What Is The Best Strategy To Maximize My Benefits?

Jan 2 2017 - 10:45am

I am 61 and currently work for the state of Colorado and must pay into our PERA program. I have not worked 35 years total (stay at home mom). I only have 8 years with PERA, which is subject to WEP. I have a divorced spouse who is currently receiving SS benefits and to whom I was married for 17 years so can file for his benefits. My question is what is the best strategy with this scenario to maximize my benefits? Collect his benefit, liquidate my PERA account (which will not pay much even if I stay until I am 70).

I think I am representative of many women my age who opted to stay at home to raise children, then got divorced and have returned very late to the workforce where they do not have enough time to build a pension/retirement fund. Any advice for women like me?

Thank you,

Hi JC,

WEP, which refers to the Windfall Elimination Provision (https://www.ssa.gov/pubs/EN-05-10045.pdf), only affects Social Security benefits payable on a person's own work record. It doesn't sound like you've paid into Social Security long enough to be insured for benefits on your own account, so I doubt if WEP will be an issue for you.

On the other hand, the Government Pension Offset (GPO) provision (https://www.ssa.gov/pubs/EN-05-10007.pdf) will affect your divorced spousal benefits if you receive a pension based on your non-covered work for the state of Colorado. The GPO provision causes divorced spousal benefits to be reduced by 2/3rds of the gross amount of your government pension.

Your divorced spousal benefits won't be affected by GPO if you withdraw just your contributions to the plan, or if you simply don't apply for a pension from the plan. However, if there is an option for a lump-sum distribution in lieu of a pension, that could still result in a GPO reduction of your divorced spousal benefits. It may be better for you overall if you go ahead and take the pension, considering that only 2/3rds of the amount would be offset against your divorced spousal benefits.

Your divorced spousal benefits will be at their highest rate if you wait to start them at your full retirement age, which would be 66 & 2 months if you were born in 1955. You could start them as early as age 62, but your benefit rate would be reduced by around 31%, and the Social Security earnings test (https://www.ssa.gov/planners/retire/whileworking2.html) may limit what you could draw prior to full retirement age.

You may want to consider running the maximization software available on this website in order to explore all of your options. The software is programmed to handle both WEP and GPO, so it should help you to determine your best course of action.

Best, Jerry