Roughly half of the people who get married in the United States will end up divorced. And Social Security is the primary source of income for 72% of unmarried retirees, many of whom are single because they're divorced.
Unfortunately, few financial advisors put those two facts together and focus on how divorce, as well as re-marriage, can affect retirement planning, said Rob Kron, head of advisor education initiatives at the New York-based investment firm BlackRock.
"Social Security is the one purchase that everyone in America makes with complete and total ignorance," Kron said. "You get a job and see your paycheck is a little lighter and you haven't any idea what you bought for that."
Although Social Security sends out annual statements that help pre-retirees estimate their future benefits, the statements are largely silent on the topic of divorce, he said.
"Even divorce attorneys are often not aware of how the Social Security benefit works," he said. "People just don't know what they don't know."
In fact, divorced people often make costly errors because they don't understand spousal and survivor benefits, said Leslie Walker, communications director for the Social Security Administration in Richmond, Calif. "The closer you get to retirement age, the more you need to know the rules."
Below is a look at some rules that could apply. If you have specific questions regarding your situation, Kron urged that you take advantage of the Social Security Administration's help line at (800) 772-1213.
"Social Security representatives can be very helpful, but they're reactive," he said. "They're not going to come to you. They'll sit at the other end of the phone until you ask."
If you were married for at least 10 years to someone who paid into the Social Security system, you are entitled to a spousal benefit, even if you are divorced from that person. Eligibility does not depend on whether or not you also worked and paid into the system.
Spousal benefits, if claimed at your full retirement age, usually amount to 50% of the wage earner's full benefit. If you claim benefits early, the amount you get is reduced.
If you worked for 10 years and paid into the Social Security system, you also may be entitled to benefits on your own work record. In that case you must choose — you cannot claim both your own and spousal benefits. You can, however, claim the one that gives you the most money.
60 is the magic number
If you remarry before age 60, you lose your ability to claim spousal or survivor benefits based on a former spouse, Walker said. If you remarry after age 60, all of your rights to spousal and survivor benefits based on your former spouse's record are retained for your lifetime.
Disaster stories about remarrying too soon are legion, Walker said. For example, one couple, who married when they were both age 58, had based their retirement projections on claiming Social Security spousal benefits based on the records of their former spouses. They found out too late that those benefits would no longer be available to them.
But there was a solution — the couple could divorce. Then, when they reached 60, they could each claim spousal benefits based on the earnings of their former spouses.
And at that point they could re-marry without hurting their spousal benefits.
Multiple spousal benefits
If you are single now but were married to more than one person for more than 10 years each, you may be eligible for spousal benefits based on the earnings records of each of those former spouses.
You don't get to add up all the benefits, of course, but you do get to choose the benefit that's the best. So, if one spouse was an executive with maximum Social Security earnings, the next spouse was a low-wage earner and the third worked in a job that didn't earn Social Security credits, you can claim the benefit from the first spouse, which is likely to amount to the most money.
Survivor benefits are best
But what if spouse No. 2 died before you claimed Social Security benefits? Then you would be entitled to spousal benefits on spouse No. 1 or survivor benefits on spouse No. 2. Because survivor benefits are 100% of the working person's entitlement and spousal benefits are just 50%, the survivor benefits may be more generous, even if spouse No. 2 didn't earn as much. You can claim the one that pays the most.