Married, divorced, single, re-married...does your marital status really affect your potential social security benefits? Absolutely! Not knowing how design a social security income strategy based on your marital status (or future martial status) can have a significant affect on your lifetime benefits.
With the divorce rate still at about 50% for first marriages, the need for divorced spouses to do planning is very important and requires an in-depth understanding of the social security rules. If a divorced spouse is considering re-marriage, then the timing and co-ordination of benefits between the divorced person, their ex-spouse and future spouse is even more important.
For example, I had a client who was 61, divorced (was married for over 20 years and divorced for over 2 years) and is now in a new relationship. She was given an analysis of her expected social security benefits from her divorce attorney. She came to me to find out how to best co-ordinate her benefits "if" she was to get re-married in the future. Since her former husband was the primary income earner in their marriage, his social security benefit was about twice hers. Her new boyfriend's benefit was similar to hers. So, what were her options?
At her full retirement age (66) she would be eligible to collect 50% of her ex-spouse's benefit. To optimize her lifetime benefit, I suggested that she take her ex-spousal benefit at age 66 until her age 70 and then switch to her own, then higher benefit. I also let her know that she would be eligible to receive his full benefit if he were to pre-decease her.
But what if she were to get re-married? Basically, as soon as you re-marry you lose all benefits off of your ex-spouse. Therefore, she would lose her ex-spousal benefit immediately upon re-marriage. She would still be eligible to receive a survivor benefit off of her ex-spouse (even if she re-marries) because she would have re-married after the age of 60. (yet another exception in the quirky social security rule book).
If she married her boyfriend, she would then be eligible to collect a spousal benefit off of his benefit once she turned 66 and assuming he had already filed for his benefits. She would also have to be married for 12 months before she could collect a spousal benefit off of her new husband. One exception to the 12 month rule is if she was already collecting ex-spousal benefits when she re-married. In that scenario the 12 month rule would not apply. (once again, another crazy and little known exception in the social security rule book!)
So, what would it cost her in lost social security benefits to get re-married before her age 66? In her particular case it would cost her a minimum of $40,000 from ages 66-70. That's the difference between her ex-spousal benefits and spousal benefits off of her new spouse. If she waits until age 70 to get married then she could collect the $40,000 of additional benefits off of her ex-spouse and then switch to her own benefit at age 70.
This is just an example of how social security benefits can be affected by re-marriage. When analyzing the affect of re-marriage on social security benefits, one must look at a number of factors for all three parties involved including their ages, benefit amounts at full retirement age, the date of re-marriage, who has filed for benefits and when, is it a second marriage for one or both spouses, past earnings records and future expected earnings and a number of other factors.
It's not a simple analysis and often requires a custom solution. However, given the importance of social security retirement benefits, especially for divorced individuals, it is imperative that all options be considered in order to maximize potential benefits.
Ash Ahluwalia, NSSA, CCSCA, MBA