Social Security is extremely important to our economic security. Social Security stands as one of the most complex areas in financial planning (let alone divorce planning), but most people overlook it. For divorcing couples, if proper planning is not done, the result could be economically detrimental. The purpose of this blog is to address some common concerns concerning Social Security considerations in divorce.
A few basic rules for divorced spouse to receive spousal benefits on the former spouses earnings are:
- The couple must have been married for a minimum of ten (10) years;
- Both spouses must be age 62 or older;
- The applicant seeking benefits must be unmarried at the time of the application;
- If the applicant is under the full retirement age (FRA) and is eligible for benefits on their own, then their own benefits must be less than 50 percent of the their former spouse’s benefit at FRA;
- If the applicant’s age is greater than FRA, they are eligible to receive spousal benefits even if their own benefit is greater than 50% of their spouse’s benefit at FRA;
- If the applicant’s former spouse has not filed for benefits at the date of the divorce, then the applicant must wait a minimum of two (2) years from the date of divorce before they are eligible to file.
- Divorced spousal benefits (DSB) are excluded from the “Family Maximum Calculation,” but surviving divorced spouse caregiver benefits are included;
- There are no available benefits for a divorced spouse with child-in-care. However, there are benefits for surviving divorced spouse with child-in-care;
- If a divorced spouse continues to work while receiving either divorced spousal or survivor benefits. the “earnings test” rules apply and may result in a reduction or elimination of benefits if received prior to FRA;
- If a divorced spouse, who previously qualified for DSB, gets remarried, they will no longer be eligible for DSB unless the subsequent marriage also end. If that occurs, the divorced spouse again becomes eligible for benefits off of the first ex-spouse.
There are a few significant differences in Social Security benefits between married and divorced couples that benefit divorced spouses. For divorced couples, a divorced spouse whose ex-spouse has not filed for benefits becomes eligible two (2) years after the divorce has been finalized. The “earnings test” does not apply to divorced couples. Divorced spouses are also eligible to file for benefits concurrently for benefits on the other. Lastly, the benefits being received by an ex-spouse do not affect the benefits that a new spouse can receive.
A divorced spouse also has the eligibility for survivor benefits if the following criteria is met: The marriage must have had a duration of at least ten (10) years; the applicant for DSB must be 60 years of age or older; and the applicant did not remarry before 60.
If a divorced spouse is contemplating filing for benefits, or remarrying, these are important points to be counseled on.