Probably no filing strategy is more misunderstood than the divorce filing. There are several caveats to first consider. Then there are the grandfathered provisions. Just so you are aware if you were married to your spouse for more than 10 years and are not remarried you can file for benefits based on the greater of your personal benefit or ½ of your ex-spouse’s benefit. With the new deemed filing rules which mean you automatically receive the greater of these benefits optimizing is taking this number and figuring out the best time to file. For those that are the lower earning spouse they also need to be aware that they can step up to their ex-spouse’s full benefit at death.
In this case we are going to take a look at an overlooked option. In this case John was the higher earning spouse but is eligible for the grandfathered restricted application. This only works if the person filing was 62 by the end of 2015. In this case John has to wait until full retirement age and then used the restricted application to get a small benefit to age 70. While it is not a huge amount, his personal benefit is allowed to accumulate the delayed retirement credits. On the flip side his ex-spouse if she had not remarried would be eligible for this greater amount at his death. In this case John gets $76,975 more by using this strategy over just taking his own benefit at his earliest time.
So in recap a higher earner that is grandfathered can benefit from the restricted benefit, The ex-spouse can benefit at death and the difference is almost $77,000 more over John’s lifetime.