No one would deny that Social Security is complicated. With about 2,700 policies governing benefits, it is no surprise that financial advisers and their customers are often confused as to how to maximize benefits. When it comes to divorced clients, multiply that confusion times two.
As strategies and techniques to optimize Social Security claims have become widespread over the previous few years, many monetary advisers now recognize the basic Social Security policies for divorced spouses: As long as a couple was married for at least 10 years before divorcing, an ex-spouse who is currently single can collect Social Security advantages as if he or she were nonetheless married — even if the other ex-spouse has remarried.
It's the nuances of the Social Security divorce regulations that are so tricky. In some ways, divorced couples have greater claiming opportunities than married couples, relying on their eligibility dates and how long they have been divorced.
The Bipartisan Budget Act of 2015 modified two crucial Social Security claiming strategies. It eliminated the capacity to “file and suspend” advantages at full retirement age and it phased out the potential to declare solely spousal benefits — really worth 50% of the laborer's amount — while their own retirement amount kept growing.
The file-and-suspend strategy, which disappeared after April 29, 2016, allowed an eligible employee to file for his or her Social Security advantages at full retirement age and then immediately suspend them. That would confer an advantage to eligible family members while permitting the laborer's own retirement advantages to continue to develop up to 8% per year until age 70.
People who exercised the file-and-suspend strategy before the April 29, 2016, cut-off date were grandfathered into the old rules. After that, the new guidelines require one spouse to actually take his or her Social Security benefits in order to set off benefits for a spouse, minor dependent or disabled adult child.
But the regulations are different for divorced couples. As long as the couple used to be married for at least 10 years before divorcing and has been divorced for at least two years, they are considered “independently entitled” spouses. Assuming each “ex” is at least sixty-two years old, an independently entitled spouse can claim Social Security benefits on an ex's entitlement, even if the ex has already claimed benefits.
The Bipartisan Act of 2015 additionally phased out the capacity to file a “restricted claim for spousal benefits” at full retirement age. That strategy allows a partner or eligible ex-spouse to declare solely spousal benefits while their own retirement advantage proceeded to grow till 70. But that regulation changed to only include people who had been born on or earlier than Jan. 1, 1954, i.e., people who turn sixty-six in 2019. However, they can exercise this option until they turn 70.
This is another example of how divorcees have extra claiming alternatives than their married counterparts. Only one person in a married couple can file a restricted claim for spousal benefits, assuming that the man or woman submitting the claim was born on or earlier than Jan. 1, 1954. But divorced spouses born on or earlier than that date can each file a restricted claim for spousal benefits on their ex's entitlement and enable their personal entitlement to grow. Younger people, whether married or divorced, no longer have this option.
As always, please consult with your financial advisor before making a choice involving your social security benefits. Choosing the right way, and the correct time, to take your benefits can make the difference between “just getting by or living a long and happy life.