Podcast
Social Security

Guided Path 2-4 Divorce, Remarriage, and Death

by
The Financial Call

Guided Path 2-4 Divorce, Remarriage, and Death

Benefits can be complex to understand, especially when remarriage or spouse deaths are involved.

And by not understanding them in detail, we may miss what we are entitled to get.

In this episode, Zacc Call and Laura Hadley chat with Jayson McGinnis, a wealth advisor at Capita Financial Network, to give details regarding divorce, remarriage, and survivor benefits. Additionally, they explain the strategy in which a couple can get divorced to improve their Social Security benefits and then get married again.

Zacc, Laura, and Jayson discuss:

  • The benefits you are entitled to get from the person you marry or divorce, and how to maximize them
  • How ex-spouses aren't notified when they apply for divorce spousal benefits
  • How a higher income could cancel the continuity of survivor benefits
  • The importance of keeping track if your ex-spouse is still alive
  • The time a client had to remarry her current husband to get the benefits of her previous marriage when the husband passed away
  • And more

Read the Full Transcript:

[00:00:00] Welcome to The Financial Call. We are financial advisors on a mission to guide you through the financial planning everyone should have, whether you're doing it yourself or working with a financial advisor, these episodes will help you break down complicated financial topics into practical, actionable steps. Our mission is to guide motivated people to become financially successful. Hey everybody. Welcome back to The Financial Call. This is guided path episode four. Season two today, we're talking all about divorce, remarriage, and death. When it comes to Social Security, all the exciting things sound really morbid when we're talking about Social Security and death, but there are some really good things here that we're gonna cover. We talked about spousal strategies last time with Mike, we've talked about how your benefit is calculated. We did have a refresher as well. Next time. We're going to be talking about Social Security penalties. Now this doesn't apply to everyone. But for the people, it does. It makes a big impact. That's the WEP and the GPO penalty. So we'll talk

[00:01:00] about that next time. And then we'll finish up this season of Social Security with when you should file. We'll have lots of different case studies and examples and go through help people decide when they should file. But today we have Jayson on with us. Jayson is another Social Security expert. Another advisor here at Capita. And he has a fun story to tell to us today. Thanks for having me. It's good to be back. It's been a little while since I've been on and looking forward to jumping in and talking more about the specifics of the case that I worked on a couple years ago and still in the process of working on as it's ongoing, but so you're still working on it. Yeah, there's a, it's like a multi-year type strategy. Multiyear means like marriage divorce, remarriage. So let's just cut to the chase here for a second here. Just say, give a little teaser. And here's the, I was kind of afraid to bring it up. Okay. So here I'm gonna explain what is needed to know. We have to go through some learning here. You need some basics to be able to understand why Jayson is ruining marriages left and right, right. Only once here's what

[00:02:00] happens. There is a legitimate strategy in which it makes sense for a couple to get divorced. In order to improve their Social Security benefits with the potential of getting remarried. Now, we're going to explain why that is. And if you listened to this episode, I don't remember what number it was, Jayson, but it's a ways back. It's probably halfway through we've recorded about 60 episodes. I think it was in the number 20 to 30, somewhere in that range. But if you've listened to this one, you've already gotten the story. Since that episode we've run into this two or three or four times, but today is all about giving you the basic understanding of divorced benefits, remarriage and survivor benefits. And then we'll let Jayson explain what he's doing, because this sounds a little bit crazy to be messing with happy marriages here in order to improve Social Security sound. Okay. They do it for the money. That's what it's for. We figured last time we figured, it was about $640,000 of excess benefits that

