Every morning when I awaken, I wonder whether the politicians changed all the rules again.…
While some Social Security strategies have been discontinued, there are still a few under-utilized strategies that could be of great benefit.
- Divorced Spouse: If you were married for 10 or more years, you are eligible to collect benefits against your former spouse’s Social Security account. A former spouse drawing against your Social Security Account has no impact on your benefits or the benefits available to your current family. Even if you remarry, your former spouse can draw against your Social Security benefits and you would never know. Most people know you can collect the spousal half if it is a higher amount than your own full benefit from Social Security, but the piece of information often forgotten is the full survivor benefit. If you hear that a former spouse died and know they earned a higher income than you, run to Social Security and see if the former spouse’s survivor benefit is higher than your own benefit. If you were collecting spousal benefits off a former spouse’s record, you may get automatically adjusted to the full survivor benefit. However, if your benefit was greater than half of the former spouse’s, but less than the full benefit of the ex, run to Social Security to ask for a recalculation. No matter what, you should remain attentive to the health status of a former spouse because it may have significant cash flow implications. If you remarried after 60 years old and find out a former spouse passed who may have a higher Social Security benefit than you or your current spouse, you can collect off the former spouse. Remember, this only applies to marriages that lasted 10 or more years. If you are in the midst of a divorce and you realize your tenth anniversary is coming up, delay signing off until after you get your gift of tin for ten years (the traditional tenth anniversary gift). Yes, tin for 10 years of marriage. It makes sense that Social Security made the divorce anniversary for Social Security 10 years; I would divorce me, too, if I gave a gift of tin after being married to me for 10 years. 😊
- Survivor Benefit: If you had a spouse pass while you were legally married, and you are not married at age 60, then you can claim the survivor’s benefits between age 60 and your full retirement age, which is now between 66 and 67 years of age for most Americans. You can collect survivor benefits after your full retirement age, but survivor benefits peak at full retirement age and not at age 70 like your own benefit. A lot of people know that you can collect survivor benefits, but you may not know that you can also wait and let your own benefits grow to age 70 and then go back and take your own higher benefits. Or if your survivor benefits are higher than your own you can take your own benefits at 62 and let your survivor benefits grow to your full retirement age. Remember that benefits collected at ages 60 to 65 are subject to an earnings test and if working making more than $25,000 per year, this may not prove beneficial. Here, though, is a piece many may not know: if you were married and your spouse passed while legally married, but you remarry before age 60, you cannot claim against the late spouse’s Social Security account. Yet if your current marriage ends in divorce, you are eligible to go back and claim against the late spouse’s Social Security account. If the current marriage ends in death, then you claim against the higher of the two late spouse’s accounts. Make sure you are always getting the larger benefit.
- Suspending Benefits: If you began to take benefits before your full retirement age and regret doing so, you have two possible options. First, you have a once-in-a-lifetime option to pay back Social Security benefits received for any period of the first 12 months and withdraw your application. The payback is also without interest, and all benefits received on your account for you, a spouse, or dependent child must be returned. This strategy is rarely exercised but should be considered more often. Second, if you have been collecting Social Security benefits and reach your full retirement age (which is between 66 and 67 for most Americans), you can begin suspending benefits and receive an 8% increase for every year deferred. If I collected at 65 and then turn 67, I can suspend to age 70 and get a 24% benefit increase. Since many Americans are living longer, well into their nineties, that 24% increase with inflation adjustments yearly for 20 to 30 years will prove to be significant.
Social Security can be complex, so make sure you sit down with your Consulate Advisor before deciding when to begin collecting Social Security. Also make sure you check in yearly so that if you already began collecting, we can consider whether a new Social Security strategy should be employed.
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