When approaching a fork in the road, what do you do?
A change and a choice are necessary.
Paths lead in different directions. Who knows where either path leads or ends.
A brochure would be helpful, with color photos and reviews from people who have made the journey.
Unfortunately, the future doesn’t distribute brochures and and everyone’s journey is so different that reviews aren’t helpful.
And when the fork in the road is divorce and retirement at the same time there is a lot to be considered.
The best approach is to pause and do your research.
Assemble facts and make a plan with your spouse.
The first piece of the puzzle is Social Security.
Social Security for a Divorced Spouse
Social Security is the primary source of retirement income for most Americans.
In order to collect Social Security from your own account you need to have contributed at least $1470.00 per quarter for 40 quarters. That is at least 10 years of employment.
However, if one spouse spent most of their marriage in the home raising the kids they may not have contributed enough to Social Security to collect a retirement benefit from their own account.
Not to worry.
It’s possible to collect from the working spouse’s account without reducing their benefit.
To be eligible to do this
You need to have been married for ten years,
Your spouse needs to be eligible to collect Social Security,
You must be over 62 years old and
Divorced for at least 2 years.
Your benefit will be 50% of your spouse’s benefit. Your spouse’s benefit will not be reduced.
If the working spouse remarries after the divorce, your benefit will not be effected.
And the ex-spouse does not have to wait for the working spouse to file for Social Security benefits before opening their own claim.
Either spouse can file first.
If Social Security does not provide enough income, or if it strikes either spouse as unfair, there is another option.
Social Security and Alimony
You can use alimony, also known as spousal support, to increase the “nonworking” spouse’s income.
If this is something you would like to consider then the first step is to establish the size of your Social Security retirement benefit
There are links to several retirement calculators near the end of this blog post.
Before you start entering numbers you should think about the age at which you wish to retire. This will have a big impact on the size of your benefit.
Full retirement age allows you to collect 100% of your Social Security benefit. Retirement age is based on your birth year.
If you were born between 1943 and 1954, full retirement occurs at age 66. If you were born after 1954 you should add 2 months per year to 66 until birth year 1960 when the full retirement age is 67.
For example,
If you were born in 1955 full retirement age would be 66 years and 2 months. If you were born in 1956, full retirement would be 66 years and 4 months.
The most popular age to retire is 62.
Retiring at 62 will reduce your benefit by approximately 30%.
And if you wait until you are 70 can receive between 124% and 132% of your benefit, depending on the year of your birth. Retirement age planner calculator.
https://www.ssa.gov/benefits/retirement/planner/delayret.html
This calculator displays the impact of your retirement age on your and your spouse’s benefit.
This links to the several official Social Security Administration calculators. They include life expectancy calculators and earnings test calculators a calculator to find your benefit amount if you also had a government pension.
It is possible to work and receive Social Security.
Work While Receiving Social Security
If you are are younger than full retirement age Social Security will deduct $1 for every $2 you earn above the limit. In 2020 the income limit is $18,240. In the year you reach full retirement Social Security will deduct $1 for every $3 you earn over the limit. $48,000 is the earning limit for working after full retirement in 2020.
I’ve attached the brochure How Work Affects Your Benefits from the Social Security Administration.
It contains examples of how the benefit reduction is calculated and they way that this reduction is applied t your benefit check.
Remarriage and Social Security
If you remarry you will not be eligible to collect your ex’s Social Security benefit. You can either collect on your current spouse’s Social Security or yours, whichever one is greater, but not both.
This is a helpful brochure from the Social Security Administration that explains how Social Security works.
There is much to consider. If you need help please call and schedule a free consultation.
The information provided in this post is for general information purposes only and should not be construed as legal advice. You should not act or rely upon this information without seeking formal professional counsel. The information provided in this post is not intended to create an attorney-client relationship.