How to Navigate Social Security During a Divorce

Every day in America, 2,230 couples divorce.

It used to be that 90% of these couples were younger folks... But a new trend has seen a shift in divorce demographics.

Today, one in four couples filing for divorce is 50 years old or older – and the numbers are increasing each year.

One of the biggest considerations for a divorce is the division of assets. And the closer you are to retirement when you split, the more vulnerable you are to big losses.

For instance, losing half your savings at age 30 is terrible. But you still have a good 35 or more years of working to help rebuild it. Losing half of everything at age 60 means that you might have to seriously downgrade your retirement...

So one of the biggest considerations for any older divorced couple is Social Security and how to maximize what you get.

You may remember that last month, a new law changed some of the rules for filing for Social Security. You should know that the changes affect divorces as well.

The Feds changed two rules called file-and-suspend and restricted application, which we wrote about last month. We've written in Retirement Millionaire about how to use these loopholes to collect even more Social Security.

The basic premise was that you could file for your benefits at full retirement age and then choose to suspend them until age 70. Suspension allows you to collect a higher amount per month when you end the suspension.

In the meantime, your spouse – and even your ex-spouse – could file a restricted application. That means he or she could file for spousal or divorced-spouse benefits – half of what your payout would be at full retirement age. It's restricted because it would allow your spouse or ex-spouse to collect spousal payments only. He or she could then suspend their own retirement benefit.

So if you would normally collect $31,668 a year in Social Security, your spouse or ex-spouse could file to collect $15,834 a year, as well. It doesn't come out of your paycheck.

Under the new law, you can still file and suspend, but no one can collect benefits based on your work record while your benefits are suspended.

If you're divorced, these laws can take a serious cut out of your living expenses. Be sure to review the laws and make a plan about who will file for benefits, and when.

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Here's what the current law says about filing for divorced-spouse benefits...

You are eligible to file for divorced-spouse benefits if you are:

  • 62 or older,
  • Unmarried,
  • You were married to your ex for at least 10 years, and
  • Your own Social Security benefits will be less than the divorced-spouse benefit.

In the meantime, you could have remarried, but as long as that marriage ended, you are free to file for divorce benefits. If your ex has remarried and remains married, that doesn't affect your ability to file.

Also, if your ex-spouse hasn't filed for benefits yet but is eligible, you can still file for divorced-spouse benefits as long as you've been divorced for at least two years.

The catch now is that the Social Security Administration will pay you the higher amount. So if your own benefit amount is higher than your divorced-spouse benefit, you will only receive your own benefit.

However, the law allows for some grandfathering depending on your age...

If you divorce after being married at least 10 years and you turned 62 by January 1, 2016, you can still file just for your divorced-spouse benefit at full retirement age and wait until age 70 to collect your own retirement benefit.

If you aren't 62 yet, you can no longer file for just your divorced-spouse benefits and wait to collect your own. The Feds will pay you the larger amount only and count your application as you file for your own retirement benefits.

If you're a Retirement Millionaire subscriber, you can read my full write-up on Social Security right here. If you aren't a subscriber, you can join for a 30-day, risk-free trial by clicking here.

Divorce is messy, especially when longer marriages end. Make sure to prepare yourself and read up on the rules ahead of time. And have an honest discussion about Social Security before it's time for either of you to file. Your future income and security will depend on it.

What We're Reading...

P.S. Boston University Professor Dr. Laurence Kotlikoff says your Social Security benefits will likely be your largest financial asset in retirement.

The government simply doesn't have the resources to help each individual or couple learn how to best maximize the benefits they receive... It's going to be up to you to make sure you get all the money you deserve.

The good news is, Dr. Kotlikoff wrote the book on maximizing your payouts. Get What's Yours covers dozens of strategies to help you earn the most money possible. And because some strategies, like file and suspend, have different rules now, we're including our detailed report on the changes along with your purchase. You can order your copy right here.