How are social security benefits calculated for divorced spouse

Social Security can be overwhelming, especially if you're unsure of what benefits you qualify for as ... [+] a divorced individual.

Since Social Security benefits can make a big difference in your cash flow and income taxes in retirement, it is worthwhile to understand how this important benefit works. If you are divorced after being married at least 10 years, you can claim social security benefits on your ex-spouse’s work record. If you’ve been married less than 10 years, you cannot claim any social security based on your ex-spouse’s work history so it’s critical you don’t finalize a divorce after 9 years of marriage without seriously thinking through the consequences.

Before jumping into the nitty gritty, let’s cover the key highlights:

1. There are no decisions to make or filing requirements during the divorce. The benefits are determined by the Social Security Administration when you get to age 62+ so this is a rare financial issue you can put off thinking about until well after the divorce is finalized if you are younger than 62.
2. No court order is necessary – all you need is proof you were married for at least 10 years and proof you are now divorced.
3. Your former spouse’s benefits are not affected at all by your claim – they don’t even have to know you are filing on their work history!
4. Benefits can be received while your ex-spouse is alive as well as after they die.

How do I qualify as an ex-spouse?

To be eligible off your ex-spouse’s work history, all the following must apply:

• Your marriage lasted 10 years or longer.
• You are not currently married (unless you were over age 60 when the remarriage occurred).
• You are 62 years or older (unless you’re disabled or your ex-spouse is deceased).
• Your ex-spouse’s benefit is greater than any you would receive based on your own working record (you can’t double dip).
• Your ex-spouse is entitled to Social Security retirement or disability benefits.

Your former spouse doesn’t have to be collecting his or her retirement benefits for you to claim your spousal benefit. However, if this is the case, your divorce must have been finalized at least two years prior. The two-year rule does not apply if your ex is already receiving benefits.

The Social Security Administration (SSA) will not notify your ex that you are collecting benefits off their work record. That is likely music to your ears as unlike many things in divorce, there’s no need to coordinate or communicate with your former spouse, as your collection of a spousal benefit does not impact their Social Security benefit.

What if I’ve been married and divorced more than once?

If each marriage lasted 10 years or more and the above qualifications apply to each situation, you can choose which benefit you would like to collect, but you cannot collect on more than one work record.

How much will I receive?

Full Retirement Age (FRA) varies based on year of birth.

Your maximum spousal benefit is 50% of what your ex-spouse will collect at full retirement age (FRA). So, for example, if your ex-spouse is entitled to the 2021 maximum monthly benefit of $3,113 at FRA, your maximum ex-spousal benefit is $1,556.50 per month at your FRA. While you can start receiving benefits before you reach your FRA, filing earlier will reduce the amount you receive by approximately 6.5%-7.5% for each year you claim early. Full retirement age (FRA) varies based on birth year.

Can I get an estimate of what this would be without going through my ex?

Yes, but it’s not as easy as accessing your own record, which you can do at any time by creating an account and logging in to www.ssa.gov. To receive an estimate of your ex-spousal benefits, you need to call or visit a local Social Security office, where you’ll need to provide your marriage certificate and divorce decree to receive an estimate of your ex-spousal benefit. You’ll also need your ex’s social security number, but if you don’t have it, then make sure you can provide their date of birth, place of birth, and parents’ names.

When can I apply for ex-spouse benefits?

Unless your ex is already deceased or you are disabled, the earliest you can file is three months before your 62nd birthday. Remember though, that 62 is considered “early retirement age,” so your benefit will be reduced if you claim as soon as you are eligible.

Should I collect benefits based on my work record or my ex’s?

All social security recipients have the option to delay taking their own social security past their FRA to increase their monthly social security check. Starting your own benefit after your FRA increases your payment by 8% per year each year beyond FRA until your age 70.

Benefits based on your work record will be reduced permanently before FRA. Delaying post-FRA ... [+] provides an 8% annual increase.

If you were born in 1953 or earlier, you have a unique option to file for ex-spousal benefits now and then switch to your own benefit later. However, when you file early both of those benefit amounts will be reduced accordingly and those reductions are permanent. So, crunch the numbers for various longevity scenarios before making this special election. For anyone born in 1954 or after, you must choose one benefit or the other. Unlike filing for benefits based on your own record, when filing as an ex-spouse, waiting until after your full retirement age will not increase your benefits, so it is best to file upon your FRA if you haven’t already.

Filing for ex-spousal benefits before FRA will result in a permanent reduction of benefits. The ... [+] above shows the percentage of your spouse's benefit you will receive based on your age when you start ex-spousal benefits.

Whenever you decide to file, your benefit is calculated as the greater of either your own benefit or your ex-spousal benefit. In other words, you cannot receive both. The decision on when and whose benefit to take is a permanent one, so it’s good to work closely with a financial advisor and the SSA to see what would give you the largest benefit.

What if my ex-spouse dies?

Many people are surprised to learn that they can receive 100% of their deceased spouse’s benefit, even as an ex-spouse. If your ex-spouse passes away, you may be eligible to receive 100% of the amount your ex-spouse was receiving from Social Security when they died. The following would have to apply for you to receive the benefit:

• The marriage lasted at least 10 years.
• You are at least 60 (50 if disabled), or you are caring for a child from the previous marriage who is either under 16 or became disabled before turning 22 (in which there’s no age minimum).
• You are single or, if you are remarried, you didn’t remarry until after you turned 60 years old (50 if disabled).