[00:03:00] she'll get. If she's willing to go through with this multi marriage step strategy. That's right. So again, we'll get into it. Let's talk first about, so we're gonna cover divorced spouse benefits, survivor benefits, and then some of the rules around remarriage. And if you can get those three categories down, you'll be able to understand what's going on in this particular case. So let's do this, let's dive right into it and Laura, can you lead us out on some of these rules for many of you that know you probably listened to us before. Better at remembering things like this. And so, and I struggle with specifics like this. Go for it. Thanks for putting the pressure on Zacc. That's right. We have a lot of people ask the last time we talked about spousal strategies. If you're married to somebody, what benefits are you entitled to from that person? Well, a lot of people were married to someone for a long time, but then they got divorced. Are they still entitled to a benefit from that person? The answer is. If your marriage lasted 10 years or more with that person, then yes. You still are entitled to benefits from that person. They work very similarly to the spousal benefit. You're

[00:04:00] entitled to half of what that person is eligible for at their full retirement age. And remember that number is called their PIA, their Primary Insurance Amount. So say your ex-spouse's Primary Insurance Amount is $2,000. You are entitled to $1,000 at your full retirement age. With spousal benefits, your spouse has to have filed for their benefits in order for you to get it. That's not the case. If you are divorced, if you're divorced, your ex-spouse just has to be the age of 62 for you to be eligible for that benefit. So don't worry about having to contact your ex spouse and see if they've filed yet or not. I think that's part of the reason why they did that. Right. So you don't have to have coordination with your ex spouse in order to be able to get benefits. Yeah. That makes sense. Exactly. And we're talking about divorce and getting divorced to get some benefits. Social Security does have a rule to prevent this. If your divorce was less than two years ago, then that spouse does need to have filed for benefits. So there is a rule. In there, as long as your divorce was more than two years ago, then they

[00:05:00] just need to be the age of 62. Yeah. Because you could see people taking advantage of this, right? Yeah. So they're both, maybe a couple is both 62 and one spouse doesn't want to file, but the other spouse wants a spousal benefit. And so they're in a little bit of a gridlock there. You can see why they put this rule in place because otherwise they could get divorced. The second spouse could take the spousal benefit and the first spouse doesn't have to file. So they have a two year waiting period on that. Yeah, exactly. And don't worry if your ex spouse has gotten remarried, that doesn't affect your benefit more than one ex spouse or spouse can receive a benefit based off of that worker's record. So don't worry if they've gotten remarried, it doesn't affect you. It doesn't affect anything. You can still get your benefit. As we've done presentations, we've run into people who have been married three or more times to three people with each marriage lasting 10 years or more. So that's 30 years of marriage. But anyway, each one of those spouses could all be taking half of that earner's benefit. And the earner could also be getting a hundred percent of their

[00:06:00] benefit. So we're up to like 250% of that person's benefit being paid out to four different people. Which is weird, but we oftentimes get that question. Like, I don't wanna take anything. Or some people will say like, oh, that's the best thing I got out of that marriage. Right? Yeah. True. and the earner isn't notified when somebody applies as a divorce spouse. So there's not even that, that's a good point. There's not even like the awkward communication, like, oh, I see what they're doing. You know, there's zero communication there. So yeah, those are the basics of the divorce, spousal benefits. Anything that I missed, anything that you guys would add to. Just to be aware of it. I remember I was doing an appointment with a client and it was actually just a referral from one of our clients and this person needed Social Security help. Our client knew that we do Social Security planning. So they sent their friend to us, which is how we end up getting introduced to a lot of people. And this gal had been married three times, like I said, two of those spouses had actually passed away and one was still alive. We'll get into survivor benefits here in a minute. But

[00:07:00] she didn't realize that she was eligible for a benefit off of the one that was alive. Even though she knew about survivor benefits, she didn't realize, so this lady actually has four different benefits that she could be eligible for one of the two survivor benefits or the spousal of the guy who's still alive, or her own benefits. So the one thing I would say about divorced spouse benefits is if you are divorced and your marriage lasted more than 10. And your spouse is 62 years old. It's time to be looking at your strategy or if your spouse is approaching 62. The other thing to keep track of is that spouse alive. I know we talked to you don't have to coordinate with your ex spouse much, but you do need to know whether or not they're alive. And I've had several people say, I don't know, I don't keep track of him anymore. In fact, the less I know about him, the better. The problem is that it changes and this will segue into the next category, right? Survivor benefits. It matters because if that ex-spouse is

