Divorce and Social Security: 3 things you need to know

Wondering how your divorce will affect Social Security? Get your facts straight before you make an irreversible mistake!

Most divorce-related financial questions have to do with the couple’s assets: the family home, investment accounts, and retirement savings. Few people are aware that the divorce can affect their Social Security benefits. While this topic is probably most urgent for Baby Boomers (generation born between 1946 and 1964), divorcing couples of all ages can benefit from understanding how divorce will affect their benefit eligibility down the line.

Here are three key points to know.

One: Divorce timing matters.

If you have been married to the same individual for 10 consecutive years or more, you may be eligible for his or her spousal benefit. Divorce timing is important: if you have been married for 9 years 11 months, you are out of luck. In cases where financial stability depends on receiving spousal Social Security benefits, it may be advisable to wait on filing for the divorce.

Two: Strategic Social Security filing might still be option.

You have probably heard that an ex-spouse could file a restricted claim for spousal benefits only. That move would allow him or her to collect spousal benefits (the equivalent of 50% of the ex-spouse’s full retirement age benefit amount) while his or her own retirement benefit continues to grow by 8% per year up until age 70.

That option is attractive, because it gives the filer a stream of cash flow now while maximizing his or her own Social Security monthly benefit down the line. If you were born on or before January 1, 1954 you can do this.

If you were born on January 2, 1954 or later, you can still file the claim but cannot choose which benefits will be paid. In other words, if your own benefits at the time of filing are larger than your ex-spouse’s, the Social Security Administration will pay the benefit that is based on your own working record. Once you file, the decision is binding and non-reversible.

Lastly, work with a financial planner.

If Social Security benefits are an important component of your overall financial picture and you are contemplating a divorce, be sure to work with a financial planner before you make any decisions. Social Security provides an important financial safety net, but its rules are complex. Work with an experienced professional who can help you understand the consequences of your choices and maximize the life-long benefits.

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