If you are divorced, the recent changes to the Social Security law may mean that you will not be able to collect as much from Social Security as you had thought. That is because the Budget Act of 2015 eliminated the option for anyone born after 1953 to file what is called a restricted application.
A restricted application allowed you to begin collecting a Social Security retirement benefit from your ex-husband at your full retirement age and then switch to receiving benefits based on your work history at age 70. This made sense for many divorced women because for every month you delay starting your Social Security benefits, the amount of your monthly benefits increases. A restricted application would allow you to get paid based on your ex-husband’s Social Security benefits while waiting for your benefits to grow larger.
If you were born in 1953 or earlier, you still have the option of benefitting from a restricted application. Before starting to receive any Social Security benefits, find out if you are eligible to receive any benefits from your ex-husband and, if so, how much (visit the Social Security Administration website for more information). Then see if using a restricted application would be beneficial. If you are not comfortable doing this analysis yourself, hire a financial advisor to help you. With potentially hundreds of thousands of dollars at stake, it is well worth getting professional advice on this issue.
If you were born after 1953, you can no longer use this strategy. However, you may still greatly benefit from delaying the start of your Social Security benefits up until age 70.
No matter when you were born, the decisions you make about Social Security should be part of an overall financial plan. The timing of when you start receiving your benefits can affect the taxes you pay, the longevity of your investment portfolio and your standard of living in retirement. Starting Social Security benefits is usually a decision that cannot be changed later on, so be sure to consult your tax preparer and financial advisor before making any final decisions.
For more information about divorce and Social Security, check out our blogpost: Five Surprising Facts About Divorce and Social Security.
Jim Uren, CFP®, CDFA™