Social Security & Divorce Issues

Social Security may be anything but at this point in time, however, for financial planning purposes it is important to look at what the potential may be for future income. 

Adding divorce to the equation can muddle the waters.  Let's clear up a few questions that I have been asked of late:

• How is my social security benefit figured -- on my or my spouse's benefits?

Actually, it may be both. 

If you have been married for at least 10 years you are entitled to choose to take either your full benefit or ½ of your ex-spouses, obviously, whichever is greater. 

If you are nearing the 10^th year of marriage, it might be worth it to postpone the divorce until you reach the 10 year mark for the additional income that may be allocated to you.  Sometimes substantially more depending on the earnings of your spouse.

• What if I am currently married or have been married multiple times?

If you are currently married you will be entitled to ½ of that spouse's income if you have been married at least 10 years.

According to the Social Security Representative I spoke with, "If you have been married multiple times you can choose from the highest amount of any spouse that you have been married to for at least 10 years (as long as you are NOT spouse #5 or greater)."  If you were not married to a spouse for at least 10 years, you are not entitled to any of their benefits.

Note that your ex-spouse's income is in no way reduced by the amount you receive.  He or she will continue to get their full retirement benefit.   Up to four former spouses can collect benefits on one spouse.  After four there's no more. 

• How can I find out what my future benefits are?

The Social Security Administration should be sending you a benefits statement once a year. This statement shows you what your retirement benefit will be if you retire early (age 62); if you retire at full retirement age (67); and if you retire later (age 70).  Your (ex)spouse should receive one as well.  You can figure 50% of whatever their benefit is depending on the age you start to take it.  If you don't have a copy of your spouses the Social Security Administration may be able to help you. 1-800-772-1213.

It is important to understand that once you elect to start receiving social security you are stuck at that level forever.  So if you choose to take early retirement and then realize that the benefits are greatly reduced and you want to wait -- it's TOO LATE!  Make sure you understand this issue before you turn on the social security faucet.

• What if my spouse is not yet receiving Social Security, but I am ready to retire?

This one is bit more complicated and so here from the horse's mouth is the answer right from the Social Security website www.socialsecurity.gov:

If you choose to receive a reduced benefit before full retirement age on your own record, you are not entitled to the full spouse's benefit rate upon reaching full retirement age, and a reduced benefit rate is payable for as long as you remain entitled to spouse's benefits.

When you apply for reduced retirement benefits, we will check to see if you are eligible for both your own retirement benefits and for benefits as a spouse. If you are eligible for both, we always pay your own benefits first.  If you are due additional benefits, you will get a combination of benefits equaling the higher spouse's benefit.  If you are not eligible for both because your spouse is not yet entitled, but you are due a higher amount when he or she starts receiving Social Security benefits, then the higher spouse's benefit is payable to you when your spouse applies for retirement benefits. Remember, you cannot receive spouse's benefits until your spouse files for retirement.

More from the SS website:

A person can receive benefits as a divorced spouse on a former spouse's Social Security record if he or she:

• was married to the former spouse for at least 10 years;
• is at least age 62 years old;
• is unmarried;
• is not entitled to a higher Social Security benefit on his or her own record.

In addition, the former spouse must be entitled to receive his or her own retirement or disability benefit. If the former spouse is eligible for a benefit, but has not yet applied for it, the divorced spouse can still receive a benefit if he or she meets the eligibility requirements above and has been divorced from the former spouse for at least two years.

Generally, benefits cannot continue to be paid if the divorced spouse remarries someone other than the former spouse, unless the latter marriage ends (whether by death, divorce, or annulment), or the marriage is to a person entitled to certain types of Social Security auxiliary or survivor's benefits. 

You can get the address and directions to your nearest office from the Social Security Office Locator that is available on the Internet.

Given the changing nature of laws, rules and regulations, there may be changes to the information contained in this article. Therefore, the information is provided here with the understanding that the author is not engaged in rendering legal, accounting, tax, or other professional advice and services.

You must do your own due diligence and check with your tax advisor before making decisions to make sure you have the most current information.

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Lisa C. Decker, CDFA™, seeks to help her clients to "Divorce Your Spouse, Not Your Money™,"  by utilizing cutting edge tools and industry insight to guide her clients during one of life's most difficult challenges -- divorce. Analyzing proposed divorce settlements, pointing out potential problems and offering alternative solutions is her specialty. 

Go to her website -- www.DivorceMoneyMatters.com for her FREE Divorce Audio Series - "5 Things You Must Know BEFORE You Sign on the Dotted Line!"  She also works as a financial consultant one on one with women who are seeking greater understanding of all aspects of their finances so that they may enlighten, enrich and empower their futures! 

Bio

Lisa C. Decker, is the founder of Divorce Money Matters and a Certified Divorce Financial Analyst through the Institute for Divorce Financial Analysts.  As an expert in divorce financial matters, she is a discreet problem-solver and trusted advisor to her clients. In addition, she holds Series 6, 63 and 65 and insurance licenses.

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