Social Security: Older Couples Face a Terrifying Divorce Trap
Source: Wikimedia Commons
their spouses. It's pretty easy to understand workers' benefits in
retirement, as they're directly linked to that person's work history and
are therefore unaffected by things like changes in marital status. But
some more complicated rules govern the spousal benefits that workers'
spouses are entitled to claim, and those benefits can change when you go
through major life events. Specifically, couples considering divorce
need to understand their Social Security benefits thoroughly in order to
make informed financial decisions and avoid unknowingly causing
payments to stop.
The general rule for divorced couples and Social SecurityMost
people considering divorce are relieved to find out that, in many
cases, divorced spouses are entitled to the same benefits they would
have received if they remained married. Specifically, if you were
married to your former spouse for at least 10 years, you can claim
spousal benefits based on your ex's work history when you turn 62 as
long as you're still unmarried at that time. The amount of that spousal
benefit is the same as it would have been as a married couple.
Indeed, divorced spouses actually have more flexibility than
married couples in one instance. Regardless of when or whether your ex
actually starts claiming benefits, divorced spouses are entitled to
benefits calculated as if their ex had waited until full retirement age
to start collecting Social Security. That can produce a clear advantage
if your ex-spouse actually claimed early benefits and therefore accepted
reduced monthly payments that would ordinarily cut your spousal
benefits as well. In addition, your ex-spouse doesn't have to have
actually claimed benefits in order for you to get spousal
benefits as a divorced spouse. That's in contrast to usual rules that
require a worker to apply for Social Security before a spouse can
receive those benefits.
Source: Social Security Office of the Inspector General
providing benefits to divorced spouses in many situations, the Social
Security rules governing divorce aren't always so benign. For couples
considering divorce in their early to mid-60s, those rules can disrupt
what would otherwise be optimal strategies for Social Security.
For instance, many couples plan to have spouses file restricted
applications for spousal benefits at full retirement age, allowing
benefits based on their own work history to receive additional delayed
retirement credits until age 70. But if you want to use that strategy,
the Social Security divorce rules say that if your to-be-ex-spouse
hasn't filed for Social Security, you have to wait two years after
getting divorced to make your claim for spousal benefits. That can make
the restricted-application strategy much less attractive and force you
to consider other less lucrative alternatives.
Source: SSA
10 years. You're entitled to apply for spousal benefits on your spouse's
work history after being married as little as a single year, so those
who marry in their late 50s or early 60s can initially apply for Social
Security and receive benefits for years before reaching the 10-year
threshold. If they divorce, however, the spousal benefits will be in
jeopardy, as people aren't entitled to divorced-spouse benefits if they
weren't married for at least 10 years.
Beware the Social Security remarriage trapFinally,
remarriage after divorce usually leads to your losing spousal benefits
based on an ex-spouse's work history. The presumption is that your
ability to claim spousal benefits on your new spouse's history replaces
your former entitlement.
Social Security has a number of confusing provisions that can lead to
unexpected results for those who don't look closely at the rules. Older
couples who marry relatively late in life need to be particularly aware
of how Social Security's provisions can adversely affect them.
Otherwise, these traps can cut the benefits you're counting on for your
financial future.
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