Divorce complicated by Social Security rules

Couples in Louisiana and nationwide who are considering getting a divorce need to factor in the impact of Social Security rules on their finances, in order to not later be confronted by unpleasant surprises. This is particularly important to consider if one or both spouses are close to the age at which they can begin receiving benefits and has not yet started doing so.

Once a couple is divorced, an ex-spouse can receive spousal Social Security benefits that are based on an ex-husband’s or ex-wife’s earnings, so long as the marriage lasted at least a decade, they are a minimum of 62 years old, they are currently not married, and they do not qualify for a higher benefit based on their own past earnings. So, for a couple married nine and a half years, it may be beneficial, to receive such benefits, to delay the finalizing of the divorce for six months.

Additionally, an ex-spouse who delays claiming his or her own Social Security benefits until the full retirement age (66 for many retiring now) can start to collect a spousal Social Security benefits check of 50 percent of an ex-spouse’s retirement benefits. He or she may continue to work and increase the eventual amount of personal Social Security retirement benefits by approximately 8 percent for every year of delayed retirement, until age 70.

By doing this, when an ex-spouse reaches age 70, the Social Security monthly retirement check would be approximately 132% larger than it otherwise would have been, and possibly larger depending on annual cost of living increases.

One tricky rule is that a divorced spouse can only receive a spousal Social Security benefit two years after a divorce, if an ex-spouse has not yet applied for his of her own retirement benefit. There are a number of other complicated rules. It is advisable that older people contemplating divorce discuss these issues with an experienced divorce attorney.

Source: Investment News, “Social Security rules can wreak havoc on divorce plans” Mary Beth Franklin, Jul. 18, 2013