Women, Divorce, and Social Security: Knowing Your Options

While it is true that the overall rate of divorce in the US is falling, there is one segment of the population that is running counter to the trend: divorces in marriages that have lasted 30 years or more. Baby Boomers—those born roughly between 1946 and 1964—are currently leading the trend toward what is often called “gray divorce.” There’s another fact hidden within this statistic that may seem counterintuitive: the majority of gray divorces—66%, according to research by AARP—are being initiated by women. This may be surprising, since many of the women in this demographic came of age in a time when finance and investment was still largely considered a “men’s game,” and women in these circumstances might be considered to be at risk of losing significantly on the financial front.

However, this is where a professional, fiduciary financial advisor can make all the difference. If women who are making the decision to end longstanding marriages are suffering financially, it may be because they need better financial advice that is designed more specifically around the needs of women.

Social Security Benefits

One of the important decisions facing older women who are either contemplating or going through divorce involves the options and timing around claiming Social Security benefits. Especially when they are eligible to claim benefits in more than one way (a frequent situation for older divorced/divorcing women), the decisions about when, how, and what to claim can seem confusing. Let’s take a quick look at some basics that should be considered by a divorced woman who is at or approaching retirement age, when she will be eligible to collect Social Security benefits.

First, it’s important to understand that a divorced woman is eligible to claim spousal benefits (based on her ex-husband’s work record) if:

  • the marriage lasted 10 years or more;
  • she is unmarried;
  • the spousal benefit is greater than the benefit she would receive based on her own work record;
  • she is at least 62 years old (i.e., eligible for early retirement under Social Security rules).

Let’s underline that last point. While a person is eligible to file for Social Security benefits as early as age 62, the benefit will be at a reduced amount from what would be available at full retirement age (FRA)—65 for those born in 1937 or earlier, increasing gradually to 67 for those born in 1960 or later. In fact, waiting until FRA to file may increase the monthly benefit by as much as 30%, compared with the benefit available at early retirement. But if you begin receiving benefits earlier than FRA, the benefit is reduced permanently; it will not automatically increase when you reach FRA.

Next, it matters how long you’ve been divorced. If it has been two years or less since the divorce was finalized, the ex-spouse must be actually receiving benefits in order for you to claim spousal benefits. If it has been more than two years, you are considered “independently entitled” and may claim spousal benefits even if your ex-spouse is not actually receiving benefits. The ex-spouse must still be eligible to receive benefits, however, even if they are not actually receiving them.

Spousal benefits max out at 50% of the benefit available to the ex-spouse at the ex-spouse’s FRA. Even if the ex-spouse defers benefits until age 70 (past FRA) in order to increase the primary monthly benefit, it will not increase the spousal benefit beyond 50% of the FRA amount. The same is true if you wait to file for spousal benefits after your own FRA.

Some potential claimants worry that if they claim spousal benefits, it will reduce the Social Security benefit available to the spouse or ex-spouse; this is not the case. In fact, the Social Security Administration won’t even notify the ex-spouse of your claim. The amount of their Social Security check remains the same, whether you file for spousal benefits or not.

A few more things to keep in mind:

  • A portion of your Social Security benefits, whether received on your own work record or as a spousal benefit, may be taxable. Once your income reaches the relatively low threshold of $25,000 per year, a portion of Social Security income becomes taxable. The maximum amount of Social Security income that is taxable is 85%; you reach this level when your income as a single filer is $34,000 or more, annually.
  • Remember: you must be unmarried in order to claim spousal benefits.
  • Women who have been married and divorced more than once and who meet the above criteria may choose the higher-earning ex-spouse as the basis for their spousal benefits claim.
  • Spousal benefits may also be claimed on the record of an ex-spouse who is deceased.

Social Security income is typically an important component of good retirement planning. Especially for women, who tend to live longer in retirement than their male counterparts, it is vital to understand all sources of income and how to maximize them. For older divorced or divorcing women, understanding all the options is an important step toward taking charge of their financial futures as they begin a new chapter in life.

At The Planning Center, we work with clients to help them achieve a financial plan that keeps the client’s best interest foremost at all times. We can provide help and advice that can enable you to get the most from your Social Security benefits and also from other sources of income that may be available to you. To learn more about how we can help, visit our website to read our article, “Messy Divorce and Messy Finances: How to Navigate Your Money during and after a Divorce.”