SOCIAL SECURITY AND DIVORCE
Marriage is a legal institution with a big impact on your finances, your retirement, and particularly your Social Security. How are your Social Security benefits determined after divorce? Here are some “must-knows” as you consider marriage or divorce.
Marriage: The good news
On the plus side, anyone who’s married has access to Social Security spousal payments . The payment amount is up to 50% of your spouse’s full Social Security payment (his or her payment at Full Retirement Age, or FRA, currently 66).
Spousal payments provide a “floor level” of payments — if your own Social Security is small, you can get the larger spousal payments. There’s no marriage penalty, just an opportunity to get at least the spousal payment level.
Most retirees are uninformed about how Social Security benefits are calculated, and often overlook how their change in marital status affects this critical retirement asset.
1. If your marriage lasted 10 years or longer and you have been divorced for at least two years, you are eligible for a divorced spousal benefit. You can claim either your own benefit or your ex-spouse’s benefit, whichever is higher.
2. You can also claim both benefits. Many divorced spouses optimize their Social Security by beginning their divorced spousal benefit at age 66, which is currently the full retirement age (FRA), and then switching to their own benefit at age 70.
For example, assume that Jane is eligible for a personal benefit of $1,500 per month at age 66 or a divorced spousal benefit of $1,000. If she files as a spouse first, she can claim $1,000 per month now and let her personal benefit grow to $1,980 by age 70, which is 32% higher than her age 66 benefit. This method is called a restricted filing application because Social Security assumes you are filing for the higher of the two benefits unless you specify that you are restricting your larger personal benefit.
When compared to simply starting with the larger benefit, filing as a spouse first will break even in 8½ years after age 66 (or by age 73½) and will provide Jane with an extra $68,160 in total benefits at her life expectancy. We’re not talking chump change.
3. If you begin claiming divorced spousal benefits between age 62 and FRA, you don’t get the opportunity to restrict your filing. Those who file for early benefits are required to take the higher of personal or spousal benefits. In fact, if you work during this time, your benefit could be adjusted downward due to the so-called earnings limit.
4. Getting remarried after a divorce generally means that you lose whatever benefit you may have been eligible for from your former spouse. For most people, this might not be a big deal because it only takes a year of remarriage to become eligible based on your new spouse’s record. The only exception to this loss of benefits occurs if your second spouse dies.
If you have been married for 10 years more than once, you could be eligible for both benefits, but you’ll only receive the higher of the two. However, if neither ex has remarried, they are both eligible to claim spousal benefits on your record.
5. You don’t need to wait for your divorced spouse to file for benefits to become eligible for spousal benefits. If you are both at least age 62, which is the earliest you are eligible for personal or spousal benefits, and you have been divorced for at least two years, Social Security allows you to make an independent filing decision.
Social Security Eligibility When Your Ex-Spouse is Deceased
If your ex-husband dies, you may receive benefits on his record, as long as your marriage lasted for at least 10 years. If you don’t meet the 10-year marriage rule, you can still qualify for benefits if all of the following are true:
– you’re caring for your ex-husband’s natural or legally adopted child
– the child is under age 16, or disabled, and
– the child is getting benefits on your ex-husband’s work record.
Your benefits will continue until the child reaches age 16 or the child’s disability ceases.
The amount of benefits you receive as a divorced spouse will not affect the amount of benefits other survivors (such as another ex-spouse) receive on your ex’s record.
Because divorce and remarriage add complexity to your Social Security decisions, seek professional financial advice before making such an important decision.
You must apply for Social Security benefits. You can do so by going on-line to SSA.gov, calling 800-772-1213, or making an appointment with your local office.