As is the case for any survivor benefit, waiting to collect benefits until full retirement age will qualify you to receive 100% of what your deceased ex was receiving when they passed away. If they were not collecting benefits at the time of death, you will receive 100% of what they were entitled to receive.

Not yet full retirement age? You may still collect survivor benefits from your late ex-spouse, however, the amount you receive will be reduced. If your late ex-spouse filed for social security benefits early (i.e.: before their full retirement age), your benefit amount will be based on that reduced amount.

For ex-survivor benefits, you can apply as early as age 62, however, your benefit will be reduced if ... [+] you file before your FRA. The above shows the percentage of your former spouse's benefits you will receive based upon your age when you start ex-survivor benefits.

Again, there’s no double dipping with Social Security. If you were collecting your own benefit prior to your ex passing away, you can still apply for survivor benefits. However, you may only collect the higher of the two benefits.

An unusual twist: the benefits you receive on your deceased ex-spouse’s record will not affect the benefit for other survivors getting benefits on their record. So, if your ex was remarried at the time of their death, their surviving spouse can also claim a survivor benefit. There is no limit to how many people can collect on one work record!

In most cases, you will not need to notify SSA of the death. That is usually handled by the funeral home. If you already receive benefits as an ex-spouse, your benefit will automatically be changed to the survivors benefits after the SSA receives the report of death.

Unfortunately, a surviving divorced spouse who was not already receiving spousal benefits cannot apply online to initiate survivor benefits. You should contact the Social Security Administration at (800) 772-1213 to request an appointment to start the filing process.

How is my social security taxed?

Unless your total income is less than $25,000 for an individual or $32,000 if you’re remarried and file jointly, you will have to pay taxes on a portion of your Social Security benefits. The amount you will be taxed on is as follows:

• If you have income between $25,000 - $34,000 for an individual or $32,000 - $44,000 for a couple, up to 50 percent of your benefit will be taxed.
• If you have income of more than $34,000 (individual) or $44,000 (couple), up to 85 percent of your benefit will be taxed.

Also keep in mind that 12 states collect taxes on Social Security benefits. These states are Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, North Dakota, Vermont, and Utah. The actual amount and calculation each of these states uses varies greatly, so it’s best to work with your accountant or do some research regarding the taxation of benefits in the state you reside.

Can I work and receive social security?

The short answer is yes, you can work and receive your benefits. However, if you haven’t yet reached FRA, there are some things to consider.

For those that haven’t yet reached full retirement age and are working, not only will you receive a permanent reduced benefit for taking early benefits, but if you earn over $18,960 (in 2021), your benefits will be temporarily reduced further. Social Security will reduce $1 of every $2 you earn over that threshold. If you work during the year you reach FRA, that deduction is $1 for every $3 you earn over $50,520 until the month you reach full retirement age. However, the benefit that is withheld isn’t gone forever as it will be added back to your benefits after you reach full retirement age.

If you have reached your FRA and are working, you can collect your full benefit amount without the temporary reduction.

What is the Government Pension Offset and how does it affect the amount I can collect?

The Government Pension Offset (GPO) is a Social Security rule that affects workers with government pensions who also receive Social Security spousal and survivor (which includes ex-spousal and ex-survivor) benefits. This provision most commonly affects teachers, law enforcement workers, firefighters and other government employees who have not paid into the Social Security system.

If you are receiving a pension based on work you have done for these government organizations, your ex-spousal benefit will be reduced by two thirds of your pension benefit. There are some exceptions to this rule, so make sure to consult with SSA to confirm.

Keep in mind that GPO only affects your benefit if you are drawing a pension off your own government work.

What is the Windfall Elimination Provision on ex-spousal benefits?

If your ex-spouse is receiving a pension from an employer who didn’t withhold Social Security taxes and qualifies for Social Security benefits from work in other jobs which did withhold Social Security taxes, his/her Social Security benefits will be recalculated to a reduced amount under the Windfall Elimination Provision (WEP). If you are then collecting ex-spousal benefits off their work record, your benefit will be indirectly reduced because of WEP. 

It is important to note that WEP only affects spousal and ex-spousal benefits. However, when your ex-spouse passes away, the reduced WEP formula will no longer apply if you receive benefits as a surviving ex-spouse.

What documentation do I need to bring to collect?

The Social Security Administration will need the following pieces of information to start the process.

• Proof of your US citizenship or legal immigration status
• Your birth certificate or other proof of birth
• Marriage certificate
• Divorce decree
• Ex-spouse’s SSN
• US military discharge paper(s) if you had military service before 1968

For more information on the process, go to www.SSA.gov or call (800) 772-1213.

Look into your benefits no matter what

Social Security may be a significant source of income to many divorced individuals in retirement. When planning for your retirement years, it’s important to understand the variables involved and what you may expect to receive.

It is also important to analyze the facts and then set a strategy to get the maximum benefit given your individual situation. Even if you think your own benefit will be the higher amount, it is worth it to double check with the SSA especially if you learn that your ex-spouse has passed away, making you eligible for survivor benefits rather than just spousal.

Most people need help navigating all the complexities of social security. Reach out to a knowledgeable professional to understand your options. Starting the conversation with a financial advisor who is experienced in the nuances of divorce is critical to maximize the money you receive from social security. Email for my Social Security After Divorce whitepaper.

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