Commentary by Joel Harris
Social Security income will undoubtedly play a major role in your retirement planning. And if you divorced and never remarried, it is imperative to learn about specific claiming strategies that can potentially have a huge effect on your retirement.
Let me share an example with you:
Brian and Jane were married for 23 years, but unfortunately the marriage ended in a divorce three years ago. Brian remarried, but Jane did not.
Jane is 65 years old and is starting to plan her retirement from a successful nursing career. Her full retirement age is 66 and her projected monthly Social Security benefit is $1,896 per month based on her income history.
Her ex-husband, Brian, is 66 and his projected benefit at full retirement age is $2,516 per month.
Most people in Jane’s shoes would claim their own benefit at age 66 without considering the divorced spousal benefits that are available.
Because Jane was married to Brian for more than 10 years and never remarried, she is eligible to claim half of Brian’s social security benefit at her full retirement age. Why would Jane think about taking half of Brian’s benefit, an amount that is about $1,258 per month, when her own benefit is $1,896 per month?
When she elects to take half of Brian’s benefit, her own monthly benefit will increase 8 percent per year until age 70 under the delayed retirement credits provision.
That being said, her $1,896 benefit will increase to approximately $2,503 per month by age 70. At age 70, she can switch from half of Brian’s benefit – $1,258 – to her own benefit, which has grown to $2,503 per month.
In this example, Jane will break even at the age of 74 years and 11 months. If she lives to be the age of 90, Jane will collect approximately $661,032 in benefits by utilizing the ex-spouse claiming strategy versus collecting $546,048 from her own benefits record.
That is more than $115,000 in additional benefits that she could potentially lose out on if she didn’t research the facts before claiming her Social Security benefits.
In the above-mentioned example, I did not factor in annual cost of living adjustments because they are unknown at this time. Please keep in mind this is a hypothetical example for illustrative purposes only and is not intended to provide specific advice or recommendations for any individual. Please consult with a competent financial professional for advice regarding your particular situation.