Maximizing Social Security Benefits for Divorcees

By Aimee Calderon, CFP®

Unfortunately, one of the realities of being a financial advisor is that we see clients get divorced.  Going through a divorce can be emotionally challenging, but it’s crucial to address the financial aspects as well. Seeking professional financial advice during this process can significantly impact your future stability.

Not only does divorce impact your current assets, it also affects your future income.  When planning for retirement, divorcees need to understand all the impacts divorce has on their retirement income.  One of the key contributors to most Americans’ retirement is Social Security benefits. Even if you haven’t contributed to Social Security during your lifetime, you may be able to collect benefits based on your ex-spouse’s work history.

1. Eligibility Criteria

To qualify for Social Security benefits as a divorced spouse, consider the following:

·         Marriage Duration: Your marriage must have lasted at least 10 years.

·         Divorced for Two Years: You need to be divorced for at least two years.

·         Age Requirement: You should be at least 62 years old.

·         Unmarried: You must not be remarried.

·         Benefit Comparison: Your own Social Security benefit should be less than the divorced spouse benefit.

·         Ex-Spouse Eligibility: Your ex-spouse must be entitled to Social Security retirement benefits.

2. Benefit Amount

·         A divorced spouse can receive up to 50% of their ex-spouse’s full retirement benefit.

·         You are entitled to the greater of your own benefit or the benefit of your ex-spouse.

·         Wait until full retirement age (usually between 66 and 67) to claim the full benefit.

·         Although you can start receiving benefits at age 62, filing early may result in a permanent reduction of up to 30%.

3. Planning Strategies

Consider these strategies to maximize benefits:

·         Coordinate with Other Income: Retirement income (such as covered pensions, annuities, or investments) doesn’t affect Social Security benefits. You can collect both simultaneously.

·         Working in Retirement: If you work while receiving benefits, your payments may be reduced. Plan accordingly to avoid exceeding income thresholds.

·         Consult a Financial Advisor: Seek professional advice to optimize your Social Security strategy.

Seeking the help of a financial advisor to understand the rules and plan strategically can help divorcees make the most of their Social Security benefits during retirement.

Schedule a 15-minute discovery call with a fee-only financial advisor if you want help thinking through some of these issues.