[00:08:00] still alive, you are operating under the rules that we've established, that Laura just established. Now, if that ex-spouse passes away, then you have a potential to get a survivor benefit, which is going to be more than the spousal benefit. So survivor benefits, same concept. You need to have been married for 10 years if divorced at the time of death. So this is survivor divorced benefits, right? Yep. So if you have since divorced and then that person passes away, the marriage needed to last for 10 years. If you have been married for nine months and death happens while you're married, then you are eligible for survivor benefits. I think that rule is there to prevent people from hurrying and getting married to somebody on their deathbed, somebody on their death bed who has a lot of income from Social Security. And there is a caveat to that. If the death was caused by an accident, it could be the month after you got married. Right. Tyler always jokes. If it looks like an accident that counts down that , oh man, we're not giving you any ideas. Right,

[00:09:00] right. We do counsel on marriage, but apparently not on this, right? No, but, okay. So survivor benefits are eligible. If you have a spouse who's passed away, it's worth talking about it and looking into. The key thing to understand about survivor benefits is that the larger of the benefits between two spouses is the one that's going to stick around. Let's say both spouses are receiving benefits and one passes away. It doesn't matter who survives. They're going to have a choice between the two benefits and typically the larger one is the one you're going to take. Of course, sometimes when you think about strategy, which is two episodes away, we're going to talk about this where it sometimes makes sense to get as much of the benefit as you can, of the smaller of the two. Because even if just one of you passes away, it's gone. And then maybe you delay the larger of the two benefits a little bit further. And I call that longevity diversification. Right. And that's just a different way of saying, like managing the risk of what if one of you dies early and one of you lives a long time. Well, you're

[00:10:00] covered in both situations if you strategize that way. So it's helpful to understand that it's not always file early or file late when it comes to thinking about survivor benefits. You want to know that one of your benefits is going to disappear. And one of them is going to stick around when one spouse. And that's always the case with Social Security, you get the higher of the two benefits. So when we're talking about spousal benefits, we're talking about survivor benefits. You don't get to keep your personal and the other benefit, you always choose the higher of the two benefits. There used to be a law where you could take a spousal benefit and defer your own benefit. But they've put into that. If you were born after 1954, you cannot do that anymore. We get that question a lot. When you go to file, you have to choose your personal benefit or that spousal or survivor benefit. Yeah, cut off for that January 1st, 1954, if you're before or after that date, you either have it or don't have the grandfathering in of that strategy. That was actually a really nice one. I loved having that around. That was tough. So then

[00:11:00] something to understand is in previous episodes, we talked about filing early, reduces your benefit. That penalty will continue on after the grave. So you guys listen to Mike in the spousal strategies he talked about. I think he talked about his grandma in that episode where grandfather took benefits pretty much as early as he could and ended up getting three quarters of his benefit and got it for approximately a year. So most people would say, good job, you got Social Security. You got as much as you could before you passed away. However, his wife has lived for multiple decades beyond that, and she is still getting a reduced survivor benefit. It would've been better. For him not to have filed and then she could have taken maybe her own benefit. And then at 66, switched to a survivor benefit when it comes to strategy around survivor benefits, the options are, you can actually take survivor benefits as early as 60. This isn't in our notes, but I think this is important. We'll go into the last, in the last episode

[00:12:00] of this season, we'll go into this in more detail, you could take survivor benefits as early as 60. It stops growing after full retirement age, which is either 66 or 67 or somewhere in between based on your year of birth. So think about this. Let's say you are eligible for both your own benefit and a survivor benefit. The strategy is either I'm going to take the survivor benefit from 60 to 70 for that whole decade and let my own benefit grow all the way until 70. And maybe I'm getting 124 to 132% of my benefit. And then you switch to your own at 70 for the rest of your life, or you flip it and you take your own at 62 and then you switch to the survivor benefit when it stops growing at 60. So it's weird, because it's not the same years, right? It's either survivor at 60 on 70 or your own at 62 survivor at 66, depending on which one's bigger, you probably take the larger of the two

