How to get the most out of Social Security after divorce

The rules governing Social Security benefits for divorced spouses are complicated.[Read: The rules on Social Security for divorce] No surprise there. But even I learned something new the other day thanks to a question submitted by a reader. First, let's review the basics. As long as you were married at least 10 years, are age 62 or older, are divorced and currently single, you can collect benefits on your ex's earnings record just as if you were still married (even if your ex has remarried). But other basic Social Security claiming rules apply. If you are also entitled to benefits on your own work record and you claim benefits before your full retirement age, which is currently 66 for anyone born from 1943 to 1954, Social Security will only pay you a spousal benefit if it is larger than your own. A spousal benefit is worth 50% of the worker's benefit if the spouse claims at 66 or later; less if claimed earlier. In most cases when a retirement benefit is larger than a spousal benefit, the spousal benefit is wasted. But if you wait until 66 to claim benefits, you can exercise a creative claiming strategy that can significantly increase your lifetime Social Security income. At 66, you can file a restricted application for spousal benefits. That will allow you to collect only your spousal benefit for up to four years, while your own retirement benefit continues to grow by 8% per year up until age 70. At 70, you can switch to your own benefit, which thanks to four years of delayed retirement credits would be worth 132% of your full retirement age amount. However, this valuable strategy of claiming only spousal benefits is disappearing. It is only available to married spouses and eligible divorced spouses who were born on or before Jan. 1, 1954. Younger people will never be able to use this claiming strategy as a result of changes authorized by the Bipartisan Budget Act of 2015. When they file for any Social Security benefits, they will effectively be filing for all of their benefits at once and will be paid the higher of the two. Only one spouse in a marriage can file a restricted claim for spousal benefits if they were born on or before Jan. 1, 1954. But divorced spouses can each claim spousal benefits on their ex's earnings record, assuming they are old enough to be grandfathered under the old rules. In addition, ex-spouses who have been divorced at least two years are “independently entitled” to Social Security benefits, meaning they can claim benefits on their former spouse's earnings record even if the former spouse has not yet claimed Social Security. Both ex-spouses must be at least 62 years old to do so. Generally, you lose the ability to claim benefits on your ex-spouse's earning record if you remarry, unless that subsequent marriage ends through death or divorce. However, if you wait until age 60 or later to remarry, you can still collect survivor benefits if your ex-spouse dies. Now, here is the new wrinkle I learned as a result of a reader's question. An adviser emailed me about his 68-year-old female client who is divorced and collecting Social Security benefits on her ex's work record. She plans to remarry soon. Her husband-to-be is 65 and has not yet started collecting Social Security. The adviser asked if his client will lose her benefits as an ex-spouse and if so, how long she must wait until she can collect spousal benefits on her new husband's record. Normally, a couple must be married one year before a spouse can collect spousal benefits. “Yes, her divorced spouse's benefits will end with the month before the month in which she remarries,” Social Security press spokesman Darren Lutz confirmed via email. But here is the big surprise: “She would not need to be married to her new spouse for one year to collect benefits off his work record,” Mr. Lutz wrote. “She meets one of the alternative requirements to duration of marriage because she was entitled to her divorced spouse's benefits in the month before her marriage to the new spouse,” he explained. “She would have to be married to the new spouse throughout the month to be eligible for benefits on his record for that month.” However, he added, “She will not be eligible for benefits off of the new spouse until he receives benefits on his own record.” So the bottom line is the new wife could collect spousal benefits on her new husband's work record after only one month of marriage if her new husband is receiving his Social Security benefits. But if he is still working, he may not want to collect his benefit until his full retirement age of 66 when the earning restrictions disappear. In the interim, she would receive no Social Security payments. However, if her ex-spouse dies, she can still collect survivor benefits because she waited until after age 60 to remarry. That assumes the survivor benefit on her ex is larger than the spousal benefit on her new husband. She can only collect one Social Security benefit, but she is entitled to collect the largest one. (Questions about new Social Security rules? Find the answers in my new ebook.) Mary Beth Franklin is a certified financial planner.