Personal Finance: What Older Divorcees Need to Know About Social Security
Wednesday, November 12, 2014
Photo Credit: iStock
While this is not a happy trend, there is (pardon the pun) a silver lining. It turns out that while the marriages themselves may have ended, certain Social Security benefits from the marriage often survive. Older divorcees need to be aware of these benefits—or else risk losing out on potentially thousands of dollars of lifetime income.
Spouses are entitled to certain Social Security benefits based on the employment record of their partner. Many are surprised to learn, however, that divorced spouses may also be entitled to the same Social Security benefits based on the employment record of their former partner. The rules vary slightly. I will first discuss those that apply to currently married couples.
At the outset, note that Social Security is a gender neutral system and either spouse in a marriage may qualify for spousal benefits. In addition, as a result of the recent Supreme Court decision in Windsor invalidating part of the Defense of Marriage Act (DOMA), legally married same-sex spouses living in states that recognize same-sex marriages are also eligible for spousal benefits. The status of same-sex couples living in other states is still unsettled.
Social Security Spousal Benefit Rules for Currently Married Couples
One spouse can claim a spousal benefit after the other has filed for his or her own retirement benefit. At full retirement age, the claiming spouse will receive 50% of the “primary worker’s” (other spouse) primary insurance amount (PIA) —that is, the retirement benefit due at full retirement age—as a spousal benefit. Claiming earlier (but not before age 62) results in a reduced benefit. After full retirement age, and while receiving a spousal benefit, the claimant spouse can defer his or her own retirement benefit in order to earn delayed credits, and then at age 70 switch to the increased retirement benefit for the rest of their life. Spouses whose own retirement benefit is less than half their spouse’s would continue collecting a spousal benefit for as long as both spouses are alive.
The death of one spouse triggers a second available benefit: the survivor benefit. Upon the death of a spouse, the surviving spouse can receive the deceased’s benefit as their own for the rest of their lives as long as this benefit is greater than the one they are entitled to on their own record. A reduced survivor benefit can be claimed as early as age 60, or the survivor can wait until full retirement age and receive an unreduced benefit (unless her spouse took his benefit early). In general, the marriage must have lasted at least nine months and the surviving spouse must not remarry before age 60.
These rules generally describe the benefits available to currently married couples. Most people do not realize, however, that these same benefits are also available to divorced spouses who satisfy a slightly different set of rules.
Social Security Spousal Benefit Rules for Divorcees
Divorced spouses who were married for at least 10 years can claim a divorced spouse benefit once their former spouse reaches age 62. If the divorced occurred more than two years ago, the former spouse does not even need to have filed for their own benefit. The other rules governing spousal benefits apply to divorced spouse benefits as well. Remarriage terminates a divorced spouse benefit.
Amazingly, the Social Security rules allow each former spouse to claim a divorced spouse benefit simultaneously (something not allowed to currently married couples). Neither ex-spouse’s benefit will be impacted by the other’s. Perhaps even more amazing is that if an individual had multiple marriages that each lasted more than 10 years, each of his or her ex-spouses can receive a divorced spouse benefit. In addition, neither the primary worker ex-spouse nor any of the claimant ex-spouses benefits will be affected as a result. (I’m certain this was not intended when the Social Security rules were first written!)
Divorced spouses are also entitled to survivor’s benefits. Again, the marriage must have lasted at least 10 years and the surviving divorced spouse must be at least age 60 and unmarried. The surviving divorcee claimant can remarry after age 60 and continue to receive a survivor’s benefit. Be aware, however, that while a survivor’s benefit can be claimed as early as age 60, taking it before full retirement age results in a reduction. This is true for all survivors, not just divorcees.
Older divorcees need to be aware of the potential Social Security benefits they may be entitled to as a result of a former marriage. Failing to take advantage of this opportunity can result in the loss of tens of thousands of additional lifetime income, especially for women whose own retirement benefits tend to be lower than their spouse’s.
Readers with questions on personal finance and Social Security can email Joe Alfonso at [email protected].
Banner Photo Credit: iStock
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