Most everyone knows and agrees that divorces require former spouses to undergo a significant amount of change in their lives. Attorneys help their clients prepare for these changes and help them secure the resources they need to begin their lives without the other spouse. One type of resource that is becoming increasingly important in securing one’s financial future and ensuring one will have money off which to live during old age is Social Security benefits. Not all divorcees know what sort of benefits to which they are entitled after a divorce.
Consider a hypothetical couple named George and Martha. George and Martha married in their early twenties and remained married until their mid-sixties. Now, the two are preparing to divorce based on incompatibility. Throughout their marriage, Martha maintained the home and raised the couple’s children while George worked. George recently retired and began receiving Social Security benefits. Since Martha did not work outside of the home, she does not receive Social Security benefits based on her employment history. She had been receiving spousal benefits from the Social Security Administration and wants to know what if any, amount she will receive after the divorce.
How Social Security Benefits are Calculated
Before answering Martha’s question, it may be helpful to review briefly how the Social Security Administration calculates retirement benefits.
For Those Who Worked Outside the Home or Were Self-Employed
A person generally needs to accumulate a total of 40 “credits” in order to receive full retirement benefits. Up to four credits per year can be earned, and credits are earned for earning a certain amount each year. A formula is then used to calculate the amount of benefits that will be paid. This formula first looks at the 35 highest-earning years the worker had after the age of 21 and considers those yearly earnings (up to a certain amount). After this amount is calculated, it is indexed for inflation.
Next, this amount is divided by 420 months (35 years). The result is called the average indexed monthly earnings, or AIME. The result is then multiplied by certain percentages: the first $767 of the AIME figure is multiplied by 90%; the difference between $767 and $4,624 (or whatever the AIME amount is, if less) is multiplied by 32%; and any AIME amount over $4,264 is multiplied by 15%. The results of each of these three calculations are added together, and the sum is the Social Security benefit to which the retiree is entitled.
For instance, suppose George’s total indexed earnings from his 35 highest-earning years totaled $1 million. His Social Security benefit would be calculated in the following manner:
- $1,000,000 / 420 = $2,381 AIME;
- $767 * 90% = $690.30; plus
- ($2,381 – $767) * 32% = $516.48
So George’s total retirement benefit would be $690.30 plus $516.48, or $1,206.70.
For Spouses Who Did Not Work Outside the Home
Generally, spouses who did not work outside the home or did not earn enough credits to be entitled to their own benefits can receive a spousal retirement benefit. So long as the spouse has reached his or her full retirement age, they will receive one-half of the spouse’s benefit amount. In this instance, while married, Martha would receive a spousal benefit of approximately $603.30.
Social Security Benefits Following Divorce
Martha can rest easy knowing that she will continue to receive the spousal benefit she received while married to George after the divorce because she has met the eligibility requirements.
A person can claim Social Security benefits based on his or her ex-spouse’s work record so long as the person meets the following requirements:
- The ex-spouse must be entitled to Social Security retirement or disability benefits. For retirement benefits, this means that the ex-spouse worked at least 10 years and is at least 62 years of age:
- The marriage lasted for at least ten years;
- The person is 62 years of age or older;
- The person has not remarried; and
- The person’s own Social Security retirement benefit is lower than the spousal benefit (in the case of a homemaker or spouse who did not work outside the home, they would not be entitled to any Social Security retirement of their own).
Amount of Benefits
Just as if the person and his or her ex-spouse continued to be married, a person is entitled to up to 50 percent of his or her ex-spouse’s Social Security retirement benefit. In the example above, Martha would be able to continue receiving $603.30, just as she had while she was married to George. If the person decides to apply for Social Security spousal benefits before his or her full retirement age, then the number of spousal benefits will be reduced by a certain percentage. Generally speaking, the earlier a person applies for spousal benefits, the lesser the amount to which he or she will be entitled.
Benefits Continue Despite Certain Changes
If a person is entitled to Social Security spousal benefits based on his or her ex-spouse’s work record, that person will continue to receive those benefits despite certain changes. Even if the ex-spouse remarries – and even if the new spouse becomes eligible for his or her own spousal benefits – the person will still receive the same spousal benefit as if they were married.
Thus if after the divorce George remarries but Martha remains single and is otherwise eligible for spousal benefits, she can continue to receive them in the amount of $603.30 despite George’s remarriage. Even if George and his new wife divorce after 10 years of marriage and the new wife seeks spousal benefits based on George’s work record, Martha will continue to receive her benefits of $603.30.
In our hypothetical case involving George and Martha, Martha will continue to receive the same spousal benefit she had been receiving while married to George. Even if George and Martha were younger and had not reached retirement age at the time of their divorce, Martha would still be entitled to apply for spousal benefits based on George’s work record when they both reached retirement age.