Social Security Benefits for Divorced Spouses
Lawrence J. Kotlifoff (2015) provides the following information about divorce, marriage and re-marriage. The statistics indicate that between 40 and 50 percent of all American first marriages end in divorce. Next between 50 and 67 percent of this population find their second marriages ending in divorce. And 75 percent of this population end-up with their third marriages ending in divorce. Kotlifoff concludes by stating that the average length of time for first marriages is eight years and in the United States two-thirds of the divorce cases are filed by women. Kotlifoff quickly points out that this is a tactical mistake. Ex-spouses need to be married for ten-years to qualify for spousal and survivor benefits.
Eligibility for Ex-spousal Social Security Benefits
Social Security regulations state that a divorced spouse may qualify for the same spousal benefits as a married spouse. There are three requirements that make ex-spouses eligible to collect on their former spouses work records:
1. You must be at least 62-years old
2. You must be single
3. The marriage to your former spouse must have been for at least 10-years.
What’s important to keep in mind, is that you collecting Social Security retirement benefits on your former spouses work record does not affect the current spouse and their children.
Of Course there are Exceptions….
The Social Security eligibility rules attempt to cover all types of situations that ex-spouses may encounter. For example, Social Security recognizes common-law marriages if they are legally entered into. This is how it works, once the common-law marriage is recognized by the state, it is recognized by other states and the Social Security Administration (SSA).
The following are a few more exceptions:
• The Rewards of Being an Ex-Spouse
If you are eligible for benefits based on your ex-spouses work record you should apply (if you have been divorced for two years). In contrast, the current spouse cannot apply for Social Security benefits until the record holder spouse applies for his Social Security benefits.
• Ex-Spouse Survivor Benefits
If you are 60 years old, single or re-married, and were married for 10-years or more, you are entitled to 100 percent of the amount of your deceased ex-spouse’s benefits, the same amount as the current widow or widower. Again, you collecting benefits will not affect the amount that others can collect.
• If you only had One Spouse Be Wary of the Penalties of Early Retirement
The spousal benefit is 50 percent of the Full-Retirement Age (FRA) benefit of the worker. If you were born between 1943 and 1954 decide to take early retirement this 50 percent amount is permanently reduced. The rate of reduction for the first 36 months is 25/36 of 1 percent. For any additional early months the benefit is reduced 5/12 of 1 percent for each month. For example, James’ basic monthly (spousal benefits do not include Delayed Retirement Credits) is $1,000. Sarah the ex-spouse files at age 62. That’s $1,000 X .50 = $500 for a FRA benefit. The early retirement reduces this benefit by 30 percent ($500 X .30 = $350). Sarah will receive $350 at age 62.
• Another Reason to Consider Waiting to File for Benefits
Because benefits go up by about 8% a year between the ages of 66 and 70, waiting to collect your own benefit could mean a significantly higher payout down the road. Just for the record, the spousal or ex-spousal benefit doesn’t go up after you reach your FRA, so there’s no advantage to waiting beyond that date to file your claim for Ex-Spousal benefits.
• Something to Think About: You Have Two Ex-Spouses and Each Marriage was over 10-Years
To be eligible for the divorced spouse benefit you must currently be single, at least 62 years old, and your work record benefit is less than the monthly Social Security benefit of your ex-spouse. If you qualify for benefits for both spouses, you can select the benefits from one spouse (usually the highest earner). You can choose to collect from either spouse but you cannot collect from both. Additionally, the amount you collect on your ex-spouses work record will not affect the ability of the current spouse to collect benefits.
Here’s a maximization strategy for individuals with two ex-spouses and each marriage was over 10-years
Let’s say that you are a baby boomer that has never worked. A neat strategy is to file for early retirement benefits on Spouse #1’s work record at age 62. If you file at age 62 you will receive 35 percent of Spouse #1’s basic FRA benefit. Then when you turn FRA, you can claim spousal benefits on Spouse #2’s work record. You will receive 50 percent of Spouse #2’s basic FRA benefit. Filing at FRA on Spouse #2’s work record will give you a raise in your monthly benefit. (You can only claim one spousal benefit at a time.) Your previously reduced filing will not carry-over to your new claim.
Note: The length of marriage rule changes if you are caring for the worker’s entitled child.
How and when you apply for ex-spousal benefits will have a direct impact on your economic well-being. What is right for others, may not be right for your personal situation. Therefore, before you make any claims for ex-spousal benefits, it is best to contact a financial adviser (www.plannersearch.org/Pages/Home.aspx ) or Social Security representative (call toll-free at 1-800-772-1213 or via email at faq.ssa.gov/ics/support/ticketnewwizard.asp?style=classic)