One of the more interesting and challenging questions many WOMEN have is not only when should they claim their own benefits, but what benefits can they claim if they are Divorced – Widowed – Remarried? This applies to men as well, but for this case study I’ll use a recent female client and I’ll call her Alissa;
Alissa DOB is 10/16/58 which means she will be 65 next month. Her PIA (Projected Benefits) is $2918 @ FRA (66 & 8 months). She thought she was eligible to claim on her ex spouse (Jeff) whom she was married to for 11 years, but divorced in 1995. She married Clyde in 2011, but he died in 2014. She is still working and plans to retire in January 2024 and makes in excess of $100k.
Whose benefits can she claim?
A) Her own benefits
B) Jeff’s spousal benefits (50% of his PIA)
C) Claim survivorship benefits on Clyde’s record
D) None of the above
Correct Answer is D
Since she is still working and not at her FRA (66 & 8 months) she is subject to the Earnings Test, thus she would lose $1 in benefits for every $2 she earns above $21,240 per year. Since she will not reach her FRA until June of 2025. However, in the year that you reach your FRA the earnings test changes to losing $1 for every $3 you earn above $56,520. Once you reach your FRA you can work and earn as much as you want! The benchmark figures $21,240 and $56,520 change annually based upon inflation.
She Retires in January 2024
When she retires the Earnings Test is no longer in play, thus she can claim either her own benefits or survivorship benefits based upon Clyde’s record. She cannot claim spousal benefits based upon Jeff’s record since she would have to claim the greater of her own benefits or 50% of Jeff’s, since she was born after 1953. Her own benefits are $2918 she would have to claim her own benefits, less approximately 8% since she is still not at FRA.
BEST OPTION
She claims survivorship benefits IMMEDIATELY upon retiring, while delaying her own benefits until age 70 and earning delayed credits of 8% per year between FRA and 70. In Alissa case her survivorship benefits will be $2400 per month with checks starting in January when she retires (should she decide to retire early she can claim survivorship benefits immediately). When she turns 70 her projected check would be $4,100 per month. Should Alissa’s own benefits at 70 be less than her survivorship benefits, I would have suggested that she claim on her own record upon retiring and then at FRA switch to survivorship benefits!
SUPER BAD Information
It’s been my experience that 90% of all widows who go to Social Security and ask for advice as to what their options are, are told to claim the higher of the 2 benefits immediately! Alissa would be able to claim $200 more per month by claiming on her own record instead of Clyde’s. So, over the next 5 years she would receive approximately $8000 more by claiming her own benefits and ignoring the ability to claim survivorship benefits and postponing her own until 70.
So what is the real cost of this ill advised advice, of claiming her own benefits at 65 vs 70?
- At age 70 her own check would be $1,300 per month or $15,600 per year less!
- Should Alissa live until 95 the cumulative difference would be $466,492
- Should she live to 105 (don’t laugh) the difference would be $735,000
The difference does not take into consideration the time value of money nor what Alissa would have been able to do or better yet what would she be unable to do had she taken the Wrong Path!
Please never hesitate, reaching out if you think I can be of service……….
Happy Fall,
