Help your retirement-age client maximize social security benefits.

August 1, 2013

The government may give, and the government may take, but in the case of Social Security they can be quite generous! Even when a couple divorces it may be possible for one spouse to collect a benefit larger than their own, based on the work record of their ex-spouse.

Married couples can take advantage of a strategy called “file and suspend” in which a worker files for benefits at full retirement age, then immediately suspends them. This allows the worker’s spouse, who must also be at full retirement age, to collect a spousal benefit equal to ½ of the worker’s benefit. Both spouses can then let their own benefit grow by 8% per year until age 70, when they reach the maximum allowed benefit. The IRS allows only one spouse of a married couple to “file and suspend.”

Divorced spouses can take advantage of this strategy in a slightly different way. First, to collect on an ex-spouse’s record you must have been married to that person for at least 10 years and divorced for at least 2 years. Also the person collecting on the ex-spouse cannot be remarried.

A worker at full retirement age can file a restricted claim, which allows that person to collect on their ex-spouse’s record (as long as the ex-spouse is eligible for benefits) even if the ex has not filed for benefits yet.

By filing a restricted claim the divorced person is collecting a spousal benefit (equal to 1/2 of their ex’s full benefit).                                                     

This allows them to let their own benefit grow until they reach their maximum benefit at age 70.

As an example, Dan is age 66 and still working. His retirement benefit is $2,000 per month. Jennifer, also age 66, is retiring and is entitled to her own benefit of $1000 per month. If Jennifer files a restricted benefit she can collect $1,000 per month – the same as her own full benefit – for 4 years, then switch to her maximum benefit of $1,320 at age 70.

Unlike the “file and suspend” strategy above, which allows only one spouse to utilize this tactic, both divorced spouses can file restricted claims on the other’s record. And since it doesn’t matter whether the ex has filed for benefits yet, there doesn’t need to be any communication between them to effect this plan.

« Go back to Divorce Newsletters