One of the challenges of planning for retirement is that an unexpected event, such as divorce, can dramatically change your retirement income needs. If you were counting on your spouse’s social security benefits to provide some of your retirement income, what happens now that you are divorced?

What are the Rules?

Even if you are divorced, you may still collect benefits on your ex-spouse’s social security earnings record if:

• Your marriage lasted 10 years or longer;
• You are age 62 or older;
• Your ex-spouse is entitled to receive social security retirement or disability benefits; and
• The benefit you are entitled to receive based on your own earnings record is less than the benefit you would receive based on your ex-spouse’s earnings record

If you have been divorced for at least two years, and the other requirements have been met, you can receive benefits on your ex-spouse’s record even if he or she has not yet applied for benefits.

How Much Can You Receive?

If you begin receiving benefits at your full retirement age, your spousal benefit is equal to 50% of your ex-spouse’s full retirement benefit. For example, if your ex-spouse’s benefit at full retirement age is $1,500, then your spousal benefit is $750. However, there are several factors that may affect how much you ultimately receive:

Are You Eligible for Benefits Based on Your Own Earnings Record?

If so, then the Social Security Administration (SSA) will pay that amount first. But if you can receive a higher benefit based on your ex-spouse’s record, then you will receive a combination of benefits that equals the higher amount.

Will You Begin Receiving Benefits Before or After Your Full Retirement Age? 

You can receive benefits as early as age 62, but your monthly benefit will be reduced (reduction applies whether the benefit is based on your own earnings record or on your ex-spouse’s). If you decide to receive benefits later than your full retirement age, your benefit will increase by 8% for each year you wait past your full retirement age, up until age 70 (increase applies only if benefit is based on your own earnings record).

Will You Work After You Begin Receiving Benefits? 

If you are under full retirement age, your earnings may reduce your social security benefit if they are more than the annual earnings limit that applies.

Are You Eligible For a Pension Based on Work Not Covered by Social Security?

If so, your social security benefit may be reduced.

Planning Tip

If you decide not to collect retirement benefits until full retirement age, you may be able to maximize your social security income by claiming your spousal benefit first. By opting to receive your spousal benefit at full retirement age, you can delay claiming benefits based on your own earnings record (up until age 70) in order to earn delayed retirement credits. This can boost your benefit by as much as 32%. Because deciding when to begin receiving social security benefits is a complicated decision and may have tax consequences, consult a professional.

What Happens if One of You Remarries?

Benefits for a divorced spouse are calculated independently from those of a current spouse, so your benefit will not be affected if your spouse remarries. However, if you remarry, then you generally cannot collect benefits on your ex-spouse’s record unless your current marriage ends. Any spousal benefits you receive will instead be based on your current spouse’s earnings record.

What if Your Ex-Spouse Dies?

If your marriage lasted 10 years or more, you may be eligible for a survivor benefit based on your ex-spouse’s earnings record.

For more information on ways to maximize your social security benefits, or for general retirement planning questions, contact Frank Washelesky at [email protected] or call him at 312.670.7444. Visit orba.com to learn more about our Wealth Management Services.