Social Security Strategies Divorced Individuals
While the Bipartisan Budget Act of 2015 limited the Social Security claiming options available for divorced individuals, there are still a few opportunities if you know where to look. Financial advisors can add considerable value for their divorced clients by helping them find and take advantage of claiming strategies unique to their situation. In this month's FinPlan Friday conversation, Joe talks about Social Security claiming approaches for divorced people.
In our video blog series, FinPlan Fridays, Covisum® Founder, and President Joe Elsasser, CFP®, offers his take on the issues financial advisors see every day. Joe is a practicing financial planner with a unique perspective on the challenges for which Covisum provides technology solutions. Join us on the first Friday of every month for FinPlan Fridays and get helpful tips to grow your financial planning practice.
I'm Joe Elsasser, CFP®, Founder and President of Covisum, and I'm also a practicing financial advisor. Welcome to another FinPlan Friday. Today's topic is Social Security for divorced individuals.
It may seem that divorced individuals don't have many planning options under Social Security after the Bipartisan Budget Act of 2015. An individual could elect only a spousal benefit while receiving delayed retirement credits on their retirement benefit and then switch over at age 70 for a much more significant retirement benefit overall. Still, the legislation eliminated that strategy for anyone born on or after January 2, 1954. Yet, there still are a couple of things that you need to be aware of when planning for divorced individuals.
Independently Entitled Rule
The independently entitled rule is fundamental to a lower wage-earning ex-spouse because although they can't file restricted, they can file for only the spousal benefit. It may represent an additional benefit on top of their own to claim under an ex-spouse. Remember, ex-spousal benefits are the same as spousal benefits in terms of the amount.
Now, the independently entitled rule effectively says that, once you've been divorced for at least two years, you can claim for as long as your ex was eligible. It is not required for them to have filed for benefits yet. That means:
- They have to be at least 62-years-old.
- They must have enough quarters of coverage that they would be eligible for Social Security benefits.
- They do not have to have filed.
That's a significant departure from traditional spousal benefits. If that's the case, you can access those spousal benefits, even if the ex has not yet filed.
Divorced Survivor Benefit and Divorced Widow Benefit
If your client was married for at least 10 years and then divorced, and their ex is now deceased, they can access the same survivor benefit that a current spouse would have been able to access. Now, this is also one of the most underutilized benefits that are out there and frequently left unclaimed. A Social Security audit from several years ago suggested that many people are potentially eligible for this benefit that don't know that they are, and as a result, have not yet claimed.
So advisors, lookout for these two opportunities:
- Situations where an independently entitled individual can access a spousal benefit that they may be unaware of or may not be claiming.
- An opportunity for a divorced widow(er) who can access that divorced widow(er) benefit.
There's some significant value you can deliver to your clients. Thanks for joining us, and we look forward to seeing you on the next FinPlan Friday.
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