Divorced people may be leaving a substantial amount of money in Social Security benefits on the table, says an advisor who specializes in this niche area.
Divorcees who were married for at least 10 years can collect Social Security benefits on their ex-spouses’ earnings record even if the marriage ended long before the person reached retirement age.
“This is something that often gets overlooked, either because the divorce was a long time ago or because the legal advisors are concentrating on other issues at the time of the divorce,” says Rosemary Frank, principal of Rosemary Frank Financial LLC, a fee-only RIA based in Brentwood, Tenn.
To claim benefits, both parties must be 62 or older and the claiming spouse must be single. The lower-wage earner claims benefits on the higher wage earner’s record. To make the matter simpler, she says, assume a traditional situation with a husband as the higher earner. He could have remarried and the wife would still be entitled to benefits on his earning record.
The ex-wife receives half of whatever he would receive at full retirement age, usually 66.
As if the rules were not confusing enough, a new wrinkle was added with the recent overhaul of Social Security that eliminated the "file and suspend" and "restricted application" strategies, Frank says.
When the file and suspend strategy was eliminated last month, a clause was written into the law saying no lower-wage earner could claim spousal benefits unless the higher wage earner was claiming benefits.
“The new regulations are supposed to apply to married couples; it had nothing to do with divorces,” Frank says. “But, strictly speaking, the law now says a divorced spouse cannot claim spousal benefits unless the ex-spouse has also filed for benefits.”
Legal and financial divorce specialists are still waiting for a clarification of this rule, she says.
“Can you imagine coordinating Social Security benefits with an ex-spouse?” asks Frank.