Today’s longer life expectancies, especially for women have increased the importance and complexity of retirement income planning. What used to be a 20-year retirement period has progressed to 30+ years for many baby boomers. One common concern I hear expressed from women thinking about leaving the workforce and transitioning into retirement is "can I enjoy my desired lifestyle and have enough money to last through my retirement years." Discussing retirement income and what part Social Security will play often leads to this question, “If I continue working, can I draw on my ex-husband's earning record at my full retirement age and defer my own Social Security benefit until age 70?"
The answer is “yes” and “it depends!” In a special rule that applies only to divorced spouses, you can claim benefits on your ex even if he has not yet filed for retirement benefits. The key is he must be at least 62 years old with sufficient Social Security credits.
Here is how this strategy works:
- At your Full Retirement Age (FRA) file a restricted claim for spousal benefits only
- You begin to collect 50% of your ex-husbands FRA benefit from age 66 to 70
- The Social Security benefit based on your earnings record increases by 8% per year with the delayed benefit credit from age 66 to age 70
Additional requirements:
- You are single and were married for more than 10 years
- You have been divorced more than 2 years (If divorced less than 2 and your ex-spouse is not collecting you must wait for the 2 year mark to receive benefit)
Crunching the numbers:
- If you are less than FRA, drawing an ex-spouse benefit to delay yours may not be allowed because the decision is impacted by the amount of your own benefit. If your benefit is greater (prior to reaching FRA) than ex-spouse you must take your own benefit.
- This strategy makes sense if your retirement benefit at full retirement age, plus a 32% increase due to delayed retirement credits would be worth more than the spousal benefit.
Settling on a Social Security strategy is one piece of the retirement income puzzle. This strategy is not meant to be a one size fits all solution; rather an example of how Social Security planning can be customized to meet your individual income needs.
Laurie Renchik, CFP®, MBA is a Senior Financial Planner at Center for Financial Planning, Inc. In addition to working with women who are in the midst of a transition (career change, receiving an inheritance, losing a life partner, divorce or remarriage), Laurie works with clients who are planning for retirement. Laurie was named to the 2013 Five Star Wealth Managers list in Detroit Hour magazine, is a member of the Leadership Oakland Alumni Association and in addition to her frequent contributions to Money Centered, she manages and is a frequent contributor to Center Connections at The Center.
Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.
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