Social Security Strategies for Single Seniors
In late 2015, Congress passed new legislation that significantly changes social security filing strategies for couples, most dramatically the ability to “file and suspend” one person’s benefits while activating and living off the benefits from the other spouse.
Before the new rules, one member of a married couple could activate his or her social security benefits at full retirement age, and then immediately suspend these benefits. This deferred payout would grow the potential monthly benefits by up to 26% thanks to a deferred payment stipulation. Once that person reached 70 years old, they would un-suspend and enjoy a much higher monthly benefit for the rest of his or her life. And all of this had no impact on the spouse’s claim, which the couple could have been living off of during those years.
The impact of the new legislation for single seniors appears to be less far-reaching, although still important to understand. If you have never been married, or are divorced after less than 10 years of marriage, and do not plan on getting married, you should be aware of one significant change. Previously, you could file and defer your benefits starting at age 66, allowing your future potential monthly payment to grow substantially, up until the age of 70.
If, however, you received a life-threatening diagnosis of a disease, for example, you could reactivate your account and collect a lump-sum of all the payments you had deferred. This was especially helpful in the case of a disease, where you might need a large amount of money for hospital bills, or your life expectancy suddenly changed. With the new legislation, you are no longer able to receive that lump sum, making suspending your monthly benefits until age 70 quite a bit more risky.
Widows and widowers were also not impacted as greatly by the new legislation. You can still take activate either your personal benefits and suspend widower benefits, or vice versa, allowing one of the benefits to grow to maximum payout down the line.
If you are divorced after being married for more than 10 years, you are eligible to receive benefits based on your ex-spouse’s record, even if he or she has remarried, as long are you are 62 or older and remain unmarried. However, if your own record would pay out a larger monthly sum, the government would pay this amount instead.
If you continue to work past full retirement age, you may be subject to the retirement earnings limit, so it’s important to check and see how all the numbers add up. You can claim benefits on your spouses record even if he or she has not yet claimed them, as long as you have been divorced for more than 2 years. The benefits you claim will not impact the benefits of your ex-spouse or his or her current spouse if they have remarried.
As you can see, the new legislation makes filing options quite a bit more complicated. It’s helpful to talk to a senior financial advisor to weigh your benefits and risks. The Social Security Administration also offers several online calculators that can give you a rough idea on how much income you will need in the future, benefits based on your retirement age, and early or late retirement calculations.