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Divorced and Retired: Don't Forget the Social Security benefits

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64 years old, unemployed and closing the book on a 26 year marriage, Beverly needed to make sure that she had explored all of her financial options. She was coming in out of the dark, because during the entire time she had been married, she had never closely managed her finances.

As her divorce financial planner, my first instinct was to ensure that Beverly was going to receive Social Security benefits that were due her even after the breakup of the marriage. This is a subject that is often overlooked in divorce discussions when emotions are running high.

Due to their complexity, these benefits are among the most misunderstood components of a comprehensive financial plan. The Social Security Administration (SSA) states that if you meet the requirements, you are entitled to receive lifetime payment benefits based on your ex-husband's work record even if you stopped paying into social security when you left the workforce during your marriage to stay at home to raise your children.

If your marriage lasted 10 years or longer and you have been divorced for at least two years, you can receive benefits based on your earnings record or ex-husband's record (even if he has remarried) whichever is higher. However, you must be at least age 62, not currently married, AND:

1. The benefit you are entitled to receive based on your own work is less than the benefit you would receive based on your ex-husband's work;
2. Your ex-husband is entitled to receive Social Security retirement or disability benefits.
3. If you remarry, you generally cannot collect benefits on your former husband's record unless your later marriage ends (whether by death, divorce or annulment).

The first step in determining your benefit is to get a copy of your most recent Social Security benefits statement. The Social Security Administration (SSA) automatically mails this statement to you every year a few months before your birthday. If you have not received it or you recently changed your address go online at www.ssa.gov to request a copy. This statement will show what your estimated monthly payment will be if you retire early (age 62), at full retirement age (depends on the year you were born), or at age 70, which is the highest payment. Once you know the amount that you are entitled to based on your work record, you can decide whether to collect a benefit based on your work record or your former husband's record.

If you are eligible for retirement benefits on your own earnings record, Social Security will pay that amount first. But if the benefit on your ex-spouse's record is a higher amount, you will get a combination of benefits that equals that higher amount (reduced for age). However, if you have reached full retirement age and you are eligible for a spouse's benefit and your own retirement benefit, you have a choice.

In addition, you can choose to receive only the divorced spouse's benefits now and delay receiving retirement benefits until a later date. If retirement benefits are delayed, a higher benefit may be received at a later date based on the effect of delayed retirement credits.

If you continue to work while receiving benefits, the retirement benefit earnings limit applies. If you are eligible for benefits this year and are still working, you can use the SSA earnings test calculator at www.ssa.gov to see how those earnings would affect your benefit payments.

Remember, the amount of benefits paid to you has no effect on the amount of benefits your ex-spouse, their current spouse, or family members receive. So, although you are collecting based on his earnings record, it does not cost him money or reduce his benefits at all.

Today, Beverly is adjusting to life alone, and has been able to budget her money wisely. Because of the monthly income she's receiving through social security and alimony, she does not depend on her adult children for financial support. She can afford to travel to see her grandchildren and enjoyed a cruise with her bridge partners. She is successfully living an independent, mature life.