• Benefits For Divorced Spouses
Another surprise to many advisors is that ex-spouses can receive benefits based on the recipient’s work record—even if the recipient is remarried. Importantly, the amount of benefits a divorced spouse receives has no effect on the benefits of the recipient or the recipient’s current spouse. To qualify, the marriage must have lasted 10 years or longer, and the divorced spouse must be age 62 or older and unmarried (this is true even if the ex-spouse married again but the marriage ended by divorce, annulment or death). If the divorced spouse is eligible for Social Security benefits on his or her own record, that amount will be paid first. However, if the primary recipient’s benefit is a higher amount, the divorced spouse will receive a combination of benefits that equals the higher amount (reduced for age). Divorced spouses also have the option to utilize the file and restrict option to take advantage of the Delayed Retirement Credit to increase their own benefit amount by 8 percent annually.
Today the market is flooded with software programs—from very basic to highly complex—designed specifically to help advisors calculate optimal distribution timing based on each client’s specific situation and considering myriad factors such as age, differences in age between spouses, benefits at FRA, health and life expectancies, additional sources of income, cash flow and more. However, it’s important to note that the Social Security claiming strategy that produces the greatest benefit according to basic calculations may not, in fact, be the optimal strategy for the client’s specific needs. When considering the more complex strategies discussed above, advisors may want to work with a specialist in Social Security benefits distribution to help ensure an optimal outcome for each client situation.
Robert M. Black, CLU, ChFC, AEP, is a senior partner at Atlas Advisory Group LLC, an independent planning firm based in Cranford, N.J. A member firm of M Financial Group, Atlas Advisory Group LLC specializes in investment tax planning and wealth transfer for executives. Independently owned and operated, Atlas Advisory Group LLC is registered with M Holdings Securities, a registered broker-dealer and investment advisor (RIA).