Social Security Benefits Rules Enacted in 2015

The U.S. divorce rate dropped for the third consecutive year reaching its lowest point in nearly 40 years according to BGSU National Center for Family and Marriage Research.  Interestingly, in contrast, the divorce rate among couples ages 50 and older, is growing rapidly. Today, 25% of the couples getting divorced in America are over the age of 50.

Understanding Social Security retirement and survivor benefit options for spouses and ex-spouses is an important part of any divorce negotiation and Settlement Agreement. In 2017, the maximum Social Security benefits depends on when one files.  Those who file at the earliest possible age of 62 can receive a maximum of $2,153 per month.  At age 70, the maximum amount is $3,538 per month.  In 2015, Congress enacted the Bipartisan Budget Act of 2015 which closed some unintentional “loopholes” in Social Security called aggressive claiming strategies.

Here the eligibility rules for divorced spouses of a retired worker.

Your Own Social Security Benefits as a Retired Worker:

  • Begin as early as age 62
  • Normal Retirement Age (NRA) is age 66, gradually increasing to 67 based on birth year
  • Maximum benefits at age 70
  • Benefits accrue at 8% each year you delay NRA until age 70
  • Benefits end when you die

Ex-Spousal Benefits of Retired Worker:

  • If marriage lasted at least 10 years
  • You are unmarried at the time of application for benefits
  • You and your ex-spouse are age 62 or older
  • Your ex-spouse is entitled to social security retirement or disability benefits
  • If your ex-spouse has not yet applied for retirement benefits, but can qualify for them, you can receive benefits based on their record if you have been divorced for at least two years
  • You are entitled to receive whichever benefit is higher, your own or 50% of your ex-spouse’s benefits. You do not receive any delayed credits your ex-spouse may receive
  • Limited in amount if you continue to work while receiving benefits (offset by the government)
  • Limited if you receive a pension based on work not covered by Social Security, such as government work (up to 2/3 of your pension amount reduces SS benefit)
  • Benefits end when you die or remarry
  • If your remarriage ends in annulment, divorce or death, then you can collect on a former spouse’s record if you qualify
  • The amount you receive as a divorced spouse has NO effect on the amount of benefits your ex-spouse or his/her current spouse may receive
  • If your ex-spouse had numerous marriages, any of his/her ex-spouses who had been married at least 10 years, is entitled to receive benefits based your former spouse’s record. This does not affect the former spouse’s benefits

The impact of the new rules enacted in 2015 for claiming Social Security as a divorced spouse is very similar to that for married spouses. They apply to anyone born after Jan.1, 1954.

  • If you apply for benefits and collect on your ex-spouse’s record, you will not continue to earn delayed credits for your own SS benefit record (8% per year) until age 70. You no longer can switch back to claiming benefits on your own record (if higher) at 70.
  • At any age, SSA will allocate whichever benefit is higher at time of your application: 50% of your ex-spouse’s benefit or 100% of your own.
  • You are stuck with original benefit application amount.
  • Spousal benefits max out at NRA of your ex-spouse (unlike your own at 70).

It is very important for family law advocates to work with their clients and/or a financial advisor regarding these changes, as this can have a significant impact on the cash flow one’s client will have available, and when they plan their filing dates. These changes will significantly impact how spouses in a divorce negotiate for spousal support and how they will anticipate and negotiate future income from Social Security benefits.

The parties will have to negotiate trade-offs in Social Security claiming strategies. These trade-offs will have to be compensated for with other assets of the marital estate, as they have associated costs to each party. The terms of each party’s Full Retirement Age and the time for collecting Social Security benefits should be specified in the Judgment of Divorce. Enforcement of these terms will be similar to the enforcement of all other terms of the Judgment. Engaging the services of a divorce financial planner is essential to the analysis of maximizing the outcome of a divorce.

 

Lili Vasileff received the Association of Divorce Financial Planners’ 2013 Pioneering Award for her public advocacy and outstanding leadership in the field of divorce financial planning. Vasileff is president emeritus of the ADFP and is a member of the Financial Planning Association. She is president and founder of Divorce and Money Matters, serving clients nationwide from Greenwich, Conn. Her website is http://www.divorcematters.com.