Ask the Expert: Waiting to file pays off

My ex-spouse and I will both turn 66 in 2012. At 66, can I collect on his Social Security and keep working until I'm 70? Will I have to repay some benefit because I earn over $55,000? At 70, can I retire and switch to my own benefit?

Your plan will work admirably, thanks to an option that's only available to people who wait until their full retirement age -- 66, in your case -- to file for Social Security.

Your own Social Security benefit is based on your work record. But married couples are also eligible for a spousal benefit based on each other's records. After a divorce, if your marriage lasted 10 years or more and you haven't remarried, you qualify for a benefit based on your ex-spouse's record. (Whether married or divorced, you can never collect your own benefit and your spousal benefit simultaneously.)

As an eligible divorced person, you can apply for this spousal benefit as soon as you and your ex are both 62. But if you apply before you're 66, you must apply for both your own benefit and your spousal benefit -- and both are reduced for age. You'll get the larger of the two amounts. If you wait until 66 instead, you can apply for your spousal benefit alone, postpone applying for your own benefit, and switch to it later. Your benefit grows 8 percent each year you delay taking it between 66 and 70. At 66, your full retirement age, you'll qualify for the maximum spousal benefit -- 50 percent of what your ex is entitled to. Plus, you can collect the whole amount while working, regardless of what you earn. Social Security recipients who work forfeit $1 of benefit for each $2 of earnings over $14,160 until they turn 66.

The bottom line It pays to study all of your Social Security options.

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