What Divorced Retirees Should Know About Social Security

NEW YORK (TheStreet) – Your marriage may be over, but there's still a chance Social Security will pay you for the years you put in.

What workers and retirees don't know about their Social Security benefits is staggering. According to a survey from financial firm Franklin Templeton, roughly 39% of Americans have no idea how much of their income Social Security will replace, with 37% unsure Social Security will provide the income they're expecting. A full 22% don't know when they should take their Social Security benefit, which is why 59% do so before full retirement age. Of that group, only 21% took the benefit because they needed it. A whopping 42% did so simply because they were eligible, which cut into the benefits they received.

“Conventional thinking and attitudes about what it means to retire are changing,” says Michael Doshier, vice president of retirement marketing for Franklin Templeton Investments. “By taking action now — via saving and planning for retirement — individuals can help ensure that they're able to embrace this next phase of life. They can also reduce the stress increasingly associated with not having enough money to retire.”

Divorcees are particularly adept at leaving money on the table when they don't have to. Mike Greenwald, partner at Friedman LLP, notes that Social Security Administration rules entitle a divorced spouse to a formers spouse's earnings if the two were married for at least 10 years and the spouse claiming benefits is unmarried. Even if the one former spouse is remarried and is still ineligible for Social Security, the other spouse can claim benefits just as long as he or she is 62 and has been divorced from the other spouse for at least two years.

“Its actually not negotiable,” Greenwald says. “Its something that divorced people can get just by right and the ex-spouse doesn't ever find out about it.”

So how does that work? Easily. Either go into a Social Security office or online, submit your divorce decree and your spouse's name and Social Security number and the Social Security Administration will determine the amount of benefits you're entitled to. If your ex spouse is eligible to get $2,000 a month in earnings, you'll get $1,000 a month — the half of their earnings you would have been entitled to as a spouse. Not only will everyone involved get their full benefit, but if the ex-spouse in question went through yet another divorce of a marriage that lasted more than 10 years — or even multiple divorces of marriages that lasted that long — each of their former spouses would be entitled to spousal benefits.

“What if you say 'I was married to one guy for 10 years and I was married to another guy for 10 years and I'm divorced from both of them?'” Greenwald says. “You can't collect on both, but you can collect on whoever has the higher benefit.”

Even if a divorced spouse can get benefits from his or her ex's Social Security by age 62, Greenwald suggests that they may want to wait until they reach full retirement age at 66 before collecting. For example, if you're 66 and can collect $1,000 a month based on your earnings, but are also entitled to half of your ex-spouse's full retirement benefits of $2,000 a month, there's a way to maximize your take without biting into either benefit all that much.

“You can collect on your spouse's benefits at full retirement age, but file and defer your own amount and get a delayed retirement credit,” Greenwald says. “Each year from age 66 to 70, your retirement benefit goes up 8% a year, so at the end of four years, your retirement benefit would be $1,320. You've collected on your ex spouse's $1,000 a month, but then you can collect on your own at a higher rate.”

Basically, you can “retire” and get $1,000 a month for four years without officially retiring and drawing from your own benefits. Meanwhile, your spouse's benefits have floated you to the maximum Social Security payout you can get. While you'll still have to negotiate over assets including 401(k) and IRA accounts, the Social Security benefits for qualified recipients can be collected without an ex-spouse's input or even knowledge. But Greenwald notes that it's still up to spouses to determine when it's best to collect benefits — health or financial concerns may require taking partial benefits before full retirement age — and need to consult with the Social Security Administration. He recommends that divorcees curious about the state of their spousal benefits log on to the Social Security website, create an account and determine benefits for themselves.

“Social Security is a lot more complicated than people think it is,” Greenwald says. “We don't live in a country like New Zealand where you hit retirement age, they send you a check and that's the only thing that happens.”

— Written by Jason Notte in Portland, Ore.

To follow the writer on Twitter, go to http://twitter.com/notteham.

This article is commentary by an independent contributor. At the time of publication, the author held TK positions in the stocks mentioned.

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