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Social Security Retirement Benefits:
The Last Insult of a Sexist Society

by Steven Abel
[Originally published in Family & Conciliation Courts Review, Jan. 1998, Vol. 36, No. 1, updated November 2007]

An older, divorcing couple rarely has more than one or two assets worth more than their Social Security rights. After a house and pension/retirement plans, Social Security is their next largest "asset." Yet it is rarely considered by their lawyers, mediators, nor the parties themselves.

In fact few divorce lawyers know much more than the oft-quoted rule that each party vests in the other's Social Security account after 10 years of marriage. This means that even a non-working spouse can collect some benefits.

In fact, there is much more to Social Security retirement benefits. The key point that gets missed is that even after 10 years of marriage, the working spouse receives twice as much Social Security as the non-working spouse. For many retiring women, getting half as much Social Security as their ex-husband, is just one more insult from a sexist society. While a non-working husband will get the same half, the problem is largely one affecting older women, who earned less on average while they worked, and who were usually the one who took time off to be with the children while the children were growing up.

This article looks at the Social Security retirement rules that make this so, and how to avoid this unjust result.

First keep in mind that Social Security benefits are protected from most creditors by strict Federal law which completely prevents anyone from taking away any part of Social Security benefits to pay any debt. Second, there is one notable exception: pursuant to court order, the Social Security Administration may take part of retirement benefits for payment of child support or alimony (maintenance). Using this exception, and with a full understanding of Social Security, a couple can make informed decisions about spousal support and equitable distribution, and equalize their combined Social Security benefits.

The Social Security Administration also provides Supplemental Security Income (SSI -- a needs based assistance program), Medicare, and Disability benefits. This article deals only with retirement and survivors benefits. (The rules for Tier 1 Railroad Retirement benefits are extremely similar to the rules for Social Security retirement benefits, and most of the information here can be applied to Railroad Retirement pensions.)

Plain Vanilla

Quarters

Before we get into the maze of divorce rules, let's start with the basic rules for Social Security. In order to collect any Social Security at all a worker must have 40 quarter years of coverage, which usually means 10 years of Social Security contributions. But note that there are special rules for people born before 1929.

Amount

The amount of your monthly Social Security payment depends upon how many years you worked, the amount you earned during the highest 35 years before retirement, your age at retirement, how much your spouse earns, whether a retiree continues to work or collects a government pension, and whether the retiree is married or single.

At age 65 a working wife can collect either the benefits she has earned or half those of her husband's, whichever amount is greater. The same rule applies to husbands, but it is usually the husband who has the higher amount.

As part of the benefit calculation, the Social Security Administration averages your income from age 21 to 62, using your highest 35 years of income. If you left the work force--to have a child, for instance--and don't have 35 years of earnings, Social Security includes as many zero years as necessary to get a 35-year average. This the source of the problem for older women: on average, they have been out of the workforce to fulfill caregiving responsibilities an average of 12 years, so that many have only 20 or 25 years of work at low earnings. Averaging in 10 or 15 years of no earnings, results in very low benefits on their own accounts.

For years before age 60, the administration increases your earnings total to reflect inflation. Earnings after age 60 are averaged in without any change.

Present Maximum & Average Payments

A single retiree receives a maximum of $2,185 in 2008 (up from $1,326 per month in 1997); a married couple can now receive at least 150%, which is $3,277 per month.

The average monthly payment in 2008 is $1,079 for a single retired worker, while the average for couples in which both are receiving benefits is $1,761 per month.

Cost of Living Adjustment

Each January, Social Security benefits are increased based upon the Consumer Price Index. For example, in 2007 there was a 3.3% increase, and in 2008 the increase is 2.3%.

Income Tax

Social Security payments are subject to income tax only if there is additional income. Fifty percent of the total Social Security is taxed if a married couple's Adjusted Gross Income is over $32,000, or over $25,000 for a single retiree. Eighty-five percent of the total Social Security is taxed if a married couple's Adjusted Gross Income is over $44,000, or over $34,000 for a single retiree. The tax rate for Social Security payments is the same as for other ordinary income.

