October 15, 2019
It is a good idea to revisit the subject of Social Security and divorce periodically, and looking back we see that our last newsletter on this subject was in June 2017. Time for a refresher! On this go-around, however, we will concentrate on the subject of accessibility: when is Social Security available?
Ignoring the issue of divorce for a moment, Social Security is available to workers who have earned it, or have a spouse who earned it, as early as age 62. “Full Retirement Age” (FRA) is between age 65-67 (depending on the year you were born), and the latest age at which one can begin to collect is 70. The amount you receive each month is reduced if you begin to collect before your FRA. If you wait beyond your FRA to begin, the benefit amount will grow. All three figures are easy to obtain through the Social Security website, www.ssa.gov. Any individual can create an account and access their up-to-date benefit estimate.
A divorced spouse is entitled to the greater of their own Social Security benefit or one-half of their ex-spouse’s benefit. As an example, Sally worked part-time for the past 30 years and has earned her own benefit of $850 per month. Her ex-husband Bob has earned a benefit of $2,200. Since one-half of Bob’s benefit ($1,100) is greater than Sally’s own benefit, she will collect $1,100 per month when she retires.
There are a few other requirements to collect Social Security based on one’s ex-spouse. The couple must have been married for 10 years, and the spouse collecting on his or her ex’s record must be age 62 or older and not remarried.
In some cases, a 2-year waiting period that may also apply. Using Sally and Bob again as our example (for ease of explanation), this requirement would be in place if Bob has not yet begun receiving his own Social Security benefit. In this situation Sally must wait until they are divorced for 2 years to receive the bump-up to her benefit based on Bob’s benefit. If she applies before 2 years, she will be entitled to her benefit only. If Bob had already started receiving Social Security at the time of the divorce then Sally could immediately begin to receive the higher amount.
This delay could be problematic for your client who is at or near retirement and is dependent upon the additional Social Security to make ends meet. If this extra income is not available, your client may need income from another source during that 2-year period. This could be alimony or additional investment assets. Alternately the higher-earner spouse could agree to begin collecting Social Security (if over the age of 62.)
Given these subtleties, we encourage you to thoroughly consider the timing of Social Security with your older divorce clients.