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New Social Security Rules Impact Divorced Women

Filed under: Retirement

Senior woman hugs her beagle dog in countryside

Last month, President Obama signed the Bipartisan Budget Act of 2015. Among other provisions, two major changes to Social Security are set to impact retirees in the coming year. You might already know that the file-and-suspend loophole has been axed, but you might be surprised to find out how the new rules impact divorced couples.

Under the old file-and-suspend strategy, the higher-earning spouse could file for benefits at full retirement age and then suspend payments, allowing them to grow larger until claiming them at a future date. The lower-earning spouse could then file for spousal benefits, allowing him or her to receive payments at about half of the higher-earning spouse’s benefit amount.

This strategy was even available to divorced couples, provided they had been previously married for at least ten years. In most cases, the lower-earning spouse was the ex-wife, because women tend to have fewer work credits due to time off caring for children earlier in their careers. Divorced women who worried about their retirement incomes could rely upon the work records of their former spouses, and claim spousal benefits even if the ex-husband suspended his own benefit.

Under the new rules, a spouse cannot claim spousal benefits if the higher-earning spouse has suspended their own benefit. But once the new law takes effect, neither spouses nor former spouses will be able to collect spousal benefits if the higher-earning spouse has suspended his or her payments.

We can all assume that married couples will work together to navigate the new Social Security rules. But unfortunately, the end of file-and-suspend could spell trouble for some divorced people, particularly women. The lower-earning former spouses are at the mercy of their former spouse’s actions; if the higher-earning spouse suspends Social Security benefits, there will be no spousal benefits in the meantime.

This scenario is only one of many possible outcomes of the new law, as it will impact everyone differently. We’re all learning the rules to a new game, and it will take some time to sort out the best course of action in each individual circumstance. If you’re concerned about your Social Security benefits, the best thing you can do is call our office to schedule a consultation. We can help you figure out whether the new rules will impact you, and help you put together a plan for a stable retirement income.

This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency

15175 – 2015/12/10