Q & A: December 2018

Would it Be Advantageous for Me to Take a Divorced Spouse Benefit?

Q:  How does divorce affect my Social Security benefits?  I’m turning 64.  My ex - husband had much higher earnings than I did.  His benefit is likely to be much higher than mine.  He has remarried and is not retired yet.  Would it advantageous for me to take a divorced spouse benefit based on his earnings, or better to wait for my own retirement benefit?  

A: A divorce can throw a monkey wrench into retirement plans, especially for women whose earning records may have fewer work years and at lower earnings than their former spouses.  Understanding your options can help you maximize your Social Security benefit and live a more secure retirement.  Here are the four main eligibility rules to qualify for a benefit based on the work record of an ex-spouse:

  • You are unmarried;
  • You are age 62 or older;
  • Your marriage lasted for 10 years or more, and your ex-spouse is entitled to Social Security benefits;
  • The benefit that you are entitled to receive on your own work record is less than the benefit you would receive on your ex-spouse’s work record.

If your ex-spouse has not applied for benefits, but qualifies for them, you may still file for divorced spouse benefits on their record if you have been divorced for at least two years.

If you meet all of these qualifications, you are eligible for a benefit as a divorced spouse that is equal to one-half of what your ex-spouse would receive at his full retirement age.  For example, if he qualifies for a monthly benefit of $2,000 at age 66, then you would qualify for $1,000 per month at your full retirement age, also 66.  Your spouse may currently be younger than full retirement age, but his full retirement age year is simply used to determine what you would be entitled to.  However, even if you qualify to do so, if you claim now, your benefit at 64 would be just 41.7% of your ex’s benefit.  It will be reduced because you are under your full retirement age.

Since you were born in 1954, however, you qualify to use a “restricted application” strategy to maximize your benefits at full retirement age (66).  Waiting just two more years could significantly boost lifetime Social Security income.  People born after 1954 may no longer use this strategy, so consider this:

When you simply claim benefits at age 66, Social Security will “deem” you eligible for both your own retirement benefit, and an ex spouse benefit.  You receive your own benefit first, and the balance that you are eligible for as a divorced spouse would make up the difference.  But by claiming at 66 you loose the advantage of delayed retirement credits that can boost your benefit by 8% per year from full retirement age to age 70.

Under a restricted application, however, you could take just one or the other of the two benefits at 66, and then allow the other benefit to grow at 8% per year, until age 70.  For example, depending on how much your own retirement benefit would be, you might file a restricted application for your own retirement benefit, and then let your larger spouse benefit grow to the maximum, switching to it at age 70.  Or, if by allowing your own retirement benefit to grow would yield a higher benefit, you could instead file a restricted application for just the ex- spouse benefit at 66, and then switch to your own higher benefit at age 70.  You will need professional help to make this determination.  The extra money you receive using this strategy accumulates over a typical retirement, and can mean a significantly higher benefit when you are older and need it the most.

If you have a retirement account like a 401 (k), you may want to ask your financial advisor if he or she can help advise you.  An online resource is Maximize my Social Security the website of Larry Kotlikoff which can be found at: https://maximizemysocialsecurity.com/ask-larry.  While there is a charge for a personalized report, there is a considerable amount of free information on this topic on the website.  Along with Philip Moeller, Larry Kotlikoff coauthored the Amazon bestselling Get What’s Yours: The Secrets to Maxing Out Your Social Security, https://www.amazon.com/Get-Whats-Yours-Revised-Security/dp/1501144766/ref=sr_1_1?ie=UTF8&qid=1538502656&sr=8-1&keywords=get+what%27s+yours.  Check to see if your library has a copy.