An internet search for “divorce celebrations” turns up a range of gift ideas, from care boxes of scented candles and mugs imprinted with affirmations to more (many more) ribald ideas, like a T-shirt that says, “You can’t fix stupid, but you can divorce it.”
These cheeky ideas may leave you thinking that it's over once the divorce papers are signed. But that’s not so. Even years after a divorce, Social Security has some surprise gifts—options for financial support that revert to when a couple was married.
I consult daily with financial advisors to find the optimal Social Security filing strategies for their clients, using advanced software to survey the options based on birth year, estimated benefit amounts, marital status and more.
Cases of divorce come up often. After all, around 45% of marriages end in divorce. If you have divorced clients, they need your help understanding their rights when filing against an ex-spouse’s earnings record and planning on if or how they’ll take advantage.
Married For At Least 10 Years? Your Clients May Be In Luck
Social Security limits who can collect Social Security benefits based on an ex-spouse’s earnings. To do so, an individual must have:
• Been married for at least 10 years.
• Reached age 62.
• Not remarried.
• A primary insurance amount (PIA) from Social Security that is less than one-half of the former spouse’s PIA. (Primary insurance amount (PIA) is the term that describes what anyone eligible for Social Security benefits is entitled to upon reaching normal, or full, retirement age. Full retirement age (FRA) varies depending on someone’s birth month and year. Look yours up at ssa.gov.)
To find out what an individual’s PIA is, they can enroll at ssa.gov for an account (they’ll need one eventually).
Anyone who meets these criteria is entitled to benefits on a former spouse’s record any time after the divorce if the ex-spouse has already applied for benefits.
Ex-Spouse Hasn’t Filed? Hope Is Not Lost
Anyone who meets all the criteria above and has been divorced for at least two years is, in Social Security parlance, an Independently Entitled Divorced Spouse (IEDS).
An IEDS can file for divorced spousal benefits through the Social Security Administration (SSA) no matter if the ex-spouse has filed for benefits yet.
Those who don’t qualify as an IEDS can set a timer and wait until they do. Or they can wait for their former spouse to file for benefits.
More About The (Surprisingly Good) Options For An IEDS
Buckle up: this is where you must dive into Social Security’s daunting rules (there are more than 2,700).
Someone with IEDS status who:
• Has reached their full retirement age,
• Was 62 before Jan. 1, 2016, and
• Has a former spouse who is at least 62 years old
… can file a restricted application for spousal benefits. A restricted application allows applicants to choose one type of benefit they want to receive, even when they are eligible for multiple benefits.
So, with a restricted application, someone can file for divorced spousal benefits and accrue Delayed Retirement Credits (or DRCs, which max out at age 70) before filing for their benefits.
If both ex-spouses are eligible to file restricted applications, they can simultaneously file against each other’s records. It’s a silver lining for divorced individuals. Married couples can’t do this.
Another benefit of IEDS status is that spousal benefits are not reduced if a former spouse begins taking their benefits but has them reduced because of the earnings test. (Social Security withholds benefits if someone collecting them is below normal retirement age and has earnings that exceed a limit set annually by the government. This is what the earnings test refers to. Once someone reaches normal, or full, retirement age, their earnings do not affect their Social Security benefits.) This is another advantage that married spouses don’t have.
An Ex Dies. What Happens To Benefits?
Divorced spouses, both those with IEDS status and without, are entitled to divorced survivor benefits at the death of their former spouse. To qualify, individuals must have been married for at least ten years, be at least 60 years old (or age 50, if disabled), and if they remarried, they didn’t do so before they turned 60.
In this situation, what’s called deemed filing does not come into play. The term refers to Social Security’s rules that when someone files for their retirement or their spouse’s retirement benefit, they are required, or “deemed,” to file for the other benefit. Someone can file for only their divorced survivor benefits while allowing their retirement benefits to grow by accruing as many DRCs as possible.
It’s important to note that there are different full retirement ages (FRAs) for survivor benefits than retirement benefits. Knowing a client’s survivor FRA is essential to avoid a reduction in their survivor benefits, if possible. You can find the survivor FRA chart on the SSA’s website.
Social Security Planning Software Is Invaluable
Social Security rules are thorny. Suppose you are trying to figure out a client’s best filing strategy that earns them the maximum benefits. In that case, I can’t encourage you enough to use the high-quality software available to financial advisors.
Divorce affects many individuals’ financial status long after the party balloons (“The end of an error”) have burst. In my experience, using software has provided advisors and divorced clients with the information and options they need to plan for secure retirements.
Alyson Dorosky, CSSCS, is head of Social Security support at LifeYield. She works with advisors and their clients to address their thorniest Social Security issues.