Divorce and Social Security
Social Security benefits, although often overlooked, are an important part of divorce, especially as couples near retirement age. Although Social Security is not divisible as property in a divorce, it is an important piece of retirement income that should not be ignored.
Social Security Benefits in General
Social Security is a federal program that provides financial assistance to retirees, disabled individuals, and survivors of deceased workers. The benefits are primarily based on a worker's earnings history and are designed to provide a basic level of income during retirement. The benefit is meant to be supplemented by a worker’s separate retirement savings, such as a 401k, IRA, 403b, pension, etc.
The more a person earns through employment prior to retiring, the more a person contributes to social security through taxes, to a point. The government sets a maximum income (“Social Security Tax Limit”) that workers will pay social security taxes on. In 2024, this limit is $168,600, meaning that people earning more than this amount will only pay social security tax on the first $168,600 earned in 2024. The more a person earns through employment, the more that person will receive as a social security benefit, to a point. The Social Security Administration calculates each person’s benefits according to a complex formula. Each person over the age of 18 years can create an account online to review their anticipated social security benefits.
Non-Division of Social Security Benefits in Divorce
As stated above, when a couple divorces, Social Security benefits earned during the marriage are not subject to division, unlike marital assets. However, there are several key points to consider:
Individual Work Records: Each spouse's individual work record determines their eligibility for Social Security benefits. Even if a couple divorces, each spouse retains their own earnings history and is entitled to benefits based on their own record.
Former Spouse's Benefit Entitlement: If a marriage meets the 10-year requirement (see next point), a former spouse may be entitled to receive Social Security benefits based on their former partner's earnings record. If a former spouse receives benefits based on their former partner’s earnings record, it does not impact the former partner’s social security benefits in any way. The former spouse can receive an amount up to 50% of the other party’s social security benefit by using the other party’s earnings record. Such a disparity in benefit amounts can exist if one party took time off work (such as to be a stay at home parent, illness, etc.) or if one party earned substantially more than the other. Note, if the former spouse’s social security benefit is lower than their spouse’s benefit because the former spouse worked for an employer but did not pay social security tax during such employment (such as working for the federal government and participating in the CSRS pension plan or working for an international organization, to name only a few potential reasons) there is a Windfall Elimination Provision that will decrease the former spouse’s benefit amount both on their own earnings record and based on their spouse’s earnings record.
Duration of Marriage: To be eligible for Social Security benefits based on an ex-spouse's record, the marriage must have lasted at least 10 years. If the marriage falls short of this duration, the ex-spouse is not entitled to benefits based on the former partner's record.
Remarriage: If an ex-spouse remarries, they generally lose eligibility for benefits based on their former partner's record, unless the subsequent marriage ends. A person must be unmarried to be eligible for benefits based on a former partner’s earnings record.
Consider the Whole Financial Picture
While Social Security benefits cannot be divided, they are a factor to be considered in various aspects of a divorce. For example, assessing each spouse's financial needs, especially in retirement, is crucial. Social Security benefits can significantly impact one's income during retirement, so it's important to understand how they fit into the overall financial picture. Disparate social security entitlements could impact alimony.
Parties going through a divorce should be confident their attorneys understand how social security and retirement benefits will impact them in the present or future, and can structure any agreement (or request in court) a division of assets and income that considers all of these factors. Contact our office today at 240-396-4373 to set up a consultation with an attorney at Markham Law Firm.
