A recent question I received from a Social Security planning workshop participant reminded me how many retirees are potentially losing thousands of dollars a year in lost benefits as a result of not seeking out a qualified Social Security benefits specialist before filing, or in some cases even after filing to ensure they are receiving the maximum benefit possible. Here is the question and how the same scenario might impact your benefits either now or at some point in the future.
At the end of one of my recent Social Security planning workshops I was approached by a woman, who seemed somewhat distraught. She shared with me how she was 65 years old, recently divorced after having been previously married for 15 years, and although currently working, was struggling to meet her current expenses. She went on to tell me she was trying to hold off as long as possible to claim her Social Security benefits, as her current estimated monthly benefit of $1,365 would not be enough to replace the lost income if she stopped working. (For related reading, see: How Social Security Survivor Benefits Work.)
After learning that her ex-husband died last year at age 68, I went on to explain to her the spousal benefit claiming rules that may allow her to still claim on her ex-husband's earnings record under the divorced spouse survivor benefit option. And depending on his earning record, her benefits could potentially be greater than claiming under her record.
A few weeks later I received a phone call from her. In a much more upbeat tone than the last time we chatted, she let me know that after contacting her local Social Security office she learned that under the divorced spouse survivor option we had discussed, she was eligible to receive a monthly Social Security benefit of $2,240 at her full retirement age of 66. This is far more than what she thought she was eligible for previously under her own earnings record.
Based on the difference in the benefit payment amount available to her, even by claiming a slightly reduced survivor benefit prior to age 66, she shared with me that she is now able to finally retire and spend the time she always wanted to with her grandchildren. Needless to say, this was just one of many scenarios we see every day where misinformation or misunderstanding regarding Social Security claiming rules impacts the daily lives of so many retirees.
Often Missed Claiming Strategies That Can Bolster Benefits
Social Security planning isn’t just for people who haven’t claimed yet. Conducting an audit of your current Social Security benefits might identify instances where you are not getting all the benefits you are entitled to. Here are a few examples:
- A low-earning spouse who never added on her spousal benefit after her husband filed for his benefit.
- A divorced person who didn’t know she could file a claim off her ex-spouse’s benefit.
- A single person whose ex-spouse, to whom she was married for over 10 years, is now deceased making her eligible for a survivor benefit that is higher than her benefit.
- A recent widow who has outlived two husbands, the first of who was a high earner, and who didn’t know she could go back and collect survivor benefits on the first husband.
Conducting an audit might uncover thousands of dollars in lost Social Security benefits you might be eligible for. (For related reading, see: 10 Commonly Asked Questions About Social Security.)
Checking for Missed Spousal Benefits
One of the most common mistakes is when a lower earning spouse doesn’t go back and claim a spousal benefit after the higher wage earner has filed. Let’s look at an example. Mary filed for her benefit at age 66, and her benefit was $800. Jack filed for his benefit a year later when he turned 66 and received $2,576. Mary’s full spousal benefit would be 50% of Jack’s benefit or $1,288. Mary could then go back to Social Security and file for her spousal benefit of $1,288.
If instead Mary had filed early at age 62, she would have received 75% of her full benefit or $600. When Jack filed for his benefit at full retirement age 66, Mary would then be eligible for her spousal benefit. In this case, Social Security rules would subtract Mary’s full benefit of $800 from her full spousal benefit of $1,288, leaving her $488. Since Mary claimed early, that $488 would be added to her reduced benefit amount of $600 to give her a new total benefit amount of $1,088.
In both cases, these changes in filing that increase Mary’s overall benefit amount do not happen automatically. Mary has to go back to Social Security and request her spousal benefits. If not, she would remain at her lower amount, losing benefits she is entitled to.
Checking for Missed Divorced-Spouse or Divorced-Spouse Survivor Benefits
The scenarios surrounding retirement benefits with spousal, survivor, divorced-spouse and divorced-spouse survivor benefits can be complicated. Because they are, this is an area where benefits can be missed. If you fall into this category ask yourself the following questions:
- Have you ever been married?
- How many times?
- How long did each marriage last?
- For each marriage, did it end by death or divorce?
- If divorce, is your ex-spouse still alive?
- Are you currently unmarried?
- If married, did you remarry after age 60?
Here are three benefit opportunities based on the answers to these questions:
- If a previous spouse died during the marriage and the marriage lasted at least nine months and you are currently unmarried or remarried after age 60, you may be eligible for a survivor benefit based on the deceased spouse’s work record.
- If a previous marriage ended in divorce and the marriage lasted at least 10 years and you are currently unmarried, you may be eligible for a divorced-spouse benefit based on that spouse work record.
- If a previous marriage ended in divorce and the ex-spouse died after the divorce and you are currently unmarried or remarried after age 60, you may be eligible for a divorced-spouse survivor benefit based on that spouse’s work record.
If any of these scenarios sounds like you, contact a qualified financial planner specializing in Social Security claiming strategies today. What you learn may prove invaluable in maximizing your own Social Security retirement benefits and living the retirement lifestyle you deserve and worked so hard to achieve. (For more from this author, see: Social Security Benefits for Dependents.)
Securities and Investment Advisory Services are offered through Signator Investors, Inc., Member FINRA/SIPC, a Registered Investment Advisor. AspenCross Wealth Management is independent of Signator Investors, Inc. 1400 Computer Drive, Westborough, MA 01581.