Retirement, Divorce, and Social Security: A Roadmap for Late-Life Transitions

For people like you who are getting divorced in their late 50s, 60s, and beyond, the circumstances surrounding Social Security benefits become increasingly important. Being able to retire comfortably is a concern for many families and for generations we have relied upon Social Security to help in that endeavor. Whether Social Security represents all your retirement income or only a portion of it, you should be intentional about how you approach this subject in your divorce. Not considering Social Security at all as you go through with your divorce would be a tremendous oversight.

When you get divorced, you can receive up to 50% of your ex-spouse’s Social Security benefits so long as a few conditions are met. First, your marriage must have lasted for up to ten years. Next, you need to wait at least two years from the date your divorce was finalized to pursue the Social Security benefits. The last two requirements to be eligible for a portion of your ex-spouse’s benefits are that you need to be unmarried and at least sixty-two years old. Meet all these requirements and you can take advantage of receiving a portion of their Social Security benefits.

One of the misconceptions that some folks have in your position that we would like to dispel is that if you choose to take advantage of these benefits of your ex-spouse you are doing so in a way that compromises your ex-spouse’s ability to have benefits under their name. As in, if you receive up to 50% of your ex-spouse’s benefits you would be denying him or limiting him from doing the same. This is not true. You receiving these benefits does not increase your existing payments nor does it reduce the amount that your ex-spouse would be paid.

Are you able to qualify for retirement benefits under your ex-spouse’s name?

Let’s examine further those qualifications that we just breezed through a moment ago. The marriage to your spouse must have lasted for longer than ten years. This is a requirement in much the same way as spousal maintenance in Texas requires that you be married to your spouse for at least ten years for a judge to order spousal maintenance to be paid in your divorce. The government does not want fly-by-night marriages or even marriages that did not last too long to create ex-spouses to be able to benefit from that marriage. It sets a scary precedent where people would be getting married primarily for financial reasons.

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Next, you and your ex-spouse need to have been divorced for at least two years. This does not mean two years from the date that you separated from your spouse or two years from the date on which you filed a divorce petition. Rather, this means two years from the date on which the judge granted the divorce and signed your Final Decree of Divorce. You can start the clock to obtain those Social Security benefits after this date. Two years allow for the dust to fully settle after the divorce comes to an end. Your life will be much more stable and predictable two years after a divorce than it was a day or two after the divorce comes to an end.

Being at least 62 years old is a straightforward retirement given that 62 is the youngest age at which a person can claim Social Security benefits. One of the age-old questions is when is it best to start claiming Social Security- early or late? The benefit to receiving the money later is that the amount which you receive will be more. On the other hand, suppose that you choose to receive your Social Security benefits at age 62 but do not need the money to live on a day-to-day or month-to-month basis. For a situation like that you can choose to invest the money you receive in Social Security benefits. By choosing to wait you give up on nearly five years of investing opportunities.

Consider that you also must be unmarried at the time that you choose to begin receiving benefits under your ex-spouse’s name. You cannot be remarried. There are many reasons for this not the least of which is that your new spouse has a duty and responsibility to care for you which would not make sense for you to then be able to take advantage of your ex-spouse’s Social Security benefits. Even if you start to receive Social Security benefits under your ex-spouse’s name and then get remarried you would no longer be eligible under their name. Rather, you would need to start receiving under your current spouse’s name or your name.

Of course, the math tells us that you would need to be in a position where your own Social Security benefit under your name is less than the benefit that you would stand to receive under your ex-spouse’s name. At first glance, it may seem like it would not make sense to claim a maximum 50% benefit under your ex-spouse’s name. However, consider a situation where you have been a stay-at-home parent and mother and have never worked. Or, you may have worked but you never earned a great income. That means your benefits through Social Security would be minimal. If your spouse has worked for a long time and been a high-income earner to boot then you may stand to benefit by claiming Social Security benefits under his name.

The last requirement is that your ex-spouse must be eligible to receive Social Security benefits. This would seem like a no-brainer to mention but I think it is worth discussing for a moment. Not every American once he or she reaches age 62 is eligible for Social Security benefits. For instance, your spouse may have been a public school teacher and not paid into Social Security. These folks have different retirement options to choose from, in many cases 403(b) accounts. Other people like pastors can decide not to pay Social Security taxes but then are not able to receive retirement benefits, either.

What sort of money are we talking about when discussing divorced spouse benefits?

As a divorced spouse, you can receive as much as 50% of your ex-spouse’s full retirement benefits. Waiting until the full retirement age at either 66 or 67 means that you can claim the full retirement benefit. By choosing to take the retirement benefit early at age 62 that means you will receive a reduced benefit sometimes up to 30% less than the full retirement benefit had you chosen to wait. Medicare benefits come along with Social Security benefits. If you are receiving Social Security benefits for disability, then you will automatically be enrolled in Medicare at age 65. Otherwise, you will need to enroll yourself.

Can you double-dip when it comes to your Social Security benefits?

