When spouses marry and subsequently divorce, one benefit often not discussed in negotiations concerns Social Security. It deserves more attention.
The principal benefit conferred through Social Security to an ex-spouse is an increase in that spouse’s Social Security retirement benefit.
If a couple stays married for at least ten consecutive years, either spouse, upon divorce, can subsequently elect to collect from his or her former spouse’s Social Security rather than their own. Here is how it works: if the former spouse had more lifelong earnings, that former spouse will have a greater retirement benefit than that attributed to the benefit seeking spouse. In this situation, the benefit seeking spouse will want the higher benefit, which under the law is equal to half the monthly benefit of the higher-earning spouse. As long as this amount is higher than what the benefit seeking spouse would receive using his or her earnings, it makes sense to elect to collect under the former spouse.
If the benefit seeking spouse so elects, it does not reduce the amount of benefit received by the earning spouse – that spouse will still receive all of the monthly benefit due.
A common error a spouse will make in this election process is claiming it too early. The sooner one starts to take Social Security, the smaller the actual benefit. Taking the early retirement sum will permanently reduce lifetime benefits while waiting until full retirement assures the maximum benefit.
The impact of Social Security benefits could play out significantly in a “gray” divorce, when older couples nearing or at retirement divorce. In this situation, particularly if only one spouse had been earning income during the marriage, the issue of maintenance (spousal support) could arise. If the party that would pay maintenance fails to raise the amount the spouse could claim under Social Security as income, that party could end up paying more in maintenance than necessary. Indeed, depending on the circumstances, it could eliminate the need for maintenance entirely.
If you have questions about Social Security and divorce, contact us – we can help.