Social Security Spousal Support Law Ends

The Social Security spousal benefit rule, a provision that allowed spouses to maximize their retirement benefits by switching between individual and spousal benefits, ended for its last eligible recipients in 2024. For decades, this rule enabled many couples to boost their financial security in retirement. However, since the Bipartisan Budget Act of 2015, this option has been gradually phased out. The final eligible retirees—those who turned 70 on January 1, 2024—were the last to take advantage of it.

With the rule no longer available, divorced spouses may find planning for retirement more complex, as they now need alternative strategies to ensure adequate income in their later years. In this article, we’ll explain the end of the spousal switching law and explore ways for divorced individuals to navigate Social Security benefits and other retirement planning options.

The End of the Social Security Spousal Switching Rule

The spousal switching rule, introduced to help married couples maximize their Social Security payouts, allowed recipients to claim spousal benefits while delaying their own retirement benefits until age 70. By delaying, they could boost their own retirement benefits through delayed credits, which significantly increased their monthly benefit amount at age 70.

Under the Bipartisan Budget Act of 2015, however, Congress eliminated this option for people born on or after January 1, 1954. The result was that anyone who turned 62 after January 1, 2016, could no longer use the rule, while those who reached 70 in 2024 were the last group able to switch to maximize their benefits. For divorced spouses, who may rely on spousal benefits for financial support after retiring, the law’s end has left a significant gap.

Now, divorced individuals may need a new strategy for maximizing retirement income after a split, particularly those who planned on utilizing the spousal benefit switch.

Social Security Benefits for Divorced Spouses: What’s Still Available

While the spousal switching rule has ended, the Social Security Administration (SSA) still provides benefits to divorced spouses. To qualify for these spousal benefits based on an ex-spouse’s work record:

1. The marriage must have lasted at least 10 years.
2. The recipient must be at least 62 years old.
3. The recipient cannot be remarried.
4. The ex-spouse must be eligible for Social Security benefits. However, they do not need to be currently claiming those benefits.

For divorced spouses who meet these criteria, the SSA allows for a spousal benefit equal to half of the ex-spouse’s full retirement benefit amount if claimed at the recipient’s full retirement age. However, unlike the former rule, this benefit is capped at 50% of the ex-spouse’s benefit and does not increase by waiting until age 70. This means that, for divorced spouses, the age 70 maximization strategy is no longer an option.

Planning for Retirement After Divorce

Divorce often brings financial challenges, particularly in retirement planning. Without the flexibility of the spousal switching rule, it’s critical for divorced individuals to explore other ways to secure their income. Here are key strategies for maximizing retirement funds after a divorce:

1. Understand Your Options

For divorced individuals preparing to retire, Social Security benefits can be a valuable source of income, especially if your own work record does not yield a high monthly benefit. Review your options for claiming either your own or your spousal benefit, and consider the timing carefully. Claiming benefits early, at age 62, will reduce your benefits permanently, which can have a lasting impact. Waiting until full retirement age (currently 67 for most) will maximize your benefit as much as possible, though it won’t reach the higher amounts allowed under the old rule.

2. Reevaluate Your Retirement Savings and Investments

Retirement accounts like 401(k)s and IRAs are often divided in a divorce settlement. If you’re preparing to retire and your savings were significantly affected by the division, it may be beneficial to revisit your goals and investment strategy. Even modest contributions to an IRA or 401(k), if you’re still working, can help bolster your income.

Consider consulting a financial planner who can offer guidance on whether adjusting your investment portfolio, boosting contributions, or diversifying assets would help compensate for any financial gaps post-divorce.

3. Consider Delayed Retirement

If feasible, working a few extra years can have a big impact on retirement security. Continuing to work until 67 or later means you’ll not only continue to earn income but also increase your Social Security benefit if you claim later rather than at the earliest eligibility age. Extra years of work can also give you more time to contribute to savings accounts and invest, potentially making up for assets lost in a divorce.

4. Look Into Health Savings Accounts (HSAs)

If you’re enrolled in a high-deductible health plan, contributing to an HSA can be a tax-advantaged way to save for healthcare costs in retirement. Contributions to an HSA grow tax-free and can be withdrawn tax-free for qualified medical expenses. Given that healthcare can be a significant expense in retirement, an HSA can provide some financial protection and reduce reliance on other savings or funds.

5. Review Your Estate Plan and Beneficiaries

It’s essential to update your estate plan and beneficiary designations after a divorce. This includes reviewing the beneficiaries on any remaining retirement accounts, life insurance policies, or other assets to reflect your post-divorce wishes. Additionally, consider whether establishing a trust, updating your will, or other estate planning steps would benefit your financial goals after retiring.

Professional Legal Counsel for Retirement Benefits During Divorce

The end of the spousal switching rule marks a significant change for those preparing to retire, especially divorced individuals who planned on using this option to maximize benefits. While Social Security remains an important source of income, maximizing it requires careful planning. From strategic timing in filing benefits to optimizing other savings accounts, there are still ways to achieve a financially secure retirement even after a divorce.At Kaspar & Lugay LLP, we specialize in helping individuals through divorce, including navigating the complexities of Social Security and retirement planning in California. Contact us today to learn how we can help you secure a stable financial future post-divorce.