Full Retirement Age

For people born before 1938, that age is 65. Full retirement age gradually rises for those born later, leveling off at 66 for those born between 1943 and 1954 and at age 67 for those born after 1959. Full Retirement Age, based upon year of birth, is shown on the following table:

Age to Receive Full Social Security Benefits

Year of Birth Full Retirement Age
1937 or earlier 65
1938 65 and 2 months
1939 65 and 4 months
1940 65 and 6 months
1941 65 and 8 months
1942 65 and 10 months
1943-1954 66
1955 66 and 2 months
1956 66 and 4 months
1957 66 and 6 months
1958 66 and 8 months
1959 66 and 10 months
1960 or later 67

Early Retirement

A retiree can collect anytime after age 62 by electing to permanently receive a lower payment. At age 62 the reduction is 25%. Each month before age 66 is calculated by taking off 5/12th of 1 percent. (See socialsecurity.gov/retire2/agereduction.htm) A person need to live to age 77 to collect the same amount of total Social Security payments by retiring early as if s/he waited until age 66.

Early Retirement/Part-Time Work

If you are 62 or older (the minimum age for Social Security eligibility) and plan to work part-time after retirement, apply for benefits in January of the year you will retire. Even if you're unsure of your post retirement plans, there's no penalty for filing early. You're not tripped up by the monthly earnings test because the Social Security Administration uses either the monthly or annual test, whichever yields the better result for the retiree. In the first year you receive benefits, the earnings test can be applied on a month-by-month basis rather than on a yearly basis. That way, someone can start receiving full benefits right after retiring, even if his or her earnings earlier in the year exceeded the annual earnings cap.

Late Retirement

If you delay drawing benefits and continue working in a job covered by Social Security, your benefit will go up for every month worked past 65 until the month you turn 70. Depending on your birth year, for every month you wait your benefit will increase by 13/24 of 1 percent -- that's 6.5 percent a year. The delayed retirement credit rate increases every two years until it reaches ½ of 1 percent a month -- 8 percent a year -- for those born in 1943 or later. A person would need to live to age 79.5 to collect the same amount of total Social Security payments by retiring at age 70 as if s/he started collecting at age 66.

Reductions For Working

If you are under full retirement age, and you elect to start receiving Social Security, your payments will be reduced if you earn more than a threshold amount from work ($13,560 in 2008). For every $2 earned above that you must give back $1 of benefits. If you are under full retirement age and your 2008 Social Security is $2,185, earnings of $5,500 per month will wipe out every cent of it. There is no penalty after you reach full retirement age, that is your Social Security payments will not be reduced regardless of how much you earn.

The dollar limit goes up each year, in step with the national average annual wage. But as full retirement age rises, so does the age for the higher allowable earnings.

These penalties only apply to earned income: maintenance/alimony, child support, and equitable distribution payments are not are considered earned income and are not included in determining reductions due to working.

There may be another penalty for working (or receiving maintenance-alimony). Your earnings (and such maintenance payments) could push your income over the threshold for taxing Social Security benefits. As more fully explained above, benefits start being taxable when adjusted gross income, including IRA distributions, tax-free-bond interest, and half of your Social Security benefits, tops $32,000 for couples or $25,000 for single people. Furthermore, you must continue paying Social Security taxes on job earnings at any age.

Two Earners

If a married couple are both eligible for Social Security, they can collect based on the higher of the two earnings records. Each spouse gets at least the amount based on his or her earnings record. But if one spouse earned by far the higher income, the couple would be entitled to 150 percent of that spouse's benefit. After one spouse dies, the survivor will continue to receive 100% of the higher of their individual benefits. The importance of this benefit is underscored by the fact that Social Security provides 90 percent or more of total income for more than four in 10 single (including widowed) women over 65.

Divorce Rules

Own Record

The spouse with the higher earning record will collect Social Security based upon his or her record, regardless of divorce or even later remarriage. In other words, a wife won't receive a benefit based on her ex-husband's Social Security benefits if she could receive a larger benefit based on her own earnings.

The spouse with the lower earnings will be able to collect a benefit based on the higher earning spouse if s/he meets certain rules. Because Social Security is both an insurance and a social welfare program, the higher earner receives 100% regardless of a divorced spouse or even two ex-spouses (both ex-spouses can receive one-half of the 100%, so that all three taken together receive 200%).

10-Year Marriage

The couple must have been married for 10 years before the divorce to collect on the other spouse's earnings. If common law marriage is recognized by the State where the couple resided, then Social Security will recognize the marriage. For example, New York and New Jersey do not recognize common-law marriage, but Pennsylvania does. This 10-year rule also permits spouses to receive Social Security Disability benefits on their ex-spouse's record.

