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How a high asset divorce affects Social Security earnings

In the past, most couples divorced well before retirement age, so there was rarely an issue about splitting up Social Security benefits. However, times have changed and more and more couples in Maryland and other parts of the country are divorcing in their 50s, 60s, and even their 70s. Splitting up so late in life often causes one to rethink his or her retirement plans because their Social Security benefits – often their largest asset – often must be split with the ex-spouse. However, there are ways to maximize one’s earnings without a huge dispute between the divorcing spouses.

First of all, the best way to go about this is to prevent an all-out war. All this does is cost more money, which is the opposite of the overall intention. Instead, focus on implementing the best method that allows each party to enjoy the standard of living that he or she was used to during the marriage. Besides Social Security, a high-asset divorce may also include property, homes, cars, pensions, and even alimony, all of which can be used to create fairness.

In terms of Social Security benefits, one spouse can receive part of the higher-earning spouse’s benefits even after a divorce. This can typically happen when the higher-earning spouse reaches age 62 and the couple has been divorced for two years. The spouse with the lower income can then apply for his or her full benefit at age 70. The higher-earning spouse should do the same, except apply for his or her full benefit at age 66.

Remarriage can also affect one’s Social Security benefits, so by staying single after a divorce and taking advantage of the benefits at the right times, a person can receive an ex-spouse’s benefits. This can be an immense help to those who are retired and have no steady source of income.

Source: Forbes, “Social Security Q&A: My higher Earning Spouse and I May Soon Divorce. How Does this Affect My Claiming Strategy?,” Laurence Kotlikoff, Aug. 15, 2014

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