How does divorce affect your Social Security benefits?
In recent years, the divorce rate among the Baby Boomer generation is on the rise. A recent New York Times article revealed that, although the overall rate in the U.S. has declined markedly over the last decade, decreasing from 50% to 40% since 1996, the Baby Boomers are experiencing an upswing, with rates increasing a staggering 50% over the past twenty years. Fifty percent! With so many individuals who are close to retirement thinking about divorce, many people are asking “How does this affect my Social Security benefits?” When considering how a ending a marriage will impact your social security retirement and disability benefits, several general rules apply.
No matter what happens in any marriage, an individual is always entitled to the Social Security benefits they have earned on their own. If, however, you are divorced and your marriage lasted ten (10) years or more, you are also eligible for ‘derivative benefits’. Derivative benefits are those earned by an ex-spouse, which an individual is entitled to claim. Derivative benefits are usually equal to 50% of the primary earner/ex-spouse’s benefits. The following circumstances are required for an individual to be eligible for derivative benefits: The marriage must have lasted at least 10 years; the ten year period is measured from the date of marriage until the date the decree was entered, not the date of separation; the applicant must be unmarried; the applicant must be at least 62 years old; you cannot claim both your own benefits and the entire derivative benefit; you are limited to taking 100% of your own or the derivative benefit, whichever provides a higher amount; typically, the Social Security Administration will pay the applicant’s individual amount plus extra to make sure the applicant receives the highest amount available to them; and derivative benefit rules apply to both Social Security Retirement and Disability.
There are a few other important items of note when it comes to this issue.
First, if an ex-spouse qualifies for Social Security benefits but has not applied for them, the applicant can still receive derivative benefits if the applicant and ex-spouse have been divorced for at least two years.
Second, there is no limit as to how many ex-spouses can claim benefits from a primary earner. For example, if John was married to Sally for 15 years, then divorced and married to Jane for 11 years, then divorced and currently married to Mary for 5 years, both Sally and Jane could claim derivative benefits from John. If Sally and Jane both claim derivative benefits from John, there is no impact on the benefits that John and his current wife Mary receive or are eligible to receive. Moreover, Sally’s benefits are not impacted by Jane’s benefits and vice versa. The benefits that Sally and Jane receive are not impacted in any way by each other or by John’s current marriage.
Third, as with all Social Security benefits, if any applicant is working and earning an income, there will be set limits on how much Social Security the applicant can collect. This rule applies equally to individuals taking their own benefits and to those taking derivative benefits.
If an ex-spouse dies when an applicant is at least age sixty, then the applicant is eligible to receive survivor benefits through their ex-spouse.
As mentioned in the general rules, above, if an applicant does remarry, they generally do not continue to be eligible for derivative benefits. However, if the second marriage ends for example, by reason of death, divorce or annulment, then the applicant is eligible to claim derivative benefits again. If the second marriage ended and lasted at least ten years, then the applicant will be able to choose which ex-spouse they wish to claim derivative benefits from. Also, if the applicant is sixty years or older when they remarry, special rules apply which could allow them to claim derivative benefits from their ex-spouse, despite being remarried. It is a unique circumstance when an individual is able to collect derivative benefits through an ex-spouse if they are remarried – it does not happen often.
If an ex-spouse is not eligible for Social Security, then an applicant, necessarily, cannot claim derivative benefits through their ex-spouse. Additionally, certain restrictions apply for applicants whose ex-spouses were public employees and do not or did not contribute to Social Security.
Remember that Social Security is not the only retirement and disability benefit available. Issues relating to pensions, 401(k) and other retirement income and funds are addressed throughout the process. The rules that apply to Social Security usually vary from those that apply to other forms of retirement accounts and pensions. To read more from the NY Times article on social security derivative benefits see http://www.nytimes.com/2013/11/26/health/families.html?hpw&rref=science&_r=0)
If you have questions about how a divorce will impact your retirement, call McMorrow Law, LLC at (724) 940-0100 to speak with a Pennsylvania Divorce Lawyer today.