Divorce in the Golden Years Requires Planning
Monday, November 9th, 2009Divorce among those approaching their so-called “golden years” is much more common than it used to be, but spouses who decide to ride to the sunset on separate horses should consider the timing. These considerations make the drafting of prenuptial agreements for those over 50 more challenging.
The remarriage penalties that come with Social Security should always be remembered. A person receives Social Security 1) based on his or her contributions to the Social Security System and 2) as a spouse of a contributor receiving what is termed “derivative benefits.” After a divorce, a spouse can receive benefits based on the contributions of a former spouse as long as the marriage lasted 10 years. When this is the case, the spouse whose marriage is approaching the 10-year mark should at least consider delaying the divorce. This is often a consideration for the stay-at-home mother who left the work force early in life to be a homemaker. If she remarries, derivative benefits are not available from the contributing spouse. If the dependent spouse has married more than once and each time for 10 or more years, the derivative benefits come from the contributing spouse with the higher benefits.
Derivative Social Security benefits may be available if the former spouse predeceases the dependent spouse. This are widow(er) benefits. The couple need to be married at least 10 years, and the surviving spouse need be only 60, or, if disabled, 50. A dependent spouse in this situation would do well to reconsider if he or she plans to remarry before turning 60. In this case, the surviving spouse receives 100 percent of the benefits, instead of the 50 percent if the former spouse is alive.
Very often alimony awards assume the dependent spouse becomes eligible for Social Security at 65. However, it is important to remember that full benefits apply at different ages: 65 is the normal retirement age for those born before 1937, but after that, the age of normal retirement increases by two-month steps for those born between 1938 to 1960. For those born in 1960 or later, normal retirement is 67. However, reduced benefits are available at 62. The reduction is 20 percent. When a divorced dependent spouse takes benefits at 62, the reduction is 25 percent. Medicare benefits do not begin at age group until 65.
What is means is that any alimony reductions contemplated at 62 should be weighed carefully because it means a significant lifetime loss of benefits, and that provisions must be made for medical benefits until normal retirement.
Pensions provide for a joint and survivor annuity to be paid to the surviving spouse after the death of the participant. If the pension with a joint and survivor annuity is in pay status, there are two assets: the payment to the participant and the joint and survivor annuity.
