Many individuals do not realize that if they are divorced, they may be eligible for Social Security benefits based on their ex’s earnings record. These include spouse and survivor benefits.
The rules that govern whether they may collect and how much their benefit will be are complex, and the amount of income at stake can have a significant impact on retirement finances.
In this article, we will present a real case study of an individual that underscores the importance of understanding Social Security divorced spouse benefit rules and consulting with subject matter experts to optimize Social Security benefits.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more – straight to your e-mail.
Profit and prosper with the best of expert advice – straight to your e-mail.
The Kiplinger Building Wealth program handpicks financial advisers and business owners from around the world to share retirement, estate planning and tax strategies to preserve and grow your wealth. These experts, who never pay for inclusion on the site, include professional wealth managers, fiduciary financial planners, CPAs and lawyers. Most of them have certifications including CFP®, ChFC®, IAR, AIF®, CDFA® and more, and their stellar records can be checked through the SEC or FINRA.
Susan’s case overview
Susan is a divorced 71-year-old and has been collecting retirement benefits, based on her own earnings record, since the earliest age of 62.
Now, Susan has learned that she is eligible to claim a higher Social Security benefit based on her ex-husband Robert’s record. She is therefore “dually entitled” to these two benefits, and the total amount she can receive is the greater of the two amounts.
Unfortunately, she missed the opportunity to claim the maximum amount of these earlier at her full retirement age (FRA) of 66 and has lost about five years’ worth of higher benefits.
By acting now, Susan can increase her monthly income and potentially recover some of the benefits lost through retroactive filing.
The eligibility rules for divorced spouse benefits
Susan meets all the criteria for divorced spouse benefits:
- Duration of marriage. She was married to Robert for 17 years, exceeding the minimum 10-year requirement.
- Current marital status. She is not currently married, making her eligible for benefits based on Robert’s record.
- Age. At 71, she is well beyond the minimum eligibility age of 62 for spouse benefits.
- Ex-spouse’s status. Robert, now 76, is receiving Social Security benefits.
- Independently entitled. Susan has been divorced for more than two years. Therefore, even if Robert was not yet collecting benefits, she would still be allowed to collect spouse benefits independently of his filing status.
How benefit amounts are calculated
A person’s primary insurance amount (PIA) is the retirement benefit amount they will receive if they collect at their FRA. The amount is decreased by a certain percentage for each month claimed earlier and increased for each month claimed later, up to age 70.
Susan can receive the maximum spouse benefit, 50% of Robert’s PIA, if the amount is greater than her own retirement benefit and if she collects it at her FRA or later. The spouse benefit is decreased each month for claiming earlier, but it is not increased for claiming later.
The spouse and retirement benefits are reduced by different percentages if claimed prior to FRA.
In Susan’s case, she began collecting retirement benefits at age 62, reducing the amount to 75% of her PIA. Her current retirement benefit is $890 a month. Therefore, her PIA is $1,187.
Calculating Susan’s ex-spouse and total benefit
Robert began collecting retirement benefits at age 70, and the amount is $4,873 a month. This is an increase of 32% above his PIA if he had collected at FRA of 66. Robert’s PIA is therefore $3,692 a month.
Susan is eligible to receive 50% of Robert’s PIA ($1,846 a month) since she is collecting it at her FRA or later. This amount is higher than what she is collecting ($890) and also higher than her PIA ($1,187).
Looking for expert tips to grow and preserve your wealth? Sign up for Building Wealth, our free, twice-weekly newsletter.
If Susan had filed for both benefits at her FRA, calculating her benefits would not be too difficult.
In that case, her PIA would be subtracted from the spouse benefit, 50% of Robert’s PIA, to determine the fully payable spouse “top-off” amount at FRA: $1,846 spouse – $1,187 Susan PIA = $659 fully payable spouse “top-off” amount at FRA.
Susan began collecting retirement benefits at 62 and is receiving $890, so her total amount will be: $890 + $659 = $1,549 a month.
Next steps for Susan
To maximize her benefits and begin receiving the additional spouse amount, Susan should follow these steps:
Step 1. Reach out to the Social Security Administration (SSA) to initiate her claim for divorced spouse benefits by calling 1-800-772-1213 or her local office to set up a phone or in-person meeting.
Step 2. Gather the required documentation, including her Social Security number (SSN), proof of her marriage and divorce, Robert’s birthday, place of birth and SSN if available.
Step 3. Request that her current benefit amount be adjusted to include the divorced spouse benefit. The SSA will calculate her updated monthly amount based on her and her ex-husband’s earnings records.
Step 4. Ask for up to six months of retroactive benefits to partially recover the lost income from the delayed claim.
If there is a dispute
If Susan encounters issues or disagreements with the SSA’s determination, she can appeal the decision through the following process:
- Reconsideration. A complete review by someone not involved in the original decision.
- Hearing by an administrative law judge. If she disagrees with the reconsideration decision.
- Appeals Council review. If she disagrees with the hearing outcome.
- Federal court review. The final step if she disagrees with the Appeals Council’s decision.
Susan should act promptly at each stage, as there are specific time limits for filing appeals.
Conclusion
By taking these steps, Susan can significantly increase her monthly Social Security income. With proper filing, she can move from her current benefit of $890 a month to $1,549 a month, a meaningful improvement in her financial situation.
Additionally, requesting retroactive benefits will allow her to recover a portion of the funds she missed due to delayed action.
Susan’s case underscores the importance of understanding Social Security rules and consulting with experts to maximize benefits.