Catch of the Day: Social Security and Divorce

Claiming Spousal Benefits and the Benefits Available to Divorced Clients

In one of the intro videos on the FPH Homepage, I refer to the search for hidden client benefits as a “Treasure Hunt.” Finding money for clients is one of the most satisfying aspects of being a financial planner, and having a thorough understanding of the complex rules for claiming social security benefits is one of the tools of the trade. Social security optimization is often the“low hanging” fruit in the quest to validate the planner's value proposition.

One of the best examples of this comes from raising client awareness of the benefits available to divorced clients who were married for at least ten years. Many divorced clients are not aware that they may be entitled to claim divorced spousal benefits when they become eligible for social security (as long as the ex-spouse is also old enough to be eligible).

For some clients, the 50% spousal benefit is significantly higher than the benefit he or she would receive by claiming benefits on their own earnings histories.

Similarly, people who were married longer than 10 years and were born between 1947 and 1954 (ages 64-70) should also be aware of the opportunity for cross-claiming of social security benefits. Under this strategy, the divorced person, upon reaching social security FRA (age 66), may file a restricted application to claim divorced spousal benefits , while allowing his or her own social security benefits to accrue at 8% per year to age 70.

It is important to understand that the Social Security Administration is not aware of your previous marital status and it is not the agency’s purview to help you maximize your lifetime benefits. It is, however, right up my alley!