If you are divorced, you may be aware that you can potentially claim retirement benefits based on your ex-spouse’s earnings record, but you may not fully appreciate how important the claiming strategy you select can be to your lifetime income.
As a divorced spouse, you may be eligible to receive a spousal benefit equal to 50 percent of what your former spouse will collect at his or her full retirement age — even if your former spouse has remarried. You will collect a permanently reduced benefit if you opt to file before you reach your own full retirement age.
You may claim a spousal benefit regardless of whether your ex has filed for his or her Social Security benefit. In order for you to collect, however, your former spouse must be entitled to Social Security retirement benefits and the benefit you would receive based on your own work history must be less than what you would receive based on your ex-spouse’s work history.
You will also have to show that:
- You are at least 62 years old
- Your marriage lasted 10 years or more
- You are currently unmarried
If your ex-spouse has not yet filed for his or her Social Security benefit, you will also have to show that you have been divorced for at least two years at the time you file for a spousal benefit.1 The amount of retirement benefits you receive has no impact on the amount of benefits your former spouse will receive.
Note that if you remarry, you generally cannot collect benefits on your former spouse’s record unless your later marriage ends due to death, divorce, or annulment, according to the Social Security Administration.
Before you decide to file for Social Security benefits, it’s important to educate yourself about the strategies that exist, which can make a big difference in the amount of Social Security benefits you ultimately receive.
Not all claiming strategies are available to all retirees.
For example, if you were born on or before January 1, 1954 and have already reached full retirement age, you can opt to receive only the divorced spouse’s benefit and delay claiming your own retirement benefit for now. This is called a restricted filing strategy. Restricted filing allows your own benefit to accrue delayed retirement credits, which produces a bigger monthly benefit down the road. When you reach age 70 (or earlier), you can then switch over to collecting your own benefit. If you were born after or on January 2, 1954, that option no longer exists. You must file for either your own retirement benefit or your spousal benefit and stick with it.
“For retirees who don’t have $1 million or more in IRAs or savings, many times Social Security is their most important retirement asset,” said Scott Bishop, a financial advisor with STA Wealth Management in Houston, Texas. “Some of the old “tried and true” strategies that were perfect candidates for divorced individuals who were married for more than 10 years are no longer available, so it’s very important to look at the variables to make sure that you make the right decision.”
Like all who are eligible for Social Security, you may begin claiming benefits before your full retirement age, as early as age 62, but your benefit will be permanently reduced by up to 30 percent to reflect the additional length of time you will be collecting benefits. If you expect to reach at least the average life expectancy, it may benefit you more to delay Social Security until your full retirement age so you can collect the full benefit amount to which you are entitled. If you can afford to cover your living expenses with personal savings, annuities, and pensions, you may even wish to delay filing for Social Security longer still. For each year you delay beyond your full retirement age, your benefit will increase by 8 percent per year. Between 66 and 70 this can amount to a 32 percent increase or between 67 and 70 this can amount to a 24 percent increase. After age 70, delayed retirement credits no longer accrue.
A 2019 MassMutual Social Security Pulse Check survey found that many who file for Social Security retirement benefits early or even at their full retirement age later regret not holding out for a bigger benefit. About 30 percent of respondents filed at age 62 or younger, and nearly four out of 10 (38 percent) of them wished they had waited.
Some indicated that they filed when they did because they had undersaved and could not afford to wait, while others needed the monthly income to cover medical bills, a loss of employment, or other unforeseen expense. “This study reveals that many are leaving money on the table that they’re eligible for — and that they could have received for many years to come,” said Mike Fanning, head of MassMutual US. “Planning ahead for the foreseen — and the unforeseen — appears to be the ‘pay it forward’ message from today’s to tomorrow’s retirees.”
“Taking the time to analyze the options can lead to gaining thousands of dollars that you otherwise might have walked right by,” said Leyla Morgillo in an email interview, a financial advisor with Madison Financial Planning Group in Syracuse, New York. “There is no one-size fits all — longevity, history, and health play a big role in the decision-making process.”
Indeed, if you have an immediate financial need, or your medical history suggests you may not reach the average life expectancy , she said, it may make sense to start claiming a reduced benefit at age 62, the earliest opportunity.
The impact of filing strategies
To illustrate the financial impact that claiming strategies can have, let’s consider hypothetical “Nancy.” Note that the following example reflects only a limited range of filing options and variables. There are many factors that could impact the amount of your Social Security retirement benefit. The benefit filing option you choose should be tailored to your unique financial profile.
Nancy is age 64 and still working, but plans to retire next year when she will begin collecting both her pension and Social Security. She was married for 18 years and has been divorced for 5 years. At her full retirement age of 66, Nancy would be eligible to receive a monthly benefit of $1,400, increased by any annual cost-of-living adjustments.
Nancy’s ex-husband is also 64, and has not yet filed for his Social Security benefit, but he will be eligible to receive $2,400 monthly at his full retirement age of 66.
Because Nancy is filing for benefits a year before her full retirement age, her monthly benefit based on her individual work history will be slightly less than $1,400. If she lives until age 90, she will have collected lifetime Social Security benefits of more than $470,000.
Nancy could also wait until her full retirement age to claim Social Security, file a restricted application for a spousal benefit and begin collecting a monthly benefit equal to half of her ex-husband’s full retirement age benefit. Her individual benefit will continue to earn delayed retirement credits and at age 70, she can stop collecting her spousal benefit and switch to her now-inflated individual benefit.
Cumulatively, she would collect roughly $140,000 more over her lifetime by using the restricting filing strategy than she would by claiming her individual benefit a year early.
Take the guesswork out of your decision
Your Social Security retirement benefit is too important for guesswork. No matter how or when you choose to begin collecting your benefit, it’s a good idea to contact the Social Security Administration ahead of time. That way, you can get the information you need to make an informed filing decision.
If you have not done so already, you should also set up your “My Social Security” page on www.socialsecurity.gov . This is an easy and secure way to view your estimated benefits and earnings history so you can plan for retirement effectively. The Social Security Administration will use this information when it calculates your benefit, so be sure that it accurately reflects your work history.
It also may be wise to contact a financial advisor well versed in Social Security filing strategies to help explore your options.
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1 Social Security Administration, “Benefits Planner: Retirement, If You Are Divorced.”