In most cases, if both spouses are past age 70, survivor
benefits are relatively simple: The survivor gets the higher of the two
benefits. But if someone dies at a younger age, it can get very, very
complicated. Today, we go into an often overlooked area: the divorced
spouse’s retirement benefits. In our experience, many divorced spouses
are completely unaware of the benefits they’re entitled to.
If you take nothing else away from this column, understand
this: A divorced spouse may qualify for the same spousal benefits as a married
spouse. This includes both retirement and survivor benefits. In
fact, not only is a divorced spouse entitled to the same benefits, but also, he
has some significant advantages over a married spouse. We’ll cover that
later in this column.
Basics
To qualify, the former spouse must be at least age 62 and
“fully insured.” This essentially means that he must have at least 10
years of SS earnings. In addition, the divorced spouse must have been
married for at least 10 years. Just like with a married spouse, the
divorced spouse who’s filing for the benefit must also be at least age
62. He must also have been divorced for at least two years and can’t be
remarried. Of course, if the divorced spouse has remarried, he may be
eligible for a spousal benefit from the new spouse.
Also, for a divorced spouse to qualify for a spousal
benefit, his personal retirement or disability benefit must not be greater than
the other spouse’s benefit. But there’s an exception to this: If the
filing spouse has reached his full retirement age (FRA), he may be eligible for
a “Spousal Only” (Restricted Application) benefit.
Note that it’s the age of the divorced spouse filing for
benefits that determines if benefits are being paid early (resulting in an
actuarial reduction of benefits) or at FRA (no reduction). The actuarial
reduction is the same as it is for a married spouse. But the former
spouse’s benefit prior to any actuarial reduction is used to determine the
divorced spouse’s benefit.
So as long the restrictions above are met, a divorced spouse
is entitled to the act same spousal benefit as a married spouse. But the
qualified divorced spouse has three distinct advantages.
Advantage 1
The first advantage involves File and Suspend. Basically,
when your client reaches FRA, he can go to SS, file for his personal benefit
and then immediately suspend it. Doing this allows your client’s spouse
to collect a spousal benefit, without affecting his ability to collect deferred
retirement credits.
A divorced spouse has no need to worry about any of
this. There’s no requirement that the ex-spouse must be receiving, or
have filed to receive, benefits. The only requirement is that both the divorced
spouse and ex-spouse must have reached age 62. This can be a good thing
if there’s any sort of contentious relationship between the two ex-spouses. In
fact, the ex-spouse isn’t even notified when someone collects a divorced
spouse’s benefit.
Advantage 2
The second advantage involves the excess earnings test
(EET). This is a bit complicated. The EET applies to anyone who’s
collecting a SS benefit before FRA. Your client may end up losing part of
your benefit if he continues to work. If the worker has earnings in
excess of the earnings limit ($15,480 in 2014), there will be a benefit reduction
of $1 for every $2 of excess earnings. If your client makes too much
money, he could lose his entire SS benefit. Note that if your client
loses a benefit by starting early, he should be able to get some of that back
because his benefit will be adjusted when he reaches FRA.
For a married spouse, if he’s collecting benefits before FRA
and he’s getting a spousal benefit, he must consider the earnings of both
spouses in the EET. With a divorced spouse, even if the ex-spouse has
earnings above the earnings limit and hasn’t reached FRA, the EET won’t reduce
the divorced spouse’s benefit.
Advantage 3
The third advantage is particularly notable. With a
married couple, only one spouse can qualify for a spousal benefit at a
time. Your client can’t collect a spousal benefit based on his spouse’s
SS record if his spouse is already doing so based on his record.
This limitation doesn’t apply to a divorced spouse. So
if the couple is divorced, both spouses can qualify to receive spousal benefits
at the same time. This means that either or both spouses could file to receive
spousal benefits based on each other’s SS record. In fact, not only can
both spouses collect at the same time, but also, it’s possible to have multiple
ex-spouses collecting at the same time based on the SS record of one
individual.
If the divorced spouse remarries, he must terminate existing
spousal retirement benefits if the marriage was to a worker who’s disabled or
retired. But of course, at that point, the divorced spouse may be eligible
to file for spousal benefits based on the new spouse’s SS record.
There’s an exception if the new spouse is receiving benefits
as a beneficiary. An example of this would be a widow’s or widower’s
benefit. If the new marriage is to someone who’s receiving benefits based
on his previous spouse’s SS record, those benefits won’t be available to the
new spouse. Therefore, the existing benefits payable to the divorced spouse may
continue.
For a surviving divorced spouse, it’s generally easier to
qualify for benefits. To qualify, instead of 10 years, the surviving
divorced spouse must have been married for at least nine months. Also, as
with a surviving married spouse, the surviving divorced spouse can begin
collecting two years earlier. He must be at least age 60 (rather than 62)
and not have remarried prior to age 60 (unless that marriage ends). His
personal retirement benefit must not be greater than the surviving spouse’s
benefit.
When a divorced spouse has existing survivor benefits, if he
then remarries, there’s no requirement that he terminate his existing survivor
benefit, even though those benefits are based on the previously deceased
spouse’s SS record. In other words, he can keep on collecting the same
benefit even after he remarries.
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