70, I could drop that 50% and I will get a 132% of my $900 which would probably put me at around $1,200 a month or something like that.

 Jason: That is such a great thing. How hard is it for somebody? Let’s say they are for retirement age. They want to file for just the spousal benefit on their divorced spouse and then want to let their own benefit grow. What’s the paperwork required to do that? Is that a complicated thing?

Kirk: Not really. All you need to do is … I would recommend that you call our office. Now then for the regular retirement claim where you’re just going to file on your own benefit, probably really basic. You can do that online. You don’t need to come into our office. You can actually file for your own retirement right online at our website. In this scenario, I would probably go ahead and call our 800 number and schedule an appointment. You’re going to need to bring in your marriage certificate, the original marriage certificate or a certified copy, your original or certified copy of the divorce certificate and then you’re going to need to come in with the … and basically say, “I do not wish to file for my own benefits. I’m opting to only file for spouse’s benefits.”

 Jason: When you go into the Social Security office under those scenarios, let’s say you just want to file your 66 and you’re ready to claim your benefits and you do this, let’s say you do it all online where you don’t actually call anybody or go through this process, does anybody know that maybe you should do this, file on your spouse’s only and suspend your own benefit or will they just give you the highest benefit available to you at the time?

Kirk: They basically will go ahead and look at the record and then basically make the determination what you’re eligible for at that particular moment.

 Jason: You don’t necessarily …

Kirk: If you were eligible to get any extra benefits on your spouse’s record, they would contact you and say, “By the way, it appears that you maybe eligible for benefits on your ex-spouse’s record. Do you want to get any of the additional benefits? They will go ahead and set up that application. Our people at our offices are not there to go ahead and give financial advice so they would not typically call you up and say, “We have an interesting strategy. If you opted not to file for your own benefit,” and so on and so forth.

 Jason: Unfortunately, this time goes by so darn fast but we’re out of time here. I just wanted to say thank you for being on the program today

Kirk: No problem. I hope we can come back and talk a little bit more about survivors benefits.

 Jason: That would be great. Thank you so much, Mr. Larson.

Kirk: Thank you.

 Jason: Bye-bye. You’ve been listening to Sound Retirement Radio with host, Jason Parker. For more information, contact Jason Parker at 360-337-2701 or online at soundretirementradio.com.