Many of us spend years planning for our retirement. And chances are while making the look ahead, you don’t factor other major life changes like marriage and divorce into the equation. But the fact is the rate of divorce after 50 has doubled since 1990. So while you may not plan for it, you should understand how such a life change can impact your retirement savings. The Motley Fool breaks it down:
What are spousal and divorce benefits?
Spousal and divorce benefits are a special type of Social Security available to those who are currently or previously married. To qualify for spousal benefits, you must currently be married to someone who is entitled to either retirement or disability Social Security. If your marriage ends, you'll lose spousal benefits -- but you could then qualify for divorce benefits.
Divorce benefits have a lengthier list of requirements, however. To qualify, your previous marriage must have lasted for at least 10 years, your ex-spouse must qualify for retirement or disability benefits, and you can't currently be married. If you've been divorced for less than two continuous years, you'll also need to wait until your former spouse begins claiming Social Security before you can file for divorce benefits.
In both cases, the maximum payment is 50% of the amount your spouse or ex-spouse is entitled to at their full retirement age. You also generally need to be at least 62 years old to qualify for either type of benefit, but to receive the full payment, you'll have to wait until your own full retirement age to begin claiming.
If you're also entitled to retirement benefits based on your own work history, you can still collect spousal or divorce benefits. However, you'll only receive the higher of the two amounts, not both.
How marriage or divorce can change your payments
In some cases, getting married or divorced after you begin taking spousal or divorce benefits could change your benefit or make you ineligible for this type of Social Security.
For example, say that you're currently married and collecting spousal benefits, but you and your partner divorce after nine years of marriage. Once you're no longer married, you won't qualify for spousal benefits. But because you were married for less than 10 years, you also won't be eligible for divorce benefits.
Similarly, say you're currently not married and receiving divorce benefits. If you remarry, and your new spouse isn't entitled to retirement benefits, you'll lose divorce benefits but also won't qualify for spousal benefits.
Your marital status can also change your benefit, depending on how much you and your spouse or ex-spouse are earning. For instance, say you're collecting $1,500 per month in divorce benefits and you marry someone who's entitled to $2,000 per month in retirement benefits. While you could still qualify for spousal benefits after remarrying, your maximum payment would only be $1,000 per month.
The reverse is also true, however. Maybe you didn't qualify for divorce benefits, but after remarrying, you can receive spousal benefits. Or if you remarry and your current spouse is entitled to a higher benefit than your ex-spouse, you could collect hundreds more per month in spousal benefits than you were previously receiving in divorce benefits.
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Social Security probably is not high on the list of things you consider when reflecting on your marital status and any changes you might be facing. And it certainly should not be a sole factor in making any decisions. However, understanding how these life changes can impact your finances at any stage of life is important.