Social Security and Gray Divorce
The term “gray divorce” refers to the trend of couples ending their marriages later in life, and after a lengthy marriage. In fact, baby boomers are divorcing at a rate higher than any other age group. According to Pew Research, the divorce rate of baby boomers has nearly doubled since 1990. This can be attributed to a number of different factors. Some of these factors include:
- Women are more financially independent than they were traditionally and have the means to leave a marriage.
- The religious and social stigma attached to divorce is no longer as strong as it once was.
- In some cases, couples faced with an empty nest simply realize they no longer have anything in common.
While a gray divorce may lead to greater emotional wellbeing for spouses that lived for years in an unhappy relationship, it also comes with financial risks. In particular, navigating social security benefits can be tricky for retirement-aged divorcees.
Social Security Strategies
Many financial advisors counsel their married clients on how to best maximize the Social Security benefits due to them as they get ready to retire. These strategies are based on the fact that the couple is together, and often involves the lower-earning spouse claiming benefits early, with the other delaying their claim to increase payments when they are collected.
This strategy works as long as the couple stays together. However, should they divorce, the lower earning spouse is left with smaller retirement benefits. Anyone considering a divorce should consult a qualified Philadelphia divorce law firm to determine the best strategy for claiming Social Security benefits when divorcing.
Know Your Rights
When a couple decides to divorce, typically a lot of thought is given to the division of assets including real estate, savings accounts, and pension plans. However, many people do not know exactly what their rights are when it comes to their ex-spouse’s Social Security payments. For a partner who stayed home to raise children or support the other spouse’s career, this can be a significant additional source of income in retirement.
For example, the Bipartisan Budget Act of 2015 has a grandfather clause that gives restricted spousal benefits to those who turned 62 on or before January 1, 2016. A divorcee who qualifies is entitled to one-half of what their ex receives in Social Security benefits. These can be collected from the full retirement age of 66 to 70, enabling the recipient to delay collecting Social Security in their own name until age 70. By waiting to collect payments until age 70, benefits are significantly increased.
Collecting restricted spousal benefits does not affect what benefits the ex-spouse receives upon retirement, or what the new spouse receives as benefits in the case of remarriage.
The center for Retirement Research at Boston College estimates that households that divorce are at a higher risk of being unable to maintain their standard of living through retirement. While retirement planning is important for everyone, the right strategy can prove to be crucial for those going through a gray divorce.
Philadelphia Divorce Lawyers at Freedman & Lorry, P.C. Provide Experienced Counsel to Those Seeking a Divorce
Understanding how a divorce will affect your Social Security benefits can be complicated and confusing, but we can help. Talk with a skilled Philadelphia divorce lawyer from Freedman & Lorry, P.C. today. Call 888-999-1962 or contact us online to schedule a free consultation. We have offices conveniently located in Philadelphia to serve clients across Pennsylvania. We also have offices in Cherry Hill, New Jersey and Pinehurst, North Carolina.