Baby boomers are known for dissolving their marriages at a much higher rate than previous generations, and have been pegged as the group most responsible for the high rate of marital failure in the U.S. over the past 20 years.
Now that boomers are beginning to move into their retirement years, they may find that those sometimes long-ago divorces will have an impact on the level of Social Security retirement benefits that they may collect. Here are three of the most common scenarios in which divorce influences the amount – and, sometimes, the timing – of Social Security benefits.
1. The 10-year rule
Divorcing before your 10th anniversary will cancel your Social Security divorced spouse benefit, meaning that you will not be able to collect half of your ex-spouse's benefit. If your marriage lasted 10 years or more, you will be able to collect as soon as you turn age 62, as long as your spouse is collecting benefits, and you have not remarried.
If you've been divorced for 2 years or more, you needn't wait until your former spouse files for his own benefits to collect – as long as he is eligible for benefits, and is also age 62.
2. Widow's benefits for ex-spouses
You need not surrender your survivor's benefits because of divorce, either. As an ex-spouse, divorced spouse survivor benefits are also available to you upon the death of your former spouse – providing that the marriage endured for at least 10 years, and you did not remarry before age 60.
If your ex-spouse waited until age 66 – the full retirement age for baby boomers – to file for his own Social Security benefits, you will receive 100% of his benefit when he dies. If he waited until later to collect, you will also receive those extra delayed retirement credits, as well.
3. Using these rules to optimize your own benefits
As long as both you and your ex-spouse qualify, you may use divorced spouse benefits to get the most out of your own Social Security benefits, provided you wait until age 66 to file for spousal benefits.
For example, you may file for your divorced spouse benefits at age 66, putting off your own benefits until age 70 – when they will have grown 8% per year, or 32%. This will give you an income equal to 50% of your ex-spouse's benefit for four years – or, if your eligible former spouse has died, 100% of his benefit amount. At age 70, you will then be eligible for your own delayed, higher benefit.
A few caveats
As always, you may collect only one Social Security benefit at a time, which will always be the higher one if you file before age 66. So, if you rush to file for your divorced spouse benefits at age 62, as soon as you both are eligible, you will collect either your own benefit, if it is larger, or a mere 35% of your former spouse's benefit. Also, if you are still working, you risk having your benefits reduced by $1 for every $2 you earn above the annual limit.
It is important to remember that choosing which benefit you may take belongs exclusively to the Social Security Administration before you reach full retirement age. You may only restrict which benefit you take, such as the benefit optimization scenario outlined above, when you reach your full retirement age.
This makes sense when you consider that the spousal benefit system was created in order to supply benefits for those who were dependent upon their spouse for income. Therefore, the SSA would naturally assume that you are filing early out of need, and would automatically assign you the highest level of benefits possible.
Your ability to collect from your ex-spouse depends only upon your own marriage status. In fact, if your former spouse was married and divorced multiple times, each of his former spouses would be eligible for divorced spouse benefits, as well as divorced spouse survivor's benefits. In each case, the marriage must have endured for at least 10 years.
For boomers who are either currently divorced or contemplating the dissolution of a marriage, these rules could have an unexpected impact on each spouse's retirement planning. Doing your homework now just might lead to a benefit windfall you never knew awaited you.