For many retirees, deciphering the best Social Security claiming strategy can be incredibly confusing. Social Security has thousands of complex rules and regulations, and policies change over time. In fact, one recent study estimated that the average American household leaves over $110,000 on the table by using the wrong Social Security claiming strategy.
That’s why I wanted to showcase one reader’s question regarding Social Security benefits for a divorced spouse. This is a great question that affects many divorced people, especially women, and illustrates how challenging it can be to keep up with changes to Social Security rules.
Here’s the question (names and minor details have been changed to protect our reader’s privacy):
I will be turning 66 next year in 2022. I was married for over 20 years and am now divorced. I was told by Social Security that I could collect on my ex’s record (he is still living) while continuing to work, and when I do decide to retire collect on my own record. When I checked back with Social Security, they told me this option hasn’t been in effect for some time. Could you find out what the policy is on this matter? I hate to miss out on something I’m entitled to. I am single, although my ex did remarry. Thank you for any help you can give me on this matter.
Deborah’s question illustrates an area of continuing confusion. Here’s why. People who are married for 10 years or more and then divorce are usually eligible to claim their own Social Security benefits, or 1/2 of their ex-spouse’s benefits, whichever is greater (I’m skipping over some of the fine print to give you the overall picture).
Until 2015, a divorced spouse could file what’s called a “restricted application” and claim spousal benefits while letting her own benefits continue to grow. You can see how this would be advantageous. You could start with spousal benefits at age 62, for example, and postpone your own benefits until age 70, when they would be at their max (benefits grow 8% per year between full retirement age and age 70). That “growth” could increase your payout by 32%.
However, this option was done away with in 2015 for people born after January 1, 1954. While all eligible divorced persons could use this claiming strategy prior to 2015, now only divorced people born January 1, 1954 or earlier are eligible.
That means that anyone born after January 1, 1954, like Deborah, has missed the boat.
At full retirement, which for someone born in 1956 like Deborah will be at 66 and 4 months, you can apply for 1/2 of your ex-spouse’s full retirement Social Security benefit. That will be the maximum spousal benefit you can receive (it does NOT increase by delaying after that date). Or, they’ll give you 100% of your own benefit on that date if bigger. (One detail I’m skipping over: you can claim a reduced spousal benefit as early as age 62).
Alternatively, you can wait longer, forego spousal benefits, and let YOUR retirement benefit keep increasing until age 70, and claim at that time. The question for you is which one is highest...50% of your spouse’s benefit or 100% of yours, and by the way, YOURS will keep growing after full retirement age. Social Security will tell you what your spousal benefit will be if you give them your ex’s Social Security number, divorce date and other info.
Here’s a restatement of the policy courtesy of retirement experts at Fidelity:
“You’ll only get a retirement benefit based on your ex’s wage record if it is a higher benefit amount than you would receive based on your own wage record. You can call or meet with the Social Security Administration and they will let you know if and how to apply for the higher benefit amount.”
Is this confusing? Yes. Many people remember the pre-2015 options, which are no longer valid. Once you find out what spousal benefits you are entitled to, however, you can start making some smart decisions. One final note: while spousal benefits are of concern to divorced women, these rules apply equally to divorced men.
The Takeaway: Want more details? Click here for additional background on divorced spousal benefits compliments of Kiplinger.
Please remember to consult with a qualified financial advisor for information specific to your situation.