Divorce and Social Security: It’s Complicated

Divorce & SS Its Complicated Hero

Social Security benefits for a divorced spouse may seem like a misnomer, but long pieces of legislation have been written into law to provide for divorcees. Benefits can be claimed based on the income history of the highest earning spouse if certain conditions are met. This can be a lifeline if you were the lower-earner or had interruptions to your work history.

We break down the basics of social security and what divorcees need to know about their options in this article.

Understanding the Basics to Social Security

There are three tranches to the social security system: retirement, disability, and survivors. Divorcees can claim benefits based on the former spouse’s earnings records through all three tranches, though this article focuses on survivors and retirement benefits.

Claiming benefits on an ex-spouse’s record requires that several conditions be met:

  • You are at least 60 years old (or 62 in the case of retirement benefits)
  • We’re married for at least 10 years
  • Your ex-spouse was entitled to Social Security in the first place
  • You have not remarried (there are some exceptions to this)
  • Your benefit is lower than your former spouse’s benefit

 

Critically, your spouse’s decision to remarry or to claim benefits will not impact the benefits you are entitled to receive. Their decisions will not impact you. Likewise, your decisions will not impact them. These are entirely separate matters. The Social Security Administration does not communicate the choices you make to an ex-spouse or vice-versa.

Social Security Retirement Benefits for a Divorced Spouse

The spousal benefit for divorcees is the same as the spousal benefit for a currently married spouse. The only differences are in who qualifies. Social Security benefits for a divorced spouse can only be paid if the marriage lasted at least ten years. You must also be at least age 62 to qualify.

The Social Security Administration (SSA) will only pay a spousal benefit if it’s lower than your own. If your benefit is higher then they’ll pay based on your record. It’s essentially “we pay whichever is more”. And there is no switching back and forth. You cannot claim at 62 on a former spouse’s record while you let your own retirement benefit grow.

The deemed filing rule that came into effect in January, 2016 made this the case. Anyone born before January 2, 1954 can still use the file and suspend or the restricted application strategies. These allow you to choose between your benefits or a spouse’s benefits. But these are no longer options for most retirees. The SSA says that you are “deemed” to be filing for your retirement benefits and spousal benefits when you file for either of those benefits. It doesn’t matter which benefit you’re applying for. They compare both and pay you whichever is more.

The two year rule

There’s an extra twist to this. The divorce must be at least two years old if your ex-spouse qualifies for benefits but has not started taking them. Retirement benefits will only be paid on your record if you apply within those first two years. This can lead to a cash crunch if your benefit is lower or if you don’t have enough credits to qualify on your own earnings record.

However, your benefit as a former spouse will be bumped up within those first two years if your spouse files for benefits. This rule does not apply if your spouse was already receiving benefits. You can immediately claim a spousal benefit based on their earnings record in that case.

How much?

Spousal benefits are never more than 50% of your former spouse’s retirement benefits. And that maximum is only reached if you apply for benefits at your full retirement age. Claiming benefits on an ex-spouses record before that date will lead to a reduction in benefits.

However, delaying past that date will not increase your spousal benefit. There are no credits that get added if you delay a spousal benefit like there would be if you delayed your own benefit. And given that you are deemed to be filing for both your own benefits and spousal benefits whenever you do file, your options for delayed credits are moot.

The only real opportunity here is if your own earnings record is projected to grow past half of your former spouse’s by waiting. It may pay to wait in that case. If you don’t anticipate ever exceeding that then it generally makes the most sense to claim at your full retirement age or sooner.

The earnings test still applies

Finally, the earnings test still applies. Some or all of your social security benefits will be withheld if you are still working and earn above certain thresholds when you claim social security on a former spouse’s record. Consider this carefully when deciding when to apply.

Social Security Survivor’s Benefits for a Divorced Spouse

Survivor’s benefits are an entirely different tranche of Social Security. The rules to qualify for a survivor’s benefit are different from those to qualify for a retirement benefit. Most importantly, the deemed filing rule doesn’t apply since we’re no longer looking at retirement benefits. This means you can claim a survivor’s benefit while letting your own retirement benefit grow!

But first the basics. The marriage must have lasted at least ten years and you must be at least 60 years old (50 if disabled) to claim. You cannot have remarried before age 60, either. You will lose the survivor benefit from the former spouse in that case. Any survivor’s benefits will be based on your new spouse’s earnings record whenever they pass away.

But the remarry rule doesn’t apply if you find someone new after age 60. You can still collect a survivor’s benefit on the deceased spouse’s record if you remarry after that age.

How much?

Survivor’s benefits pay as much as 100% of the deceased former spouse’s benefits. But this requires you to claim at your full retirement age. There is a reduction if claimed early and no delayed credits for claiming late!

Moreover, you won’t see an increase if your spouse delays their benefit. Spousal and survivor benefits are determined from a worker’s Primary Insurance Amount (PIA), which is based on the highest 35 years of earnings history of any individual. The only way to see your spousal or retirement benefits increase is for a former spouse to add high-earning years to their work history.

And remember, the earnings test still applies. Benefits will be reduced or wiped out completely if you’re still working and claiming a survivor benefit prior to your full retirement age.

You can’t get the burial payment

A one-time payment of $255 can be made to a surviving spouse or in some cases child of the decedent. Ex-spouses don’t qualify for this. Don’t rush to the nearest SSA office to waive the victory flag. Your nominal one-time payment isn’t coming.

Coordinating Benefits

Deemed filing doesn’t apply between retirement benefits and survivor’s benefits. This means you can claim a survivor’s benefit as an ex-spouse as soon as age 60 and let your own retirement benefit grow until age 70! You are not deemed to be applying for both when you apply for one.

However, only one benefit can be paid at a time. You cannot simultaneously collect a survivor benefit and a retirement benefit. No doubling up.

This can be a boon. Your own earnings record may be strong enough to preclude you from collecting a spousal benefit. But you could defer your own retirement benefits to age 70, max out your delayed credits, and still collect from social security from as early as age 60! And all this from a former spouse.

The Takeaway

Social Security is a messy, complicated system. Your life may be as well (to a degree, anyway). You can qualify for benefits as a divorcee but understanding what you’re entitled to is just the start. Deciding when to claim, when to stop working, and in a broader sense just how these payments factor in to your greater retirement plan is the real heart of the matter. Get your Social Security ducks in a row and keep building towards your retirement. We’re here to help when you need us.

The information contained herein is intended to be used for educational purposes only and is not exhaustive. Diversification and/or any strategy that may be discussed does not guarantee against investment losses but is intended to help manage risks and return. If applicable, historical discussions and/or opinions are not predictive of future events. The content is presented in good faith and has been drawn from sources believed to be reliable. The content is not intended to be legal, tax, or financial advice. Please consult a legal, tax, or financial professional for information specific to your individual situation.

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