Reality check on retirement
The letter from a 50-year-old, newly divorced reader was brief, but full of pain, errors and red flags.
“I was married to my ex-husband for 23 years,” it began. “My attorney said I will receive half of his Social Security benefits because I was the first wife and married to him for over 10 years. I will not remarry, EVER, so I know that rule will never affect me. My question is: Do I need to apply for his benefits when I reach a certain age? I am 50 years old and want to have all my ducks in a row when I retire at age 62.”
Let’s start with the facts and errors, then we’ll deal with the pain and red flags.
For starters, Social Security isn’t a first-wives club.
Any ex-spouse could be eligible for spousal benefits on a former spouse’s record if he or she meets the criteria, which include having been in at least a 10-year marriage, not being remarried (unless the subsequent marriage has ended in death or divorce), and being at least age 62.
Generally, spousal benefits amount to half the worker’s benefit amount, though several factors can affect the actual payout.
For more criteria and explanation, check out this link to the Social Security Administration: ssa.gov/retire2/yourdivspouse.htm.
At 62, you’ll be five years away from full retirement age as defined by Social Security for your age group, so you wouldn’t be eligible to choose between taking your own reduced benefit (if you qualify for one) or the spousal benefit.
Now, let’s get to the pain and red flags.
As you contemplate a financial plan for life’s second half, to paint yourself into a corner by saying you will never, EVER remarry could be dangerous.
“I don’t use words like never or always,” said Ivy Menchel, founder and president of Family Wealth Planning Partners in New York, a financial planning firm that specializes in divorce planning. “It’s very common to feel that you’ll never be with somebody else again, but over time, very often people feel differently. I’ve had other women tell me they definitely plan to marry again and that bothered me too. A man is not a retirement plan.”
Particularly if your divorce is fairly fresh, you might want to think twice about totally dismissing the possibility of another marriage. At just 50, you will find a lot can happen between here and retirement age, and you’ll want to build some flexibility into your future finances.
Where did age 62 come from? Was that the age you used to plan on retiring with your husband? Did you choose that age because it’s the earliest age to begin collecting Social Security benefits?
You didn’t say how you’ll support yourself for the next 12 years, but if Social Security will account for a large percentage of retirement income, you might want to strongly rethink the plan to retire and start taking those benefits early.
“The first call to reality is that half of a spouse’s benefit will not suffice to support an entire retirement game plan,” said Lili Vasileff, founder and president of Divorce and Money Matters LLC in Greenwich, Conn.
If you work already or plan to start a new career, you have a lot of time to boost the work record on which your own benefits will be based. And delaying claiming benefits to full retirement age (67 in your case) or even to age 70 to get delayed retirement credits could significantly boost your lifetime benefits, though, of course, that depends on how long you live, Vasileff said.
Depending on the amount of both benefits, it could also pay to wait until full retirement age to claim one benefit, then switch to the other at 70.
And don’t forget to factor in the possibility of a divorced survivor’s benefit if you outlive your ex.
“A lot of people think they should collect as soon as they can, but it sounds like she could really benefit from some economic modeling to see the impact” of delaying benefits, Menchel said.
There are several online calculators, free and paid, that can help you maximize your benefits based on your priorities. AARP offers a free one at aarp.org/work/social-security/social-security-benefits-calculator.html.
It’s perfectly appropriate to research benefit strategies and contemplate your financial future as a single, but don’t lock yourself into something just for the “security” of having a plan. A few ducks out of line now may give you some options down the road.
Share your journey to or through retirement or ask a question at firstname.lastname@example.org.