Social Security and Divorce: 6 Ways to Maximize Income

Contributed by: Melissa Joy, CFP® Melissa Joy

Social Security and divorce planning are two complex financial planning topics. The combination of the two can be even trickier. If you are divorced, keep this advice in mind as you work to make the best Social Security decisions.

1. KNOW YOUR FACTS

Social Security is not straightforward in cases of divorce. First, 10 years is the magic number for you to be eligible to receive Social Security benefits or survivor benefits on your ex-spouse's record.

There’s an extra wrinkle when it comes to divorced people receiving Social Security. While you are often eligible to receive benefits on your ex’s record, the Social Security Administration will not disclose their earnings record, and they’ll only let you know if that benefit would be more beneficial than your current benefit. If you are on friendly terms with your ex, you may want to see if they will provide you with their benefit information. If you’re going through a divorce, requesting your spouse’s benefit statement during discovery will be helpful, especially if you are close to eligibility ages for Social Security benefits.

2. REMARRIAGE MATTERS

If you got (and stayed) remarried, you will not be eligible to claim benefits based on your ex's record. If you have had more than one marriage that lasted more than 10 years and resulted in divorce, both exes' records are in play as potential claiming strategies.

3. PATIENCE PAYS OFF

As always, the longer you can wait for Social Security, up to age 70, the larger the monthly benefit will be. Focusing on full retirement age (currently age 66) and beyond is key for maximization strategies. Note that you don't just need to know your full retirement age; your ex-spouse's age matters as well.

Tip: Begin to think about Social Security strategies early -- well before age 62, when you’re first able to claim your benefits.

4. CONSIDER A RESTRICTED BENEFIT

Social Security maximization will often include file-and-suspend or use of a restricted benefit. In the case of divorce, it may be advantageous to file for a restricted benefit so that you can collect on your ex's record at first, then switch to your own necessarily higher benefit at age 70.

Tip: Work with a financial planner who can provide analysis of effective Social Security claiming strategies for your personal circumstances – this can illustrate the effective use of a restricted benefit if it’s appropriate for you.

5. OFFER THE RIGHT ADVICE THE RIGHT WAY

Americans continue to shortchange themselves with early claiming. To make the best decision, don’t focus only on the benefits you will receive early in retirement before age 70. Look at the benefits you will receive throughout your claiming. In later life years, you will have a much higher Social Security paycheck if you’ve delayed. Since people are living longer these days, this is an effective way for you to prepare for a long life.

6. DON'T FORGET SURVIVOR BENEFITS

If you are divorced and eligible to receive a spousal benefit on a former spouse's record, you are also eligible for survivor benefits upon the death of that spouse. You can even receive a survivor benefit on your ex when you’re remarried, if you waited until after age 60 to get remarried and your ex’s benefit is higher than other benefits you’re eligible for.

Make sure that you discuss previous marriages and potential benefits with your financial planner. For the most optimal information, look at your complete picture with a thorough retirement analysis to help you understand the impact of your claiming decisions for today and the future.

Melissa Joy, CFP® is Partner and Director of Investments at Center for Financial Planning, Inc. In 2013, Melissa was honored by Financial Advisor magazine in the Research All Star List for the third consecutive year. In addition to her contributions to Money Centered blogs, she writes investment updates at The Center and is regularly quoted in national media publications including The Chicago Tribune, Investment News, and Morningstar Advisor.


Financial Advisor magazine's inaugural Research All Star List is based on job function of the person evaluated, fund selections and evaluation process used, study of rejected fund examples, and evaluation of challenges faced in the job and actions taken to overcome those challenges. Evaluations are independently conducted by Financial Advisor Magazine.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Melissa Joy, CFP® and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Financial Advisors of RJFS are not qualified to render advice on legal matters. You should discuss legal matters with the appropriate professional.