For divorcees nearing retirement, time is of the essence to thoroughly analyze financial readiness. To that end, Social Security is often not given its due attention. It not only ensures a consistent income stream, but it is also somewhat customizable to individual circumstances.
Social Security benefits are far more complex than many people realize. But a financial planner who is well versed in the intricate rules and options can customize a claiming strategy based on individual circumstances such as health status, life expectancy, need for income, and plans to continue working, among other factors.
Take for instance, the case of Peter and Sarah. The couple had been married for 26 years at the time of their divorce, and Peter had been the primary wage earner while they were together. Although the divorce settlement was amicable, Sarah was still worried about her retirement.
Early Retirement May Mean Reduced Benefits for Both Ex Spouses
One of the issues that concerned Sarah was that Peter had decided to retire early, before his full retirement age of 66, which would mean a reduction in benefits for both of them. And while Sarah continued to work, after her living expenses, there was not much left to save toward retirement.
After speaking with her financial advisor, Sarah got some good news. She learned that divorcees are eligible for a benefit equal to one-half of their ex-spouses full retirement amount, as long as they start receiving benefits at their own full retirement age. So for Sarah, who just turned 66, along with Peter, this meant she was immediately eligible for the divorced spousal benefit. She could still continue to work, and sock away even more for retirement savings. And this newfound source of monthly income would have no effect on Peter’s benefits. Also, he would never even know that she was receiving a distribution.
Often-overlooked Social Security Benefits for Long-lasting Marriages
A divorcee is entitled to benefits based on his/her ex-spouse’s employment when:
• the ex is eligible for Social Security retirement or disability benefits;
• the marriage lasted 10 years or longer;
• the divorcee remains unmarried;
• the divorcee is at least age 62; and
• the benefit that the divorcee is entitled to, based on his/her own wages, is less than the benefit he/she would receive based on the ex’s.
Sarah also learned that just as retiring early will reduce your Social Security benefit, delaying retirement will increase it. With that understanding, she decided to continue working until age 70, at which point, she would begin drawing a benefit based on her own wage history, rather than Peter’s, and also be entitled to the maximum delayed retirement credit.
Unwinding a marriage is widely considered the second most stressful life event one can experience. And ensuring a comfortable retirement is arguably the most pressing financial concern of a lifetime. Navigating the intricacies of Social Security benefits is just one of the many ways a financial advisor can help.
Resources for Financial Planners
Resources to help financial planners improve their Social Security planning proficiency are readily available. The Social Security Administration provides a dedicated website titled, “Information for Financial Planners.” In addition, Social Security Analyzer Maximization Software is a terrific tool for benefit calculations and strategy development.
Dana McLaughlin, CFP®, C(k)P® is a Senior Wealth Advisor at Beirne Wealth Consulting. With a thoughtful, creative, and holistic planning approach, Dana is responsible for advising individuals and families throughout the country on financial organization, investments, customized financial planning, retirement, advanced cash-flow analysis, and estate planning strategies. Dana focuses on helping clients to ultimately achieve an overall sense of financial well-being by articulating their most important personal goals and connecting those goals regularly with their financial life.
About Beirne Wealth Consulting Services, LLC
Beirne Wealth Consulting Services, LLC (“BWC”) is a growing, privately owned, SEC Registered Investment Advisor with about $2 billion in assets under management and over 25 employees in Connecticut, Pennsylvania and Florida. BWC provides independent, fee-based investment management services and customized financial planning solutions. Our institutional business provides consulting expertise to defined benefit and defined contribution plans, endowments, foundations and non-profit organizations. Our private clients include high net-worth individuals and prominent families, many of whom bring complex wealth management challenges and multigenerational planning needs. For more information, please visit www.beirnewealth.com or give us a call today at 888-231-6372.