During a divorce, most spouses tend to focus on retirement accounts associated with employment or IRAs opened during the marriage. Too often, spouses tend to neglect another retirement windfall – Social Security.
Social Security benefits function as a form of retirement benefits that depend on several factors.
First, the more you worked during your pre-retirement life, the higher your benefit. Social Security is not a one-size-fits-all; to the contrary, it reflects how hard you worked (number of years of employment) and how well you advanced (your actual income). The more you worked at a higher income, the greater your retirement benefit.
Second, when you claim your benefit can affect the value of that benefit. Currently, Social Security allows you to claim as early as 62, but with a caveat: your benefit will be less than if you waited until full retirement. If you do not claim until age 65 or 67 or 70, your monthly benefit will continue to increase. And, importantly, once you claim your benefits, you lock yourself in for the rest of your life.
Third, if you were married but are now divorced and your spouse earned more than you did, you might have the ability to claim your spouse’s benefit level rather than your own. In order to be eligible, you had to have been married to your former spouse for at least 10 years. If you meet this threshold, once you claim retirement, you can claim 50% of your former spouse’s monthly benefit. If that sum exceeds what you would receive based on your own work record, this is a great windfall for you. But here is another caveat: in order to continue to receive this benefit, you must not remarry. If you do remarry, you lose those benefits. Consequently, remarriage later in life could have serious unintended financial consequences.
Before you claim any Social Security benefits, be sure to examine if your prior marriage will factor into what you could receive and if it might provide higher retirement income.
If you have questions about Social Security and divorce, contact us – we can help.