The rules and purpose of Social Security, or Old Age, Survivors and Disability (OASDI) benefits are generally simple. This program from the US government is managed by the Social Security Administration or SSA. Its main function is to provide American workers with a portion of their income when they retire, so they have something to live on in their less productive years.
While this is a straightforward retirement feature, some complications can arise for retirees in special situations. One of these special situations is when they get or are divorced. In cases like these, Social Security has some rules that apply to this not-so-unique situation.
We say “not-so-unique" because around 43% of all couples who marry their first spouse have their marriage end in divorce, and the percentage goes even higher for second and third marriages. There can be a lot of people who can have their Social Security benefits impacted by their first divorce.
In this article, InvestmentNews discusses the possible impacts of divorce on your clients’ Social Security.
We will provide insight to questions like:
To shed light on these and other questions, we focus on Social Security rules for divorced spouses in this guide.
Depending on the situation, a couples’ divorce may be an amicable or messy parting of ways.
But regardless of how the divorce process unfolded, these circumstances do not prevent the divorced spouse from receiving benefits. What’s more, the spouse who is expected to receive a lower Social Security benefit can receive benefits from the spouse who is entitled to a larger benefit between them.
The main factors to consider when determining whether someone is still entitled to Social Security benefits are:
In general, your client can collect Social Security benefits from their ex-spouse if:
This is also assuming the ex-spouse paid into their Social Security when they were still working.
If any of these three crucial criteria are not met, then your client may not collect any Social Security from their former spouse.
Apart from the 10-year marriage requirement and the age of a spouse, certain qualifying factors should be present before your client can collect Social Security benefits from their former spouse:
To get their ex’s benefits, divorced spouses must apply for them either on the SSA website or by scheduling an appointment at their local Social Security office. Applying for benefits should only be done with the SSA to avoid Social Security scammers.
To help determine and confirm that your client is indeed eligible for Social Security benefits from their ex-spouse, be sure that your client prepares the following documents for the SSA to review:
The SSA emphasizes that these must be original documents or certified true copies from the agency or office that issued them. The SSA cannot accept notarized copies or photocopies, and these documents must be as clean as possible.
If your client lacks certain documents, they can supply whatever documents they already have. The SSA will assist your client in getting the missing documents and completing the application.
If those filing for these benefits from their former spouse are doing it via the website, they may begin their application at least 3 months before their 62nd birthday.
As soon as they turn 62, your client can go to the nearest SSA office to apply for these benefits personally. While it isn’t necessary to schedule an appointment, calling the office and setting an appointment can help your client avoid waiting for a long time before applying.
Your client may call the SSA toll-free number at 1-800-772-1213 (TTY 1-800-325-0778) to get the application process started.
In most cases, no. The SSA will only pay out the higher benefit that your client is eligible to receive, but not both.
Also, if your client is set to receive their own benefits, they must decline to receive their own benefits if they wish to get their ex-spouse's benefits. However, there may be situations where it’s possible for your client to receive both their own benefits as well as their ex-spouse's.
Can your client receive their own benefits based on their work record and their former spouse’s?
The answer to this question is a mixed bag. That is possible in these scenarios:
When your client is eligible for retirement benefits on their own record, the Social Security Administration (SSA) pays that first. However, if the benefit on their ex-spouse's record is higher, they can get an additional amount so that this combination of benefits becomes equal to the higher amount.
In a way, they would be receiving their own Social Security benefits and from that of their ex-spouse.
Your client can choose to get only their ex-spouse's higher benefit and delay their own. This is possible only if your client’s date of birth was any time before January 2, 1954, and they have reached Full Retirement Age (FRA). Should their birthday be on or after this date, they may no longer take only one benefit at their FRA. This means they will file for all retirement or Social Security spousal benefits, even if they are filing for only one benefit.
If your client chooses to keep working even after they’ve reached their FRA, the same earnings limits apply to them and their ex-spouse. You can use the SSA’s retirement earnings test calculator to figure out how their earnings might affect these payments if they're still working and are eligible for benefits this year.
Should your client’s ex qualify but hasn’t applied for their benefits yet, your client can receive payments based on their ex’s work record. But this is only allowed if your client has been divorced from the ex-spouse for at least two years and the other requirements apply.
In cases where an ex-spouse has died, the divorced spouse may still receive survivors’ benefits.
These individuals are entitled to survivors’ benefits according to the SSA:
All these people can be eligible for monthly survivor benefits based on the decedent’s earnings.
The one-time lump sum death payment of $255 can also be made to a qualified spouse or child if they meet specific requirements.
Survivors must apply for this lump sum death payment within 2 years of the date of the number holder’s death.
In general, a divorced spouse can receive as much as 50% of their ex-spouse's retirement benefits, even if their ex has remarried. But if the ex is deceased, your client, the former spouse, can be eligible for survivor’s benefits amounting to 100% of the deceased’s benefits. But for these conditions to apply, the divorced spouse must have reached their Full Retirement Age.
If the divorced spouse has yet to reach their Full Retirement Age and they file for their Social Security benefits, their benefits will be reduced permanently. Remind your divorced client also that they can apply for their Social Security as early as age 62, but this will likewise reduce their monthly benefit amount.
This 10-year rule states that divorced spouses need to have been married to their exes for at least 10 years to be eligible to receive retirement benefits. Should there be unique circumstances where your client was married to two or more people, each of those marriages would need to have lasted at least 10 years.
In such a case, the SSA will only allow the divorced spouse to receive benefits based on the highest benefit; the divorced spouse cannot collect on them all.
Here's a video that gives an overview of all the conditions discussed in this article, with a few unique circumstances.
If a divorced spouse receives benefits from their former spouse’s entitlement, then they remarry while their former spouse is alive, they can no longer receive these benefits. However, if their ex passes away, they can still collect survivors’ benefits and remarry – but only if they were 60 years old or older when they remarried.
No. While a divorced spouse is entitled to benefits based on the work record of their ex, these amounts do not reduce the benefits of the ex or affect them in any way. In fact, the SSA does not even notify a divorced spouse’s ex if they have been collecting retirement benefits based on their work record.
For divorced spouses, collecting Social Security benefits based on their ex’s work record can be a viable financial strategy. This can be especially helpful if your client predicts they will have fewer and smaller sources of income when they retire. For many retirees, even if they report they feel relatively content with what they have in retirement, it usually means that these retirees are largely dependent on Social Security.
As a financial advisor, you can inform your divorced client of their options. They can:
When it comes to collecting retirement benefits based on their ex-spouse's record, assist your client to make the best decision that suits their financial goals and needs.
Get the latest news and opinions of experts when it comes to retirement planning, here on InvestmentNews.
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