[00:13:00] last and that helps dictate the strategy. But usually you wanna run a break even on that again, we'll go over that in future episodes and really that's a personal thing you need to run individually. Oh, and last thing on survivor benefits, there is an earnings limit. So if you are working and I said, you could file for it at 60, but if you're earning too much money, they will take back that survivor benefit. I had a lady who was 61 years old and she needed income and she had a deceased spouse. So we looked into it, but she made just enough money that it was going to cancel out all of the survivor benefits. And so we just decided not to even go through with filing because she'd go through all the work and then they would pull that. There is a point at which you don't have to worry about the reduced survivor or the penalty for working, just like with, when you're filing on your own benefit. Okay. I think that's pretty much it with survivors. Yeah. Just recognize you are eligible for a larger benefit because it's all of what your spouse was getting or would have gotten. Rather

[00:14:00] than half or a third as a spouse. And if they delayed it till 70 and grew their benefit, you are entitled to that delayed benefit that has grown. I was gonna mention one more thing with it. So if your spouse is receiving a benefit, that's the larger of your two benefits, but you're still under your full retirement aid. You can actually stop receiving that survivor benefit and wait until your full retirement age or later. So. Won't be reduced as much. So there are lots of options there. Hopefully that made sense with the survivor, you can choose between your personal and the survivor. You can't do that really with the spousal and your personal, so lots of different rules in there. Hopefully that helps with the basics. Yeah, that's true. I, that was hard for me at first to understand, because like, wait a second, a spousal benefit and your own benefit. They're kind of in the same bag. Yeah. And you can only pull one out of the bag at a. But the survivor benefits in its own bag off on another shelf. And you could go, like you said, you can pick between those. So just recognize there are more options there. Okay. So remarriage with all

[00:15:00] of this, there's not a lot about remarriage in the code. This is something that we just think is important for you to understand a few exceptions associated with remarriage. So let's say that you are on a spousal benefit from a previous spouse. And you get married to a new spouse. You won't be able to continue to get your previous spousal benefit if you are remarried, regardless of when you get married. You can't be getting a spousal benefit off of your ex-husband from 20 years ago, but be married to somebody else who's still alive. Who's still alive. The prior husband. Yeah. Good point if everybody's still alive. Spousal. Yeah. That's a spousal benefit. Good clarification, Jayson. But if they passed away, that's different. This is why, like he, the ex spouse, the ex spouse good point. This is the ex-spouse. This is why it's important that you at least try to keep track of whether or not your ex is. Because if they passed away, there is a chance you could be on a survivor benefit. Even if you are remarried, you just

[00:16:00] cannot get remarried before 60. So that's the key. So Mike had a client that was just almost 60 and he postponed the wedding. He was able to hurry and call. they got the announcement and said, wait, wait, wait, wait, hold on. You can't do this yet. Do you know what's happening here? She didn't realize. And so they postponed several months, got married after 60 and it worked out so she could receive a survivor benefit based off of her deceased expo, and then still get married after each 60 and continue to receive those survivor benefits. Right. So if you get remarried to someone, let's say that in our example, we're talking about this person getting remarried and the new spouse has a pretty high PIA or pretty high Social Security benefit. That new marriage might offer them a spousal benefit, but they have to wait at least one year to start getting those new spousal benefits off of the new spouse. And again, you can see why all these rules, all these technicalities have popped up. You know, that somebody tried to pull a

[00:17:00] fast one on the government and they basically said, wait a second. We don't like this. I bet a lot of people got away with it before they caught it. But, you know, all these weird rules come about because of problems, problems. You got it. You got it. Okay. So this, that comment we were just talking about is your situation, right? Jayson, can you give us a little background without, of course, any personal information, names or anything like that, but let's just talk about some situations. And I know Tyler Williamson here in our office has run into this a couple of times and actually gone through with it. But the bottom line is you have somebody who was married. And their previous spouse passed away. Yeah. So I came across a case where a client, who was married at 23 husband passed away when she was 53 and she was remarried at age 57. And came to me around age 62, when she was looking to retire and looking at what benefits that she has and identified that she was not eligible for her first husband's benefit, which was a hundred percent of his benefit. Because they were married

