Are you nearing ten years of marriage and contemplating divorce? If so, you should be aware that the timing of your divorce can effect your future financial situation. Understanding how Social Security works—whether you are divorced or not—can help you make important decisions.
Social Security Benefits Based on Your Ex-Spouse’s Record
A divorced spouse collects half of his or her ex-spouse’s full retirement or disability benefit if at full retirement age.
- The marriage must have lasted at least 10 consecutive years.
- You must be 62 year of age or older.
- Your ex-spouse must be eligible for a Social Security retirement or disability benefit.
- You are not married.
- If you remarried, that marriage must have ended.
- Your benefit must be less than that of your ex-spouse; otherwise, you will collect your own benefit.
Two Strategies That Were Eliminated in the Bipartisan Budget Act of 2015
Two strategies that allowed individuals—both married and divorced—to maximize benefits were eliminated by the BBA of 2015. Known as “file and suspend” and “restricting an application,” both were especially helpful for higher-income beneficiaries.
File and Suspend
Before the passage of this act, this strategy could be used to allow the lower-earning spouse or ex-spouse to receive spousal benefits while the higher-earning spouse continued to earn delayed retirement credits until reapplying at age 70.
This is how file and suspend worked:
- At full retirement age, the party who had earned the most claimed his or her retirement benefit.
- The lower-earning spouse or ex-spouse claimed a spousal benefit.
- The higher-earning spouse or ex-spouse immediately suspended his or her benefit.
- The higher-earning spouse or ex-spouse continued to earn delayed retirement credit.
- The higher-earning spouse or ex-spouse reapplied at age 70. The benefit will be a greater amount than if he or she had not suspended the benefit.
This is how the BBA of 2015 changed file and suspend:
The lower-earning spouse or ex-spouse is no longer allowed to claim a spousal benefit if the higher-earning spouse suspends his or her benefit.
A parent can no longer collect a benefit for a child while continuing to grow his or her own benefit.
Restricting an Application
The strategy known as “restricting an application” is being phased out by the BBA of 2015. No one who was 62 or older on January 1, 2015, will be able to use this strategy.
This is how it worked:
When someone between 62 and full retirement age, which as of this writing is 66 years of age, applied to the Social Security Agency to collect his or her benefit, the SSA deemed that he or she must take the highest benefit possible. However, once that person reached full retirement age, he or she was permitted to restrict the application to spousal support only.
In other words, the higher earner could collect a spousal benefit and at the same time earn additional credits in his or her own account.
This is how the BBA of 2015 changed “restricting an application”:
The BBA of 2015 applied the “deeming” rule to all ages. No matter what the age of the beneficiary, the SSA automatically gives the higher amount for which he or she is eligible.
In other words, the higher earner is now unable to collect a spousal benefit.
Social Security and Divorce
The changes that went into effect because of the BBA of 2015 apply whether you are married or divorced. However, there are important factors to remember if you are divorced:
- If you have been divorced for more than two years, you can claim a spousal benefit even if your ex-spouse has suspended or delayed his or her benefit.
- You must be married for at least 10 years in order to be eligible to collect a spousal social security benefit.
Social security issues and the many exceptions that come into play can be complicated. If you have any questions regarding social security and divorce or any other family law matter, it is recommended that you seek the advice of a qualified New Jersey attorney.