Social
Security has a way of making your life decisions difficult. When
divorce and remarriage enter the picture, things get very complicated.
The
earliest age you can start claiming Social Security benefits is 62. You
can also delay taking benefits to any age. If you wait until your full
retirement age, which is 66 for the current crop of Baby Boomers, you
receive a larger benefit. If you can get by without the monthly benefits
for a few years longer, delaying further to 70 results in a maximized
benefit for you.
What complicates the matter is the spousal
benefit. When you're eligible for a spousal benefit, you may take all
available benefits (your own and the spousal) at 62 at reduced amounts.
Or, if timing is right, you can take your own benefit early and then add
the spousal benefit later.
Another choice is to claim the spousal
benefit when you reach your full retirement age and maximize your own
benefit by waiting until 70.
Since your spouse must file for
benefits before you can claim spousal benefits, whether all of these
options are available to you depends on your spouse's age.
Complicating
matters further, what if you're divorced and are now considering a
remarriage? If you remarry, you are no longer eligible for any spousal
benefits based on your ex-spouse's record.
This brings up a set of
difficult scenarios. You have this new person in your life, but it
might be financially advantageous for you to remain unmarried. But if
you're not married, you cannot provide future spousal benefits and
survivor benefits for your new love.
I recently dealt with the
same situation. Carol, 62, divorced Bob several years ago after a
20-plus-year marriage. Bob, 10 years her senior, has a Social Security
record that would provide a significant spousal benefit for Carol -
$12,000 per year if she takes it at 66, her full retirement age. She
will claim her own benefit at 70. By then it'll be considerably larger,
roughly $31,680 per year.
This had been Carol's plan all along,
but then she met Ted, and they were considering getting married.
However, Ted has a much smaller Social Security benefit coming to him,
around $6,000 per year. A spousal benefit based on Ted's record would
only amount to $3,000 per year. Plus, he's eight years younger than
Carol.
If she marries Ted, Carol cannot receive a spousal benefit
based on his record at 66. She also loses the spousal benefit from Bob's
record. But if they don't get married, Ted would not be able to receive
the spousal and survivor benefit based on Carol's record.
My
recommendation to the couple is to delay the marriage until she's 70,
and at the same time, purchase a 10-year level term life insurance
policy that is worth the total amount of survivor benefits for Ted.
This
way, Carol can receive the spousal benefit based on Bob's record when
she reaches 66 and continue to receive it for four years until she's 70.
For Ted, the insurance policy provides him with a future income
resource if Carol passes away before they marry. Ted would be eligible
for the spousal and survivor benefit based on Carol's record one year
after the marriage.
In addition, Carol and Ted can get married at
any time after Bob dies. Since Carol is over 60, a remarriage doesn't
jeopardize her eligibility for the survivor benefit based on his record.
Culled from Advice IQ IN US Today
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