Not too long ago, a friend of ours gave us a bottle of pure maple syrup from Vermont. It was delicious.
It got me thinking about the process of how maple syrup was made. I wasn’t sure how they got syrup from a tree, so I did a little bit of online research. Apparently, they put what they call a spile into a tree and the tree sap comes out through the spile and into a container below.
Sounds simple enough. However, one of the key decisions that the sugarmakers have to make is when to tap the tree with the spile. If they tap too early in the season or too late in the season, they will not get the maximum amount of sap out of the maple tree.
Tapping the tree is easy. Knowing when to tap is the hard part. This process reminds me of Social Security retirement benefits. Once you qualify, it is relatively easy to apply for benefits. The key issue is when you should apply for your benefits.
Like with tapping a tree, starting Social Security retirement benefits too early or too late may mean that you won’t get as much out as you could have.
FACT ONE: If you were married to your ex-husband for ten years or longer, you may be eligible to receive a retirement benefit from Social Security based on his work history. The Social Security Administration will provide you with retirement benefits based on your ex-husband’s work history if you meet four key requirements. First, you must have been married for at least 10 years or longer to your ex-husband. Second, you must currently be unmarried. Third, both you and your former spouse must be at least age 62 or older. And finally, if you have yet reached your full-retirement age (66-67), then you will only receive a retirement benefit based on your ex-husband’s work history if you are not entitled to a higher benefit based on your personal work history.
FACT TWO: If your ex-husband is deceased, then you may be eligible for widow benefits based on his work history. If you meet the requirements to receive a Social Security retirement benefit based on your ex-husband’s work history (see above), that benefit will typically be about half of his full benefit depending on how old you are when you begin receiving the benefit. However, if your ex-husband is deceased or becomes deceased while you are receiving half of his benefit, you will become eligible to receive his full benefit amount.
FACT THREE: Your ex-husband’s current marital status or the decisions he makes about his Social Security retirement benefits will not affect your retirement benefits. In the case of divorce, the Social Security Administration does not limit the number of individuals eligible to receive retirement benefits based on a single individual’s work history. So it is possible that your ex-husband has three former spouses and one current spouse that all meet the eligibility requirements to receive a Social Security retirement benefit based on his work history. Even if this is the case, your benefits will not be reduced because of the other spouses.
FACT FOUR: If you have two ex-husbands, you can often claim a retirement benefit based on the former spouses’ work history that will give you the largest benefit. If you have been divorced more than once and remain single, you may be able to claim a benefit based on either (but not both) spouses’ work history. You must have been married for at least ten years to each spouse and meet all of the other eligibility requirements. For this reason, it is important to keep a record of any former spouses’ Social Security number so that you can apply for benefits at a later date.
FACT FIVE: You may be able to start receiving retirement benefits on your ex-husband’s work history and then later switch to receiving larger benefits based on your own work history. It can sometimes make sense to start claiming a retirement benefit based on your ex-husband’s work history and then switch to benefits based on your personal work history later. In order to use this strategy, you must wait until you reach full-retirement age before claiming Social Security retirement benefits on your ex-husband’s work history. This strategy can be effective because your personal Social Security retirement benefits increase each month you delay receiving them beyond your full-retirement age up to the age of 70. This delay may make sense if your personal benefits are similar to or greater than the benefits you can receive based on your ex-husband’s work history. For example, let’s say that at age 66 you can receive $980 based on your ex-husband’s work history or $1,000 based on your work history. In this case, you can collect the $980 per month between ages 66 to 70 and then at age 70, start collecting approximately $1,320 per month based on your work history. It is like getting paid while you wait for your benefit to reach the maximum amount at age 70.
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[UPDATE: The Budget Act of 2015, which was passed by Congress and signed by President Obama, eliminates the strategy discussed in FACT FIVE for anyone born after 1953. However, you may still benefit from delaying your Social Security benefits beyond your full-retirement age.]
Jim Uren, CFP®, CDFA™