Posted by Cindy Wilson.
As Director of Financial Consultants at TIAA, I often observe one-on-one advice sessions, and recently met a woman in San Diego whoʼd spent many years as a stay-at-home parent, raising two children. Since getting divorced from her breadwinning husband, she had worked full-time striving to catch up, but was still worried sheʼd under-saved for retirement. Sadly, this is a common story. Surprisingly, what I have found to be equally common is that people in this situation are generally in the dark regarding the benefits they are entitled to.
The advice-seeker in this example was completely unaware that she could claim Social Security benefits based on her ex-husbandʼs earnings record—similar to the spousal benefit she would have been entitled to if she were still married to him. Needless to say, she walked away from the advice session feeling much better about her financial future, knowing that she would be retiring with significantly more income than sheʼd originally thought.
How much will you receive (if you remain unmarried)?
Suppose your ex-husband or ex-wife is entitled to $2,000 per month (based on his or her work record), but your individual benefit amount at full retirement age is just $500. Claiming benefits on your exʼs earnings history instead of your own would be a no-brainer (the maximum benefit youʼre entitled to is 50% of your former spouseʼs individual benefit, so $2000/2 = $1000). Meaning you walk away with double the monthly Social Security income you otherwise would have received.
If the two amounts are almost the same at full retirement age, it may be wiser to claim on your own work record because you can postpone receiving payments up until age 70, earning delayed retirement credits each year, ultimately receiving a larger monthly benefit. However, if you turned age 62 before 2016, you may be allowed to file a Restricted Application for purposes of claiming only your available divorced spouse benefit, while continuing to grow your primary benefit.
What if your ex-spouse hasnʼt retired yet?
In the case of marriages that lasted at least 10 years, you are entitled to receive a divorced spouse benefit on your ex-spouseʼs record, whether or not your ex has retired or started applying for benefits themselves. All that matters is that they are qualified to receive benefits when at the time you file, that you are 62 or over, remain unmarried at such time that you are seeking benefits, and have been divorced from that ex for at least two years. The primary insurance amount (PIA) your former spouse is estimated to receive at full retirement age will be used to calculate your “divorced spouse” benefit, whether or not that spouse has started claiming. Keep in mind that while you can file as early as age 62, your benefit will be permanently reduced if you file before you attain full retirement age.
What if your ex has died?
In that case, you may be entitled to survivor benefits. This applies even if you were divorced at the time of death, as long as you were married for at least 10 years and remain unmarried at such time (or remarried after age 60). While you must be at least age 62 to file for a divorced spouse benefit, you can file for a survivor benefit as early as age 60. However, please note that the benefit amount may be permanently reduced if you file before attaining full retirement age.
What if your ex has remarried? Will the new spouse be entitled to spousal benefits?
It doesnʼt matter how many other spouses he or she subsequently acquired. There is no single pot of spousal benefits to draw from; the amount of benefits your exʼs current spouse receives wonʼt affect (or be affected by) your claim.
What if you subsequently remarried?
Then you wonʼt be able to claim a divorced spouse benefit on your exʼs record, unless your later marriage ends (by divorce, annulment or death). In which case, you can still claim on your first spouseʼs Social Security record. Unlike a divorced spouse benefit, you can continue to receive a survivor benefit if you remarry after age 60.
What if youʼre not on good terms with your ex?
Not all divorces are amicable, and many ex-partners cut ties with each other altogether, especially if there are no children involved. The good news is, you donʼt need to be in contact with your former husband or wife in order to claim Social Security benefits based on their record. Nor will your ex be informed that youʼre collecting on their record, unless you decide to tell them. All the Social Security office needs is the necessary documentation, such as marriage license and divorce decree.
What if my ex-spouse or I receive a pension based on work not covered by Social Security?
If you or your ex-spouse is entitled to receive a federal/state/local government pension for employment not covered by Social Security, your “divorced spouse” or survivor benefit may be affected. Although, if you were assigned some of your ex-spouseʼs employer retirement plan benefits at the time of divorce, through a qualified domestic relations order (QDRO), it may help to offset any reduction of your divorced spouse benefit due to your ex-spouseʼs pension.
When is the best time to claim?
While you may be entitled to Social Security benefits on your ex-spouseʼs record, getting paid as soon as you are eligible to file does not make sense for everyone. Bear in mind that once you file for a Social Security benefit, you will typically only receive the largest benefit available to you, which may be permanently impacted by the age at which you decide to file. In addition, remember that Social Security may be counted towards your taxable income, so it may make sense for you to wait, for tax purposes. Your claiming strategy will depend on many individual factors, such as your life expectancy (based on current health issues and family history). Discussions with a financial advisor and a tax advisor can help to add more clarity when making any Social Security decision.
Remember, you canʼt assume that the Social Security benefits officer in charge of your claim will know how to maximize your benefits. Itʼs up to you to ask the right questions. Hopefully Iʼve armed you with some of the answers in advance, helping you to secure a better-funded retirement.
Note: The following piece is for educational purposes and is not legal or tax advice. Consult with your tax and legal advisors regarding your personal circumstances.