The process of going through a divorce is a life altering event for individuals. For some people this may mean a dramatic decrease in their future retirement income if they were reliant on their ex-spouse as the primary bread winner. Those who have planned their retirement with their ex-spouse using the three legged stool approach can now all of a sudden be missing some of these income sources as a divorced individual. (The modern version of three-legged stool has retirement income sources from 401k’s, other personal savings/retirement accounts and Social Security). This can wreak havoc on a person’s retirement planning.
On the positive side, the Social Security Administration has some provisions built into the system to help out and not have a retiree completely missing one of these “legs” of the stool. There are certainly some rules and/or exclusions one needs to be aware of and always check with your local SSA office before making decisions and committing to filing. Some choices cannot be reversed once they are officially made.
If you are divorced currently but your marriage lasted 10 years or longer, you can claim benefits on your ex-spouse’s record. This choice is available weather or not your ex-spouse has remarried. According to the SSA website (www.ssa.gov) to qualify you must meet the following conditions:
- You are unmarried
- You are age 62 or older;
- Your ex-spouse is entitled to Social Security retirement or disability benefits and
- The benefit you are entitled to receive based on your own work is less than the benefit you would receive based on your ex-spouse’s work.
Note: Your benefit as a divorced spouse is one half of your ex-spouse’s full retirement amount (or disability) if you begin receiving benefits at your full retirement age. These benefits do not receive any delayed credits your ex-spouse may receive for waiting to file past their full retirement age.
Some of the exclusions would include:
- If you remarry you cannot usually collect benefits on your former spouse’s record unless your current marriage ends (by death, divorce or annulment).
- If your ex-spouse has not applied for his or her benefits, but qualifies for them, you can receive benefits on his or her record if you have been divorced two years or more.
- If you are eligible for retirement benefits on your own record and your divorced spouse’s record as well, they will pay the retirement benefit on your record first. You will then get an additional amount on your ex-spouse’s record so that the combination of benefits will equal the higher amount.
- If you continue to work while receiving these benefits, the retirement benefit earnings limit will apply. This hurts people who are still working and collecting Social Security prior to their full retirement age.
- If you will also receive a pension based on work not covered by S.S. (government work as an example) your benefit on your ex-spouse’s record may be reduced.
This may seem like a complicated benefit—because it is. Planning for retirement is a task that one needs to tackle before getting to the age of retirement. Step one is to solve for how much savings you need to accumulate by the time you retire. Figuring out an estimate of what your Social Security Benefit will be is a good first step towards that goal because that monthly Social Security Income payment will reduce how much you need to save. Then you can begin working on the other two “legs” of your retirement plan.
Eric S. Smith, JD, CFP™
Eric is a retirement income focused financial advisor.
Eric is a Registered Principal with and securities offered through LPL Financial, a Registered Broker/Dealer, Member FINRA/SIPC
This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation