Divorced, Remarried and Confused About Social Security

Recently, I came across a 2015 story about divorce rates in Tennessee produced by a local WATE Knoxville anchor, Kristen Farley. The article highlights issues fueling divorce in our area. Notably, Farley points out while Tennesseans are known for traditional values, 31.6% of men have been married two or more times, while 31.4% of women have been married two or more times. Both of these numbers are above the national divorce rate average (Men: 24.8% / Women: 24.48%). These data points align with my experience – more than a third of my planning sessions involve providing clarity to the types/amounts of Social Security benefits available to an individual who has been divorced and remarried. I’ve said many times that it’s one of the most complex areas of Social Security for an individual to comprehend and to know how to make an educated decision. To understand why, let’s look at a case study.

Case Study:

Jane is 66 years old.

After working 30 years, Jane’s benefit based on her working record is $1,700 /mo.

Jane was married for 15 years to her husband John before being divorced.

5 years after being divorced, Jane gets remarried to a man named Robert.

Robert and Jane are still married. Robert filed for his benefit at 66 @ $2,500 /mo.

John is alive, also remarried and was a higher income earner than Robert.

John filed for his benefit at 68 @ $3,000 /mo.

From Jane’s Perspective:

Before we dive into the technical analysis of this example, I think it’s important to acknowledge the psychological anxiety Jane could encounter as she and Robert decide how to file for Social Security. Jane knows that her first husband made more money than her and Robert. Jane might also presume because her previous husband remarried, she might not be able to receive as much from her first husband. So Jane decides to call the Social Security Office and the representative tells her that because she has been remarried to Robert, she can’t receive any benefit from her first husband. Jane thinks that’s unfair, but decides there’s not much she can do to change the rules. Jane decides to turn her focus to what she can control, her own benefit and Robert’s benefits. Jane calls the Social Security Office again to inquire about what type of spousal benefit she can receive from her current husband, Robert. The Social Security representative informs Jane that her own benefit ($1,700 /mo) is larger than the spousal benefit ($1,250 /mo) she could get from Robert. Jane feels stuck and frustrated. Jane has friends that have taken advantage of spousal benefits, but doesn’t quite understand why she can’t benefit from either of her higher earning spouses. In some ways, Jane feels penalized for having worked longer at a higher income than her friends. Jane doesn’t have the time to know everything there is to know about Social Security, so she does what she thought about doing from the start. Jane files for her $1,700/mo benefit and doesn’t look back.

From Our Perspective:

There are four benefit amounts available to Jane that she needs to be aware of. First, her own benefit that is based on her own working record. Second, a spousal benefit that she qualifies for by virtue of being married to Robert. Third and Fourth, a survivor benefit that Jane can receive if certain scenarios play out. Let’s look at the survivor benefits first.

 If John dies first, Jane has no claim to the $3,000 /mo survivor benefit. Jane would stay on her $1,700 /mo benefit while Robert was alive. If Robert pre-deceases Jane, she will be allowed to start collecting the $3,000 /mo survivor benefit from John. Said in another way, if Jane outlives both Robert and John, she is free to choose the highest survivor benefit – in this case John’s $3,000/mo.

If Robert dies first, Jane will begin to collect $2,500 /mo instead of her $1,700/mo. Because John hasn’t died yet, there is no claim to the $3,000 /mo. benefit. Just like the example above, if Jane outlives Robert as well, Jane would begin to collect $3,000 /mo instead of the current $2,500 survivor benefit she was receiving off Robert.

The spousal benefit that Jane was told she wasn’t allowed to file for (because it was smaller than her $1,700 /mo benefit) isn’t true at all. There exists a filing strategy that Jane qualifies for (that’s being phased out gradually over time via the 2015 Bipartisan Budget Act) known as a Restricted Application she could employ if she wanted to. Since Jane has reached her full retirement age, she has the option to collect a spousal benefit off Robert ($1,250 /mo) while her own benefit ($1,700 /mo) continues to grow by 8% per year until she turns 70, at which time would be around $2,244 /mo.

Once you have all the data on the table, you can begin having a more targeted discussion about what does or doesn’t make sense for you. We don’t like to give Social Security planning advice in a vacuum. What Jane should do in this scenario is dependent on a lot of things: Life expectancy for all parties involved, outside assets, financial goals, tax brackets, etc. If you’ve been divorced and remarried, there’s a strong possibility we can bring clarity to your benefit options and how to coordinate them with the rest of your financial situation.