Divorce Before Collecting

If the divorce occurs before either party starts collecting Social Security, both former spouses must be age 62 for the lower wage earner to apply. Second, the lower earner must not have remarried before age 60 or must end that marriage to obtain benefits. THIRD, THE LOWER EARNER MUST BE DIVORCED FOR TWO YEARS TO COLLECT BENEFITS. This two year delay could be a real trap for the unwary. In practical terms it means that if the lower wage earner plans to apply for Social Security retirement benefits within the next two years, then s/he should apply to collect first, then file for divorce second. If the lower earner plans to keep working for the next two years, then this rule will not apply.

The lower earner can collect even though the higher earner never applies for Social Security or is not collecting because s/he is earning too much. The lower earner also benefits from the higher earner's delay in retiring as well as the higher earner's increased Social Security payment due to additional years of work.

Divorce While Collecting

If the divorce occurs after Social Security is being paid, the lower wage earner will continue to receive benefits if:

Death of Higher Earner After Divorce

If the higher earner dies after divorce, the lower earner can still collect if:

Other Spouses

In general, the remarriage of the higher wage earner does not affect the benefits of previous spouses, nor the prospective benefits of the new spouse.

The remarriage of the lower earner has no ill effect if it is after age 60. In addition, after one year or more of remarriage, the lower wage earner can receive benefits based on a new spouse's earnings record (but not the new spouse's ex-spouse) if the new spouse has higher benefits than the former spouse.

Social Security benefits for divorced spouses are not "shared." What an ex-wife receives has no bearing on any benefits received by either her ex-husband or, if he has remarried, his new wife. Similarly, a second wife's benefits will not be affected by any benefits paid to her husband's first wife. For example: where a man is receiving $1,800 a month in Social Security retirement benefits, both a current wife and an ex-wife could receive up to $900 a month based on his record. After his death, each would receive $1,800 a month.

Divorced and Widowed

If your ex-spouse dies, you become a "surviving divorced spouse." And if you are the lower wage earner you get more money, generally the full amount your ex-spouse was eligible to collect. In order to collect, you must meet all of the following conditions:

Obtaining Earnings History

Because your entire earnings history determines the size of your retirement, disability and survivor benefits, you should check your official record, even if you're decades from retirement. Every year you should be receiving a "Social Security Statement." If you don't have one, you can use the Social Security website to download a paper version of a request form to mail in, or call a toll-free telephone number 1-800-772-1213 and ask to have Form 7004, "Request for Earnings and Benefit Estimate Statement" mailed to you. Three to four weeks after you mail back the form, you should receive your "Social Security Statement."

What to Look For

The statement will tell you whether you are a victim of the most common error - having zero earnings posted for a year that you were working. That happens when an employer reports your wages under an incorrect social security number. For an idea of what that kind of mistake could cost, consider the case of a retiree who had consistently earned the maximum amount covered by social security for about 35 years. Two years of data were omitted, which reduced his monthly retirement benefit by $5. That's a $1,200 loss if he collects benefits for 20 years.

Legal Background for Divorce

Social Security Law specifically provides that it is not subject to division under community property settlements, equitable distribution settlements, or other division of property between spouses or former spouses. 45 U.S.C. §407. This provision has been interpreted by the United States Supreme Court in Hisquierdo v Hisquierdo, 439 US 572, 99 Sup. Ct. 802 (1979), to prevent division of future payments of social security retirement benefits. New York Courts have followed this interpretation. See Principe v Principe, 229 AD2d 522, 644 NYS2d 1005 ( 2nd Dept. 1996), Wallach v Wallach, 37 AD3d 707, 831 NYS2d 210 (2nd Dept. 2007). However, payments already received have been treated as marital property. See Wiercinski v Wiercinski, 116 AD2d 789, 497 NYS2d 179 (3rd Dept,. 1986). Further, the courts have approved consideration of social security benefits being received as a factor determining the appropriate amount of maintenance. Thomas v Thomas, 221 AD2d 621, 634 NYS2d 496 (2nd Dept., 1995) and Larosa v Larosa, NYLJ July 29, 2002, p. 27, col.4, (Sup. Ct. Suffolk Cty., 2002).