Are you able to have your cake and eat it too when it comes to Social Security benefits? Meaning, Can you receive your benefits under your name and then benefits under your ex-spouse’s name at the same time? No, you cannot do that. If you are in a position to receive benefits under your name and that of your ex-spouse, the Social Security Administration would pay you whichever benefit is more. If you choose to receive benefits under your name, you would then be paid an additional amount up to what your benefit would have been under your ex-spouse’s name.

What are some other ways to prepare for life after divorce financially?

When going through a divorce is your golden years it is reasonable to be concerned with your finances. Retirement is hopefully approaching for you and is something that you need to be planning for. However, if you lack the resources to do so then you would need to continue working. With that in mind, the attorneys with the Law Office of Bryan Fagan wanted to take this opportunity to share with you our thoughts on what you can do to continue or even start planning your retirement journey in the months and years following a divorce.

Consider during the divorce the importance of dividing up retirement accounts. If you have been a stay-at-home parent and spouse for most of your marriage then the divorce is not a time for you to lose focus of your life after the divorce comes to an end. I know that it can be a lot to consider retirement during an emotionally difficult time like your divorce. However, if you do not keep your mind focused on your life after the divorce then you are setting yourself up for a tough time. Not having worked means that you may lack professional skills and connections. This does not mean that you cannot work in the future, but your options may be more limited.

For that reason, understand that retirement accounts with your spouse’s name on them can be divided in the divorce. Even though your name does not appear as the owner of the spouse odds are good that some or even most of the money in those accounts is community property. This is especially true in a situation where you and your spouse have been married for a long time. Marriages of thirty and forty years are tragic when they end in divorce, but the law protects your community property interest in any retirement accounts. You need to be prepared to negotiate on that with your spouse during the divorce. You will not be allowed to do so after the divorce. There are methods of dividing up a retirement that can be done inside the divorce and you need an attorney who can help facilitate this.

The most common method to divide up a retirement plan or account is known as a Qualified Domestic Relations Order, or QDRO. A QDRO is tailored specifically for the type of retirement plan as well as the company that administers the account on behalf of your spouse. Your attorney should contact the plan administrator to be sent the sample language which needs to be included in the QDRO. The last thing you want to do is get to the end of the divorce only to realize that you included incorrect language in the QDRO because you did not ask the plan administrator what is required for their company. A judge can sign the QDRO and then it can be sent to the plan administrator. However, if language in the plan is not correct the plan administrator will not be able to send you the money and you will need to go back to court. This is not efficient and could have been avoided had you asked the plan administrator for sample language at the beginning of your divorce.

Next, we can consider two topics that are connected: spousal maintenance and contractual alimony. Spousal maintenance involves a court ordering post-divorce spousal support payments to be made. However, much like Social Security benefits for an ex-spouse, some requirements must be met for you to receive spousal maintenance because of your divorce. For one, you must have been married to your spouse for ten years or have had your spouse convicted of a crime involving family violence within two years of your divorce. Next, you would need to show the court that you are unable to meet your minimal, basic needs using only your income.

Contractual alimony is another form of post-divorce spousal support which you can receive in Texas. However, the main difference is that contractual alimony is not something that can be ordered by a judge. Rather, you and your spouse must have negotiated for contractual alimony during the negotiation phase of your divorce. The rules as far as the length of your marriage do not relate to contractual alimony so you can negotiate for this no matter how long you and your spouse have been married.

Another limitation that applies to spousal maintenance which does not relate to contractual alimony is that when it comes to spousal maintenance you are capped at 25% of your spouse’s gross monthly income as far as what can be paid to you in spousal maintenance. This cap does not apply to contractual alimony. One negative of contractual alimony is that the protections afforded to an ex-spouse with enforcing spousal maintenance orders do not apply to contractual alimony. Judges would need to apply contract law to the enforcement of contractual alimony which typically does not offer an injured spouse the same remedies as under the Texas Family Code.

Be intentional and have a plan when divorcing in your golden years

The final point that we would like to make in today’s blog post is that you need to approach your divorce with an eye toward your future. Divorcing in your golden years does not mean that you can disregard the present by any means. However, it also means that your eye needs to be on the future, as well. There is no telling the point at which you will need to retire or will otherwise be unable to work. Hopefully, you can choose when you would no longer like to work but that is not guaranteed.

If you have not worked in many years, or have never worked outside the home at all, then you need to develop a plan for entering the workforce. Spousal maintenance is a real possibility for someone married for longer than ten years but that will not last forever. Social Security benefits can provide you with a baseline as far as household income is concerned in your sixties and beyond, but it does not mean that you will be comfortable in retirement. For that, you need to have a plan for working and for maximizing what happens in the divorce as far as the financials are concerned.

For instance, it may be better for you to retire with a lot of cash and no house now than to have the reverse. What if you can use that cash to train to be a medical coder, machinist, or some other trade? While a house is nice, cash may be more important for you right now. With any luck, you can turn that education into a career, save money, and buy a house with cash in addition to the money you came out of the community property division with.

You have options in a golden year’s divorce. Just because your age begins with a 5, 6, or 7 does not mean that your productive years are over by any means. However, you may need to focus more on financials than a younger person who is going through a divorce. The attorneys with the Law Office of Bryan Fagan are here to help you with that.

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