Part 3 of 3
Social Security is complicated. This world of confusion stems from all the factors that have to be accounted for, including your age, income, marital status, health and life expectancy. With Social Security accounting for nearly 40% of most Americans’ retirement income, it’s important to get your filing decision right or as close to it as possible.
Don’t worry, it can be done. Specialized software can help illustrate the likelihood and potential impact of various choices, but you’ll want to start the planning process well before you file a claim. Preparation is key.
In part three of this three-part article on Social Security we will consider how changing circumstances in your life will impact your social security strategy.
Twists and Turns in Your Life
Should you find yourself in changing circumstances – dealing with a loss of a loved one or ending a marriage – there are strategies that can help you avoid short-term financial hardship and solidify your long-term retirement income during and after these times of transition. These strategies aren’t all that dissimilar from the spousal options shared in part 2 of this series.
Filing on Your Ex’s Record
Yes, you can do this. It’s almost exactly the same process as filing for spousal benefits, except you must have been married for at least 10 years and remain unmarried while you collect on your ex’s record. If you’ve been divorced for two years, your ex doesn’t even have to file for benefits for you to qualify. He or she merely has to be eligible for benefits (e.g., at least age 62). Plus, your (ex-)spousal benefits in no way affect your ex’s benefits or any benefits that would be owed to a future spouse. You can even collect if your ex remarries.
Here’s another twist: You can even file a restricted application for spousal benefits based upon your ex-spouse’s record if you were 62 by the end of 2015. Survivor benefits may also apply.
Dealing with a Loss
For widows and widowers under age 60 who have worked for at least 10 years, you have choices to make between your survivor and worker benefits. Typically, you’d claim the higher of the two when you initially file, but in some cases, you can integrate both.
Widows and widowers are among the few who can claim benefits before age 62, so you have the option to start your survivor benefit at the earliest age possible – age 60 – and switch to your own worker benefit when you turn 70, when it’ll reach its maximum thanks to delayed retirement credits and COLAs. You can deploy this strategy at any point between age 60 and 70.
Or you can reverse the order, but you’ll have to wait two years before you can start. If you made less than your spouse, you have the option to claim your own worker benefit as early as age 62, then switch to your higher survivor benefit at FRA. Again, there’s no reason to wait longer than that because survivor benefits don’t earn delayed retirement credits.
Finding the Right Path for You
Even though the Bipartisan Budget Act of 2015 restricted the use of certain popular Social Security claiming strategies, you still have options to help you and/or your spouse maximize your benefits. Remember, there’s no one “best” strategy for anyone. The right strategy for you depends on your PIA and that of your spouse, as well as your health and financial status.
You can find out your expected Primary Insurance Amount (PIA) by signing up for a Social Security account and monitoring your estimated benefits. You can run what-if scenarios with your advisor to map out just what will happen if you file at 62, 66 or 70; what could happen if one or both of you fall ill or any combination of key factors. The point is the best answer may not be what you first thought.
Sources: Prudential, ssa.gov
Content created by Raymond James for use by its financial advisors.