One of the things I do is teach a class on smart Social Security strategies. Married spouse, divorced-spouse, survivor and divorced-survivor strategies play an important role in a woman's retirement plan. Because women live longer than men and traditionally earn less over their lifetime, Social Security planning is really too important to ignore.
In 2006, 43.4% of all elderly unmarried females receiving Social Security benefits relied on Social Security for 90% or more of their income. With the average monthly benefit in 2011 being $1,181.60, that describes a less than comfortable retirement.
One of the strategies I'd like to share here is for a divorced women (it works for men too) who was married at least 10 years and is currently unmarried. Social Security is gender neutral so any strategy that works for a woman, will apply to a man as well.
You may take your divorced-spouse benefit at age 66 and allow your own benefit to earn delayed credits up to age 70. Your divorced-spouse benefit will be one-half of your ex-spouse's Primary Insurance Amount or PIA. The PIA is the dollar amount at age 66-67 found on your Social Security statement. The PIA is basically your base amount that all other amounts are calculated from.
If you have been divorced more than two years, your spouse doesn't need to have filed for their own benefit, but must be over age 62 (and eligible for SS benefits). Typically SS likes to give you the highest benefit you are entitled to receive, even though it may not be the preferred strategy that you are trying to implement. So even if your own PIA is higher, you don't want to take your own but restrict your application to your divorced-spouse benefit. In this case, your own PIA is irrelevant. It will become relevant when at a later date, preferably age 70 for the greatest growth in your benefit due to delayed credits, you will then apply for your own benefit. If you were in your highest earning years during this time as well, your own benefit will be even greater at age 70.
Too many women make the mistake of taking benefits too early, at age 62. We find that many want to take it because they don't know if it will be here later and they just want to start getting that check. Delaying the start of benefits to at least full retirement age (age 66-67) can make a tremendous difference in the amount one receives at age 80 or 90.
One of the best parts of this strategy is that the ex-spouse will never know that your are utilizing this strategy. They will never be notified and their own benefits are not affected. This strategy is especially beneficial for divorced women in order to allow them to maximize their own benefit and lifetime income from Social Security.
It's very important to understand that there are many things to consider when deciding when and how to start Social Security and realize there are many smart strategies out there that may help you maximize your lifetime benefit. Be sure to do some research or consult with an advisor when deciding on your strategy.
Angie Furubotten-LaRosee, CFP® is a financial planner who helps regular people with "big picture" planning, focusing on their money and their lives.
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