[00:18:00] for 30 years and he was deceased. So that's when we first met. That's where things were. And just to clarify, explain to the listener, she's not eligible for that benefit, even though they were married for 30 years, she is not eligible as a survivor. Because she got married before age 60. Yeah. Yep. And not knowing and maybe for the better, right. You know, you're right. You would hate for that to be weighing over somebody's head. And thank goodness. There was a way through some strategy and planning that we could put her back in position to get her first. Husband's a hundred percent of his benefit, which is to get divorced and then get remarried because she's now 64. So beyond 60, the rule is you have to be remarried. The most recent marriage needs to have started after 60 years old. Correct. And then if she gets remarried to the same guy, that's fine because her most recent marriage is after 60 years old. People remarry the same person all the time, all the time, which makes sense. So her deadline on this is age 60. Yeah. And that's more strategy based. It made

[00:19:00] sense for her to start her own benefit at 62 and she's working a little so, but she was under the limit. So it made sense to file and delay the deceased spouse's benefit and tell her PIA, her full retirement age of 66 and a half. Which was nice. It gave them like a four year window to plan their divorce plan, their divorce and then plan the remarriage. So then, okay. Going back to the original strategy I was talking about of 60 and then 70 or 62 and 66, she's a 62 66 person. She's right. She's filing for her own 62, because it's not that big compared to the survivor benefit. Then she will switch to the survivor benefit when it stops growing. It will stop growing when she reaches full retirement age, which is 66 and a half, you said? Yep. So then, I mean, it's not necessarily a hard deadline, but she's leaving money on the table every month that she's not on that survivor benefit by age 66 and a half. Exactly. Yeah. And in Tyler's case, it made sense for them to do the remarriage and file and get the deceased spouse's benefit like

[00:20:00] right there right now. Yeah. At that time where in my case made sense to delay. And so yours for overtime and age yours, we haven't gone through the process yet of helping this couple. I think it would be amazing if they let you attend the wedding or, or even attend the divorce, attend the divorce. I think I should be there for both. Yeah. Agree. Are you fair? It was your idea in the first it was my idea. Yeah. Um, but Tyler's situation. So yours has not come to fruition yet, but Tyler's clients they've already done it. They did it. And it worked. And like we knew it would, but it was really cool to see it go all the way through, start to finish. And with my client that I've been working with, we've had three years where we've had reviews and I've had periodic check-ins and that's always an item that we wanna just revisit. I am always curious to know like, Hey, like, is this the. Because they could divorce and remarry at any time. There's no period of time where they have to divorce, file for benefits and then remarry. It's just, they can divorce and remarry, however fast you could do it. So. I love that that's on your annual review, financial planning, annual review checklist. Yeah. Is okay. We've gone through your tax

[00:21:00] strategy. We've reviewed your cash flow. When are you getting divorced and then remarried? Yeah, it's always something that we all laugh at when we first started to look at this strategy and knew that it was legit and it worked for me. It was a little weird. To the client debt like anybody you're married to somebody for 30 years, you lose them from death. And then later find out you're not eligible for their Social Security benefit financially. That was a hit cuz that's a lot of money, but also emotionally the loss. And anytime you're able to recoup something like that, there was an emotional win for this family as well, which that's something that I didn't expect. I wasn't thinking that way as a financial advisor, but it was really cool to witness. I wouldn't have thought to get divorced and remarried. Whose idea was this? Was this your idea originally? Yeah, I mean, I read it. Oh, you look, you just found it in some article somewhere else. Mm-hmm okay. Yeah. And then checked with resources that we use regularly, like check ourselves. Right? Exactly. Jayson just researched divorce articles frequently and came across the social social strategy recreationally. Yeah, no kidding. Does Becky know that you're

