Most divorce-related personal finance questions are associated with financial assets, such as savings accounts and retirement accounts, but increasingly, aging baby boomers are wondering what, if any, impact divorce might have on their Social Security benefits. Can I qualify for spousal benefits even though we divorced decades ago? Will my Social Security be reduced if my ex-spouse files a spousal claim on my work record?

Read on to learn more about the relationship between divorce and Social Security.

Divorce can affect your retirement savings

Image source: Getty Images.

The background

Social Security provides an important financial safety net to millions of seniors. To qualify for Social Security, you must accumulate 40 work credits, which is the equivalent of a 10-year work history.

The amount of money you'll receive in Social Security benefits depends on a complex calculation based on up to 35 years of inflation-adjusted income. While the amount paid out in benefits varies widely from person to person, the program is designed to replace, on average, 40% of your preretirement income. In 2017, the average retired worker will receive $1,360 per month in Social Security benefits.

While most people's benefits are based entirely on their own work records, people can also receive benefits on a spouse's work record, if their spousal benefits are higher than the benefits they would otherwise receive.

A spouse, or an ex-spouse who meets certain qualifications (more on that in a minute), can receive a permanently reduced spousal benefit beginning at age 62. Or a spouse or ex-spouse can receive up to the maximum 50% of the spouse's/ex-spouse's full retirement amount, if they wait to claim until they reach their own full retirement age.

A spouse or ex-spouse's full retirement age varies between age 66 and age 67, depending on the year in which they were born.

Data source: Internal Revenue Service. Table by author.

Divorcees and spousal benefits

Regardless of how long ago your marriage ended, you may still qualify for spousal benefits on your ex-spouse's work record, as long as you were married 10 years or longer, and you meet the following criteria:

  • You must be unmarried.
  • You have to be age 62 or older.
  • Your ex-spouse is entitled to Social Security retirement or disability benefits.
  • The benefit you are entitled to receive based on your own work is less than the benefit you would receive based on your ex-spouse's work.

If you're remarried, you usually can't collect spousal benefits on your ex-spouse's work record, unless your remarriage has also ended (by divorce, death, or annulment).

In order to get spousal benefits, your ex-spouse has to qualify for Social Security, but your ex-spouse doesn't have to be collecting Social Security. If the ex qualifies for Social Security, but hasn't claimed a benefit yet, then you need to have been divorced for at least two years in order to receive spousal benefits.

Also, remember, you will only receive up to the amount allowed on your former spouse's record if it exceeds the amount you would receive based on your own work record.

Figuring your spousal benefit

Social Security bases spousal benefits on the primary worker's average indexed monthly earnings, or AIME. Specifically, the highest 35 years of earnings are indexed and averaged, and then bend points are applied to to determine the primary insurance amount, or PIA. In 2017, 90% of the first $885 in AIME, 23% of earnings between $885 and $5,336, and 15% of earnings above $5,336 are added together to calculate a worker's PIA.

Fortunately, you don't have to work with this formula yourself. As long as you're applying within three months of turning 62, the Social Security Administration can walk you through your benefits online, by phone, or in person.

When applying for benefits as an ex-spouse, you'll be asked to provide information such as the birth date or age of your former spouse, as well as his or her Social Security number, if you know it. You'll also be asked to provide your marriage certificate and your final divorce decree, and you may also be asked to provide other information.

Things to keep in mind

If you have an ex-spouse who is claiming Social Security on your work record, rest easy. A spousal benefit paid to an ex-spouse does not reduce your Social Security benefits.

If you're an ex-spouse who claims spousal benefits, you're younger than your full retirement age, and you plan to keep working, then you could end up having some of your Social Security income held back, if your income is too high. Social Security will hold back $1 for every $2 you earn above $16,920 in 2017. Any money that is withheld in 2017 because of this earnings limit will be used later to increase your benefit once you reach your full retirement age.

Additionally, spousal Social Security benefits may be taxable, depending on your income. For example, single Americans who earn adjusted incomes of more than $25,000 in 2017 will pay income taxes on at least some of their Social Security income. To get a rough calculation of your adjusted income, add one-half of your Social Security income to your other sources of income. If your adjusted income is above the threshold for paying taxes on spousal benefits, make sure to plan ahead so that you avoid a surprise at tax time.

It's vitally important to understand the basics of this key program.