WASHINGTON — Widows, widowers and divorcees approaching retirement age and about to file for Social Security need to know about filing options that could significantly increase their monthly benefit.
While the rules are different for surviving spouses and divorcees, these single seniors have options, and taking the time to do the math before claiming their own benefit can mean a potentially bigger payoff in retirement. They may be able to file for spousal or survivor benefits instead of their own.
I recently met with a widowed client who was approaching age 66, her “full retirement age” as defined by Social Security, to discuss her benefit options. She lost her husband more than 25 years ago, had never remarried, and was unaware that she could claim her “survivor” benefits, those of her deceased husband, instead of her own. (Survivors may be entitled up to 100 percent of their spouse’s benefits as long as they don’t remarry prior to age 60.) So why would she want to consider this?
When we compared both of their benefits, we found that she could collect either her benefit of $2,300 per month at age 66, or her survivor’s benefit of $2,000 per month based on her deceased husband’s account. (A deceased spouse’s benefit adjusts for inflation, so although her spouse died years ago, the amount of the benefit continued to increase.)
On face value, most people would choose to take the higher benefit — in this case, her own. But each person’s own Social Security benefits grow if delayed until age 70, while survivor benefits do not. In her situation, her own benefit would increase to approximately $3,130 per month by waiting until age 70 to claim it. That’s an 8 percent per year increase in income.
Since she could do without the additional $300 per month, she decided to choose her survivor benefits at age 66, and then switch to her own larger monthly benefit at age 70. If she were to live to age 90, she would collect approximately $185,000 more in benefits by utilizing this strategy rather than just collecting her own benefits at full retirement age.
Divorcees have options too and often don’t realize that they can claim spousal benefits on their ex-spouse’s record. For divorcees, spousal benefits are typically 50 percent of their ex-spouse’s benefit when their ex-spouse is eligible for their full retirement benefits.
The divorcee must be at least 62 years old to claim spousal benefits and cannot be remarried. One other difference to note is that ex-spousal benefits must be higher than the divorcee’s own at the time they begin claiming benefits. Like the surviving spouse, this claiming strategy allows the divorcee to collect some income before claiming their own benefit at age 70 when it has reached its maximum amount.
If one’s ex-spouse dies first, the divorcee may be entitled to collect their full survivor benefit instead of the 50 percent spousal benefit. Refer to these handy references from the Social Security Administration outlining the conditions that must be met: If You Are Divorced and If You’re the Worker’s Surviving Divorced Spouse.
The application process to learn what the monthly amount of the surviving or ex-spousal benefits will be takes time, so we recommend that widows, widowers and divorcees start this process at least three months before the date at which they want to start collecting benefits. They will need their spouse’s/ex’s Social Security number and date of birth to begin the inquiry. For more information, go to the Social Security application website.
Maximizing retirement income starts with knowing what Social Security options are right for each retiree. The rules for claiming Social Security benefits are very complicated, so it’s best to consult with a financial advisor or Social Security specialist to fully understand all the options. By asking questions and doing the math, those retirement years can be even more golden.
Editor’s Note: Barry Glassman, CFP®, founder and president of Glassman Wealth Services in McLean, Va., is a nationally recognized leader in investment and wealth management. His fee-only firm offers successful professionals, executives and business owners financial guidance and resources to effectively manage their family’s wealth. Follow Barry on Twitter at @BarryGlassman. Follow @WTOP and @WTOPliving on Twitter.
