Social Security is a frequent topic of this column for the simple reason that it is the most valuable retirement asset most Americans have. Moreover, with 76 million baby boomers either in or heading toward this phase of their lives, there’s a lot of interest in this program.
Unfortunately, there’s also widespread confusion about the rules.
But until this past week, I didn’t fully realize how little knowledge many among us have about this critically-important source of income. Two stories served as my wake-up call, and both involved older women who were divorced and struggling financially. In both cases, the ex-husband had been the primary earner and had re-married a younger woman.
Margaret* had been married to a doctor. She was a stay-at-home mom and devoted keeper of the home and the social calendar. One day, after more than 25 years of marriage, her husband announced he wanted a divorce. Margaret, of course, was devastated. Her ex-husband had a sharp attorney, and in the divorce settlement she ended up with less than you might assume.
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Margaret looked for a job, but had no resume. Her work skills were completely out-dated. Alone and in her mid-60s, she was struggling to pay her basic living expenses.
Then she attended a seminar on Social Security. Afterwards, she approached the speaker and thanked him for the information he had delivered. Then, with tears welling up in her eyes, she said, “I also want to thank you for literally changing my life.”
Until that night, Margaret had had no idea that she was entitled to Social Security benefits based upon her ex-husband’s work record. She planned to visit her local Social Security office the next day and sign up. She now knew she could at least count on a monthly source of inflation-adjusted income for the rest of her life.
The second case is similar. Except that Katherine* was 85 years old when she learned that she could have been receiving a divorced spousal benefits for decades. Sadly, she had spent more than 20 years scraping by, relying on whatever family members could afford to give her and skipping meals to save money.
There are Social Security benefits for some divorced spouses. The monthly check can be as much as 50% of what the ex-spouse is entitled to receive when s/he is full retirement age (FRA). Currently, this is age 66.
Here are some of the things to consider:
- The maximum benefit you’ll get is half the amount your ex is entitled to at FRA. (This is referred to as their Primary Insurance Amount, or PIA.) However, if you, yourself, are under FRA when you apply, your benefit will be reduced. For instance, if your full retirement age is 66 and you apply for a divorced spouse benefit at the earliest age possible (62), the amount you receive will be roughly 35% - not 50%- of what your ex would receive at FRA.
- The age that your ex files to start Social Security benefits does not affect the amount you are eligible to receive.
- You are entitled to a divorced spouse benefit if:
- You were married at least 10 years
- You are unmarried at the time you apply
- If you re-marry, you will generally lose your divorced spouse benefits until your new marriage ends (due to death, divorce, or annulment)(1)
- You are not entitled to receive a higher benefit based upon your own work history
- Your ex is already receiving Social Security
- If your ex has not yet filed for Social Security, then you must be divorced for at least two years
I often get asked how the Social Security Administration will knows the amount of an ex-spouse’s benefit: he or she is in their computer system. However, it helps if you remember the person's Social Security number.
You also have to prove the marriage with a a copy of the marriage certificate and divorce decree. The ex will not be informed that a former spouse is getting benefits--after all, it has no affect on the amount the ex entitled to.
There is no deadline for filing spousal benefits.
For more information about divorced spouse benefits, visit the Social Security website and type “divorced spouse” in the search box.
No one should be forced to spend their later years in poverty due to divorce.
*Names have been change
1. Exceptions are if your new spouse is receiving widow’s or parent’s benefits.
Ms. Buckner is a Retirement and Financial Planning Specialist and an instructor in Franklin Templeton Investments' global Academy. The views expressed in this article are only those of Ms. Buckner or the individual commentator identified therein, and are not necessarily the views of Franklin Templeton Investments, which has not reviewed, and is not responsible for, the content.
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