Divorcing older couples must see financial hurdles to clear them

Oftentimes we do not realize how little we know until it is too late. As we observed in an article not long ago, this is a dilemma that some older Minnesota couples considering divorce may end up facing.

Going through a divorce is never easy. One of the major financial hurdles that every divorcing couple must face is making the transition from a two-income home to a one-income home. With retirement on the horizon, financial considerations become increasingly crucial when a divorce is sought later in life. 

When faced with divorce, older individuals have a limited amount of time to make plans for retirement. While the allocation of the various forms of financial and retirement accounts are addressed during the divorce proceeding, many individuals are left in the dark as to their right to claim Social Security under their ex-spouse's earning record. Investment News recently compiled a list of the top 10 Social Security Questions that arise in light of divorce.

An individual's eligibility to collect on the benefits of an ex-spouse is a matter of federal law and, as such, is typically not addressed in their divorce decree. This eligibility is not a guarantee, however. In order to collect Social Security benefits based upon an ex-spouse's benefits, the couple must have been married at least 10 years. If eligible, these benefits are equal to what could have been claimed had the divorce not occurred.

Remarriage affects your eligibility to collect on a former spouse's benefit. Generally, remarriage extinguishes the right to collect on a former-spouse's benefit. There are some exceptions to this rule, however. For instance, if an individual remarries after they have begun collecting on their spouse's benefit, their new marriage does not revoke their right to continue collecting these benefits.

A divorced individual can file for benefits independent of the other spouse if both parties are 62 and if two years has passed since the divorce was finalized. If an ex-spouse dies, the surviving ex-spouse can claim a survivor benefit worth 100 percent of what the deceased former partner was receiving or could have received at the time of death, even if the deceased had remarried.

The nature of retirement benefits accrued through an individual's employer may also impact their ability to claim Social Security benefits. As such, it is important that the entire picture is looked at when making financial decisions in the face of divorce.