THE FORGOTTEN ASSET: Spousal Social Security Benefits
People going through divorce experience a lot of emotional pain and it sometimes clouds their ability to address their need to emerge from the experience with a plan. Lawyers commonly hear from clients what they want from the marital estate and respond to those demands even when they make little sense from a financial planning viewpoint. A typical example are spouses who insists that they must keep the marital or vacation residences without considering the fact that these properties yield no income and often cost lots to carry.
But today we write about a surprise asset and one that clients and their lawyers often ignore. If you are a spouse who has been married for 10 years or more, you are eligible to claim a spousal social security benefit based upon your former spouse’s social security contributions. You can’t claim it on top of your own entitlements based on your work history and you wouldn’t want to claim it if your own work history entitles you to get more. But many couples come out of a divorce after more than a decade of marriage with one spouse having a yawning gap in his/her own social security contributions because of “stay at home” parenting.
There are some rules here besides a 10 year marriage to the spouse who earned more. You can’t claim until you attain age 62 but it doesn’t matter whether your spouse is in pay status when you apply. You do get more by waiting until the full retirement age (today age 67). You can’t make a claim until you have been divorced for two years and, here’s a big catch; you can’t be remarried. You will need a record of your own date of marriage and divorce (court dockets would show that) to prove the ten year marriage. You should probably make an appointment with a Social Security representative to explore whether you are better off claiming on your income record or your former spouses. Your journey will be far easier if you arrive with the social security numbers that are relevant. Also, if you are working at the time you apply, your work income may affect your benefit.
The fun part is that it really is free money. Your spouse will never know because their benefit is unaffected. In a sense Social Security pays out twice on the same contributions; once to you as the 10 year spouse and then to the person who actually paid the contributions. If you were married to two or more spouses for 10+ years, you can choose which spouse’s benefit to collect on. Hint: choose the higher earner even if you relish collecting on the other one(s).
How much? Up to half of the benefit of your former spouse in a day when the maximum benefit at full retirement age is $3,345. So that could be $1,672.50 a month or just over $20,000 a year. It’s found money and often forgotten or unknown as an income source by lawyers and financial planners.
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The key points: stay married for 10 years if you are close to that milestone. Don’t remarry unless you are prepared to lose the payment. Check to make certain you work history will not yield a higher benefit.