The Statutory Basis For Equalizing Social Security

New York's Domestic Relations Law provides several possible points to use in arguing for equalization. The first two are in the section dealing with the considerations for equitable distribution. Two of the specific factors listed there are:

The loss of use of the combined Social Security benefit and the receipt of half as much as the other spouse is a part of the future financial circumstances of the ex-wife.

Next, in the maintenance provisions, there are also factors that would allow a court to direct equalization:

Taken together, these provisions are powerful factors in determining a fair distribution of Social Security.

Negotiating Strategies for Divorce

By this point it should be clear that the impact of the 35-year averaging rule will mean that most women will be unable to receive as much Social Security on their own earnings record as they would by taking one-half of their ex-husband's benefit. The reasons for this are simple and well-known:

In short, the average woman will receive about $500 per month while her ex-husband will receive $1,000 per month from Social Security. In a long-term marriage, leaving the parties where they are may not be fair.

In fact the extraordinary unfairness of this situation, led at least one older couple in mediation to equalize all of their retirement benefits, including Social Security, before having lawyers review their proposed arrangement.

In another case, where I represented a wife of 30 years, the parties were bitter and battled about many points. But when I asked the other attorney to consider equalizing Social Security benefits, she reported that the husband agreed immediately. The terms of this settlement provide that the Husband would pay one-half of the difference between their benefits to the Wife as maintenance. By paying the equalizing amount as maintenance, the Husband will not pay income tax on the Social Security, while the Wife will be required to report it as income. This may turn out to be a bit unfair in terms of after-tax income but it's hard to convince anyone to pay taxes on their ex-spouse's maintenance. This result would be avoided if the Social Security law permitted the parties to divvy up the total benefit.

The other advantage to calling this split "maintenance" is that it will allow the ex-wife to garnish the husband's Social Security and obtain direct payment, if he fails to make voluntary payments.

Another way to approach equalization of Social Security benefits would be to treat them like defined benefit pension plans. The difference between the two parties benefits could be reduced to present value and traded against other assets such as the house, stocks, or other investments.

Sample Clause
Article 12
Social Security

As and for additional maintenance to the WIFE, the parties agree to equally divide any Social Security retirement benefits ("benefits" hereafter) received by them on the Husband's Social Security account by payment by the HUSBAND to the WIFE of one-half of the difference between the payments provided by the Social Security Administration to each of them. Such benefits shall be equally divided only at such time as both parties have retired and begin collecting benefits.

The parties may retire at any time after each is eligible to retire pursuant to the United States Social Security law. Neither party shall any right to compel the other to retire at any particular time.

Should either party continue to work after retiring for Social Security purposes, any reduction of benefits shall be disregarded in determining the equal sharing of benefits.

The parties shall notify each other in writing within 30 days after applying for benefits.

The parties shall provide each other with a copy of their annual Internal Revenue Service form 1099-SSA, reporting their annual benefit, or such other similar form as may replace 1099-SSA, within 30 days of receipt of said form.

It is intended that the maintenance provided for by this Article shall be tax deductible by the HUSBAND and taxable income to the WIFE, as presently provided for by the Internal Revenue Code. In the event of any change in the Code, the parties agree to renegotiate this Article so as to conform as closely as possible to the same after-tax impact as originally intended.


Social Security Resource List

The Family Law Practitioner's Guide to Social Security by Carlton D. Stansbury, Section of Family Law, American Bar Association, 750 North Lake Shore Dr., Chicago, IL. The most thorough work on divorce and Social Security, plus a strong chapter on Qualified Medical Child Support Orders, with forms.

Social Security Administration, 1-800-772-1213. 24-hour telephone service to order booklets and Benefits Estimate form. SSA publishes short, client-oriented booklets on every aspect of the various programs, including "What Every Woman Should Know." It also has the 500-page Social Security Handbook. Most are easily available from Social Security's district offices. My experience in researching this article was that the staff was helpful and pleasant. SSA's Website at http://www.ssa.gov is as straightforward and easy to use as any I've tried. It even has the full Social Security Handbook.

The Older Women's League (OWL) has some in-depth papers on the entrenched sexism facing elder women. 666 11th Street, Washington, DC 20001. Check the Fact Sheets button at its website: http://www.owl-national.org

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