Divorce + Social Security: What You Must Know

If there was $1,000/month with your name on it, would you want it? Of course! If you are divorced, there may be a Social Security benefit worth just as much, or even more, with your name on it. This is because divorced spouses may be eligible to draw a Social Security benefit based on their ex's record. Most people don't know this--and why would they? Many spouses aren't aware they're eligible for a benefit based on their spouse's record, let alone on a divorced spouse's record. But, it's true!

Let's talk about what you need to know if you're divorced or if you have people in your circle who are. (Share this with them--they will thank you!) As long as you were married for 10 years or more prior to divorce and are still single, you are eligible for the same Social Security benefits as a still married spouse. For this to make sense, we have to remember what the benefits are to a spouse.  You may want to visit my blog, the “3 Must- Know Social Security Facts for Couples” to refresh your memory on the basics relating to spousal benefits.

I don't know about you, but Social Security rules can confuse the heck out of me. Let's look at examples as we go through these main points to clear up some of the confusion.

1. If you were married for 10+ years, are divorced, and have not remarried, you will be eligible for 1/2 of your ex's Social Security benefit. Just as with regular Social Security benefits, if you claim the benefits before your Full Retirement Age (FRA) your benefit will be reduced.

   Jan and Bob were married for 25 years. They're now divorced. Bob was the breadwinner, as Jan focused on volunteer work. If Bob's full retirement benefit is $2,500/month from Social Security, that means Jan (even though they're divorced) is eligible for a benefit of $1,250/month based on Bob's record* if she draws at her FRA. If she draws the benefit sooner, her benefit will be reduced.

2. In order to draw benefits, both you and your ex must be at least 62 years of age.

   If Jan is 66 (her FRA) and Bob is only 61, Jan will have to wait until Bob is 62 to pull the $1,250/month, from our previous example. That's a bummer, but forfeiting one year of benefits is better than forfeiting years of benefits if Jan didn't know she was eligible!

3. It does not matter if your ex has remarried. Your ex may have remarried and the new spouse may also be drawing benefits based off your ex's record--it doesn't matter! As long as everything in Point #1 applies to you, you're still eligible.

   Let's say Bob remarried. His new wife, Sarah, will be eligible for the same $1,250/month as Jan. Sarah and Jan can both draw a spousal benefit based on Bob's record! The only thing that will disrupt Jan's benefit is if she remarries.

4. Married spouses now have to wait until their spouse begins benefits to collect their spousal benefit. But exes don't have the same requirement! As long as you're both at least 62, an ex-spouse can draw benefits based on their ex's record even if the ex is not yet drawing benefits themselves.

   If Bob decides to wait until age 70 to draw his benefits, his new wife, Sarah, cannot draw spousal benefits until Bob begins his personal benefits. This rule doesn't apply to Jan! She can begin benefits based on Bob's record so long as she and Bob have both passed the "age 62" threshold and Jan hasn't remarried. This is a really unique benefit to divorced spouses.

5. If you're eligible for a divorced spouse benefit, it will not show on the statement you receive from Social Security. It's best to call to confirm your options with a Social Security representative (1-800-772-1213).

I suspect there are a good number of divorced spouses out there who are eligible for benefits and don't know it. This could accumulate to thousands upon thousands of dollars over time. Please don't let yourself or any of your loved ones fall into that category!

There are additional caveats, specifically relating to claiming strategies for divorced spouses that go too far into the weeds for our discussion today. Reviewing your Social Security benefit options and strategies is such an important piece of your income picture. The impact can be astronomical. However, looking at your benefits on their own will not lead to the best decisions. I feel strongly that it's best to review your options inclusive of your entire financial picture. For this reason, review of Social Security is an integral piece of our clients' financial planning. Call us to set up a complimentary phone call to discuss our financial planning process.

*What do we mean by "record"? The Social Security Administration keeps track of your earnings history. This is the information they use to calculate your retirement benefits. We call this your "record.”