Divorce at any age is tough, but when women get divorced later in life, more questions — and fears — come up about retirement. Of adults 65 and older who live alone, 33% say they have enough money to live comfortably, 24% can meet basic expenses and still have some left over, 25% have just enough to meet basic expenses and 12% don’t have enough to meet basic expenses.1 Preparing for retirement is enormously important for any couple, and divorce can certainly throw a wrench in those plans.
If you are divorced or are in the process, you are far from alone. In 2015, for every 1,000 married people aged 50 or over, 10 divorced — a rise from five in 1990.2 And while Social Security isn’t the only aspect of retirement planning, it’s one that comes with a lot of questions — regardless if you were a full-time mom or worked outside the home most of your life.
When Should You File for Social Security Benefits?
Answering this question is crucial to planning your retirement. While you can start receiving Social Security at age 62, you will only receive between 70–75% of your monthly benefit because you filed early.3 The percentage is based on your full retirement age (FRA), which differs depending on the year you were born. If you were born in or after 1960, your FRA is 67, meaning you get the full 100% of your monthly benefit if you wait until that age to file.
What About Spousal Benefits?
The spousal benefit is the option to take if you did not or will not earn 40 Social Security credits throughout your working-age life, or if the benefit you’re entitled to based on your career is less than the spousal benefit you would receive. (Social Security automatically chooses whichever one is higher.)
You can receive the amount of one-half of your ex-spouse’s monthly Social Security benefit so long as:
– Your marriage lasted at least 10 years
– You are unmarried
– You qualify for Social Security or disability benefits
– Your ex-spouse qualifies for Social Security or disability benefits
– You have been divorced from your ex-spouse for at least two years (this requirement only applies if your ex-spouse has not yet applied for their own Social Security benefit)4
If you happen to be older than your ex-spouse, the good thing is that you only need to wait until they are 62 years old to file (unless they qualify for disability). You just need to reach your FRA in order to get the full 50% of their benefit.
If you get remarried while collecting on an ex-spouse’s Social Security benefit, that benefit will stop, since you must be unmarried to collect on it. However, you must be married for at least one year to a new spouse before you can file an application for spousal benefits based on their record.
What If You Work While Receiving Benefits?
If you work while getting benefits — whether spousal or your own benefit — and are under your FRA, there’s a limit to how much you can earn per year. If you go over this amount, you get money deducted from your benefit payment (you can view these limits on the Social Security Administration’s website). But beginning with the month you reach FRA, your earnings no longer reduce your benefits, no matter how much you earn.5
How Can I Best Plan My Retirement?
Divorcing while in your 50s can shake up your world, forcing you to change your future plans and think about what your lifestyle will look like without the benefit of your spouse’s income. That’s why carefully planning your retirement now is so crucial.
Women can protect themselves several different ways. If you currently work, you should consider maximizing your 401(k) contributions. You should also maximize your IRA contributions if you work or don’t work but are receiving alimony. A well-diversified investment portfolio that factors in your goals and risk tolerance can help you save enough for retirement and potentially protect you from inflation.
It is also important to have a comprehensive financial plan in place. Meeting with a trusted financial advisor will help you determine your goals and what it will take for you to achieve them by the time you reach retirement age. Learn more about Wipfli Financial’s collaborative, three-step financial planning process to get started.
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