No matter at which stage of life it occurs, divorce is one of the most difficult circumstances to negotiate. But especially for those who are nearing or in retirement, divorce can present some particularly difficult challenges, both emotional and financial. Unfortunately, later-life divorces—sometimes called “gray divorces”—are on the rise in the United States, and the implications and consequences for retirement planning are perhaps more substantial for this demographic than for others, due to the higher likelihood that persons in this stage of life have accumulated more assets that must be divided fairly when the marital union dissolves. Later-life divorces also typically raise questions about Social Security income.
We’ve written previously about some of the financial challenges presented by gray divorce, including the problems involved with dividing significant assets, estate planning implications, and the possibility of one or both of the divorcing parties having acquired a new live-in partner. But what about considerations involving Social Security benefits, which remain a cornerstone of retirement planning for most Americans?
Spousal Social Security Benefits
Perhaps the biggest question that comes up in these situations is around claiming spousal Social Security benefits. When one of the divorcing parties has been the primary income earner during the marriage, it is more likely that the other spouse will not have qualified for significant income benefits on their own record; they would likely need to claim spousal benefits. But are they still eligible for spousal benefits after the divorce?
To qualify for claiming spousal benefits based on the earnings record of an ex-spouse, several conditions must be met:
- The claimant must be eligible to claim benefits (age 62 or older);
- The marriage must have lasted for 10 years or longer;
- The claimant must be unmarried
- The ex-spouse on whose record the benefits are based must be eligible to receive benefits (age 62 or older; not required to be actually receiving the benefits);
- The divorce has been final for 2 years or longer OR the ex-spouse on whose record the benefits are based is already claiming benefits.
It’s important to note that claiming spousal benefits does not affect the benefits payable to the ex-spouse in any way; they are not reduced or changed by the granting of a spousal benefit. The maximum spousal benefit payable is 50% of the ex-spouse’s full retirement benefit. In other words, if the ex-spouse delays receiving benefits until age 70 in order to increase the size of the benefit, that will not increase the spousal benefit; it will still be based on the benefit payable to the ex-spouse at full retirement age (66 for those born in 1954 or earlier; up to 66 and 10 months for those born 1955–59; 67 for those born 1960 and later) If the person claiming spousal benefits is also entitled to a benefit based on their own earnings record, the Social Security Administration will pay the greater of the two; benefits will not be combined.
There are a few points here that probably bear repeating.
- Receiving spousal benefits does not affect the ex-spouse’s benefits in any way;
- No permission is required from the ex-spouse;
- The maximum spousal benefit is 50% of the ex-spouse’s FRA benefit (in other words, waiting to collect the benefit until age 70 will not affect its size);
Further, the ex-spouse’s marital status has no effect on the spousal benefit, and the spousal benefit is not affected by how the ex-spouse claims their benefit.
Again, divorce can be a challenging time, both emotionally and financially, especially when it happens close to or during retirement. But knowing the options around Social Security benefits can help both parties get on with the financial planning that is necessary in order to enter this new phase of life with more confidence.
At The Planning Center, we place our priority on giving you the information you need to make important financial decisions. We work with clients to develop financial strategies that take into consideration their unique situations, resources, and most important goals. To learn more, or to find answers, please contact us.
