I am grateful to build long-lasting relationships with clients as a Wealth Advisor. I once helped an especially memorable woman — let’s just say her name was Clarice. We began working together during her first marriage. Five years later, she found herself a fifty-something widow with no awareness of her spouse’s financial affairs (sadly, a very common situation). Prospects started to gradually brighten as we mapped out her financial plan and discovered that ample resources were at her command. Eventually, she met someone and remarried. After 12 years, Clarice’s second marriage fell victim to “gray divorce” (or dissolution during twilight years), and she parted ways with husband number two. Once again, we needed to do a careful inventory of options to develop a financial path forward that was both independent and secure.

No matter what phase of life, bereavement and divorce can be two of the most traumatizing events one can face. And American women have statistically 50% less¹ retirement savings than their male counterparts, so facing financial uncertainty in later years can create harsh challenges.

And the problem isn’t just with retirement savings. A recent TIAA Institute study found that women typically collect about 22% less in Social Security benefits² than men. The reasons aren’t hard to discern; by stepping aside from their careers to be caregivers to children or aging relatives, women often sacrifice an average of $131,000 in lifetime Social Security benefits.

All this points to the vital need for financial advice and coaching for widowed or divorced women, especially relative to Social Security options providing enhanced retirement income.

Multiple Marriages and Spousal Benefits

While negotiating Social Security complexities is never a picnic, figuring out the complex calculus surrounding spousal benefits can be even trickier — and they may be a foundational part of retirement income planning. It should be noted that benefits are available for both males and females, but the vast majority of benefits claimants are women³ (by nearly eleven times).

Many women with multiple marriages may not realize that they have a choice of spousal benefits to claim. While receiving benefits from more than one source at a time is prohibited, it is possible to choose among multiple sources to ensure the maximum benefit. For women like Clarice without their own work history or Social Security benefits, making the right choice becomes crucial.

The spousal benefit is capped at 50% of the earning spouse’s Full Retirement Age (FRA) Social Security benefit. The Social Security Administration (SSA) will pay the greater of either the claimant’s or spousal benefit. If, for example, a woman is eligible for her own $1,000 monthly benefit, but the spousal benefit would amount to $1,200 per month, her benefit will be $1,200.

Clarice had a choice of spousal benefits⁴ from the first and second husbands. Spousal benefits are available for marriages lasting ten years or more if the claimant has not remarried. As it turned out, her second husband’s lifetime earnings record qualified for an FRA benefit of $3,500. Clarice’s deceased husband had a lesser benefit due to the shorter span of years  paid into Social Security. Even the survivor benefit (100% of the deceased husband’s benefit at FRA) was less than this amount.

“But we’re divorced,” Clarice responded when I advised to draw benefits based on her ex’s earnings record. “I don’t want to have to tell him why his Social Security is getting cut in half.” I explained that receiving a spousal benefit had no effect whatsoever⁵ on her ex-husband’s benefit. In many cases, the “earning” spouse or ex-spouse may not even know that a benefit is being paid. In fact, the “earning” spouse may not currently be receiving benefits (if, for example, he is waiting until 70 for the maximum benefit). The only requirements are that you have been divorced for at least two years and have not remarried and that your ex-spouse is eligible to receive benefits.⁶  If the “earning spouse” waits beyond FRA to claim benefits, that has no effect on the spousal benefit; it is capped at 50% of the primary earner’s available benefit.

Timing Matters

Divorced and widowed persons can claim spousal benefits at age 62 if the “earning” spouse or ex-spouse has reached FRA, but this will permanently reduce the benefit.⁷ Just as with claiming on your own record, waiting until FRA guarantees the maximum spousal benefit. For example, if the “earning spouse” qualifies for a $2,000 monthly benefit at FRA, the spousal benefit available would be $1,000. But if that same claimant decided to claim at 62, the benefit would be permanently reduced to $650.

An independent and secure retirement is vital, especially during an inflationary and potentially recessionary post-pandemic economy — and for those with reduced incomes. Understanding Social Security benefits is an integral part of your overall retirement financial wellness. If you are divorced and/or widowed, contact your Wealth Advisor to review what benefits may be available.