[00:22:00] constantly researching divorce strategy? Oh my, yeah, she'd be nervous. Right? If she saw the browser history. Why is my husband searching divorce? Ah, I understand your father-in-law listens to these episodes every once in a while. Right? So we should just clear the air, right? Jayson is not trying to divorce your daughter, right? Nope, absolutely not just trying to make money less quiet. Exactly. You said it was 640,000. That was the total survivor benefit that she was receiving. I think we did a calculation of her own benefit compared to the survivor benefit. And multiplied that over a rough expected life expectancy, you know, and yeah. And the difference was all different. It was about 640,000. Wow. Yep. We compared her benefit because she had earned a benefit. She had worked for 20 years. By the time I started working with her and starting it when she was 40 to her current, husband's the spousal benefit on her current husband's and then also the deceased husband. So we compared all three, it was a 630 to $640,000 difference in benefits over her lifetime. If she lived in. So, I mean, you see what the market's doing right now. It's like

[00:23:00] this strategy's a lot better than what you could earn and, and investments from a risk standpoint in the last six months that's been right. That's right. Where, wow. Okay. So then let's go through as a refresher here and recap basically what's going on. So I think what you need to understand about divorce, spousal benefits from last episode, remarriage and survivor benefits is that this is not as simple, like, oh, I'll go to the Social Security administration. And I'll ask them what benefits I'm eligible for and I'll get them because I can't tell you how many times that we've had clients go and file for a benefit, not knowing they were eligible for something entirely different because no one told them that they were eligible for it. So it's more of a, you need to spend some time reviewing your marriages. If you've been married more than once, how long were you married to each and then explore the benefits associated with each marriage and make sure that you take advantage of anything available there. There's more to survivor benefits. We are not going to go into everything,

[00:24:00] but if you have children who are younger, your children may be eligible for benefits. If they're under 18. Or if they're between 18 and 19 and full-time students, or if they're older than that and permanently disabled before 22. So there are all these different rules that could make your family eligible for various benefits. We even run into child benefits where no one's passed away. And there's just, someone had a child that late in life where their Social Security. They have young young kids and they can get child benefits. We're not gonna go into child benefits, survivor benefits for families beyond the spouse. But hopefully this gives you an understanding that there's a lot to this, and hopefully we can bring it together. In our last episode where we use some of these concepts to help create the break, even analysis and teach people what types of strategies to choose. So next time is an episode about the penalty. That one again is hyper specific to a few people. It may not be applicable to you, but for

[00:25:00] those who are affected by it, it is everything to them. So we need to go through that. And then lastly, strategies overall, anything else to add? No, I think that's everything we covered a lot. That was great. Thanks for joining us, Jayson. Thanks for having me. I think we need to have you back once they go through with it, to find out what they did while divorced like that sounds great. Did they go on a vacation separately? Did they go on a trip? Yes, exactly. Was there another honeymoon? You could really have fun with this. Thanks, Jayson. Thanks. Thanks. This podcast is intended for informational purposes only and is not a substitute for personal advice from Capita. This is not a recommendation offer or solicitation to buy or sell any security. Past performance is not indicative of future results. There can be no assurance. Investment objectives will be achieved. Different types of

[00:26:00] investments involve varying degrees of risk, including the loss of money invested. Therefore it should not be assumed that future performance of any specific investment or investment strategy, including the investments or  investment strategies recommended or proposed by Capita who will be profitable. Further Capita does not provide legal or tax advice. Please consult with your legal or tax professional for advice prior to implementing any strategies discussed during this podcast, certain of the information discussed during this podcast is based upon forward looking statements, information and opinions, including descriptions of Anticipated market changes

[00:27:00] and expectations of future activity. Capita believes that such statements, information and opinions are based upon reasonable estimates and assumptions. However, forward looking statements, information and opinion are inherently uncertain and actual events or results. May. Material from those reflected in the forward looking statements, therefore undo reliance should not be placed on such forward looking statements, information and opinions, opinions, registration with the SEC does not imply a certain level of skill or training.

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