Social Security plays a vital role for many retirees, including those who are divorced. Recent changes and adjustments in the program could significantly impact divorced individuals, particularly those relying on spousal or divorce benefits.
Understanding these changes can help you better plan your finances and maximize your benefits.
Eligibility for Spousal or Divorced Benefits
Divorced individuals may be eligible for Social Security spousal benefits if the marriage lasted at least 10 years, the divorced spouse is unmarried, and both individuals are at least 62 years old. If the divorced spouse cares for a qualifying child, age restrictions may not apply.
Spousal benefits can amount to up to 50% of the primary insurance amount (PIA) of the earning spouse. However, starting benefits early, before the full retirement age (FRA), can lead to a reduction in the total benefit amount.
Cost-of-Living Adjustment (COLA) Impact
In 2025, Social Security’s COLA will increase by 2.5%, the lowest level in four years. While this may seem like a slight adjustment, it has a significant impact on spousal or divorced benefits, which are typically smaller than standard benefits.
For instance, with an average monthly spousal benefit of $909, the COLA increase will add less than $23 monthly.
Earnings Test and Its Effect on Divorced Benefits
If you are working while receiving Social Security benefits before reaching your FRA, the earnings test will apply.
The earnings limit for those reaching FRA in the following year is $62,160. If earnings exceed this limit, $1 is deducted from benefits for every $3 earned over the cap. For those not reaching FRA, the annual earnings limit is $23,400, with $1 deducted for every $2 over the limit.
For divorced or spousal benefits, which are often lower than the typical retiree’s benefits, these reductions can have a more noticeable financial impact.
Medicare Premiums and Social Security Checks
Medicare Part B premiums, deducted directly from Social Security benefits, will increase to $185 per month in 2025.
For those receiving smaller checks, such as spousal or divorced benefits, this deduction represents a larger percentage of their income.
With the average spousal benefit increasing by only $23 due to COLA, a $12.70 increase in Medicare premiums can significantly offset the raise.
Effect of Early Retirement on Spousal Benefits
Starting benefits early can lead to substantial reductions in spousal benefits. For every month benefits are claimed before FRA, a reduction of 25/36 of 1% is applied for up to 36 months. Beyond 36 months, an additional reduction of 5/12 of 1% per month applies.
For example, if an employee’s PIA is $1,600 and their spouse begins benefits 36 months before FRA, the base spousal benefit of $800 is reduced by 25%, resulting in a final monthly benefit of $600. This is just 37.5% of the PIA, significantly lower than the standard 50%.
| Factor | Impact | Example Amounts | Details |
|---|---|---|---|
| Marriage Duration | Minimum of 10 years | N/A | Required for spousal or divorced benefits |
| COLA Adjustment | 2.5% increase | $23 monthly (spousal avg) | Lowest increase in four years |
| Earnings Test Limit | $62,160 (reaching FRA) | $23,400 (not reaching FRA) | $1 deduction per $2 or $3 excess |
| Medicare Part B Premiums | $185/month | $12.70 increase | Higher deduction for smaller benefits |
| Early Retirement Reduction | 25% reduction (36 months before FRA) | $800 to $600 | Decreases spousal benefits |
Divorced individuals receiving Social Security benefits must navigate these changes to minimize financial setbacks.
Understanding eligibility requirements, reductions, and adjustments ensures you maximize your benefits and adapt to potential deductions.
FAQs
How does early retirement affect divorced spousal benefits?
Claiming benefits early leads to reductions. For instance, retiring 36 months before FRA results in a 25% decrease in spousal benefits.
Can a divorced individual receive benefits if their ex-spouse hasn’t retired?
Yes, as long as the marriage lasted 10 years, the ex-spouse is at least 62, and the divorced individual is eligible based on other criteria.
What if Medicare premiums exceed my Social Security check?
If Medicare premiums surpass your benefit amount, you will receive a bill for the remaining balance instead of a check.
