Divorce: Economic Issues

The Social Security program provides more than twelve different types of benefits—each with its own unique set of eligibility rules and often with different benefits structures. To understand the different benefits provided by the program, it is useful first to distinguish the difference between primary and secondary beneficiaries. A primary beneficiary is a person who receives a benefit based on his or her own work in Social Security-covered employment. In contrast, a secondary beneficiary is a person who receives a benefit because of his or her relationship to a retired worker, a disabled worker, a deceased insured person, or an insured ex-spouse not yet receiving benefits.

One group of secondary beneficiaries relates to spouses: the aged spouse benefit, the child in care spouse benefit, and the divorced spouse benefit. Regarding the last, someone who is sixty-two years old (or older) and was married to a person for ten or more years is eligible to receive a divorced spouse benefit if he or she is divorced from that person and the person is a retired or disabled worker or is a living insured person sixty-two years old or older.

Another type of eligibility arises from being the survivor of a deceased insured person. A divorced person who is at least sixty years old and whose ex-spouse is deceased is eligible to receive a surviving divorced spouse benefit if the marriage to the ex-spouse lasted ten years or more. In addition, divorced persons who survive their ex-spouses can qualify for child in care benefits or disabled survivor benefits.

The amount paid to a secondary depends on a complex calculation of lifetime average earnings, determining what is called the "primary insurance amount" (PIA). The PIA is calculated from the lifetime earnings record of either the retired/disabled person or the insured person. The benefit amount of an aged spouse or a divorced spouse retiring at the "normal retirement age" (currently age sixty-five but scheduled to rise gradually to age sixty-seven) is equal to 50 percent of the calculated PIA. Thus, generally the worker receives an amount twice as large as the worker's spouse or ex-spouse. However, an aged widow(er) or a surviving divorced spouse can receive a benefit equal to 100 percent of the PIA if the benefit received at the "normal retirement age." All benefits before the "normal retirement age" (regardless of marital status) are reduced on the basis of actuarial calculations using estimates of average life expectancy at any particular "early retirement age."

To receive secondary benefits, a person cannot be married to a new partner. A new marriage generally makes a person ineligible to receive, for example, a divorced spouse benefit. Also, a remarried person cannot collect a surviving divorced spouse benefit (unless his or her current marriage occurred after the age of sixty).

Another complexity of the benefit calculation arises when the divorced person is also eligible for a primary benefit, that is, a benefit based on his/her own work history. When a person's primary benefit exceeds his or her secondary benefit, only the primary benefit is paid. Thus, most aged women who are divorced do not receive divorced spouse benefits because of their own work history that entitles them to higher primary benefits. However, the benefit determination is not either-or decision. In many cases a person may receive both a primary benefit and part of a secondary benefit. The primary benefit is paid in full but, if relatively small, is supplemented by the spouse benefit up to the amount the person would have received as a spouse without any work history. And if an individual is eligible for two or more secondary benefits, generally only the highest secondary benefit is paid. Thus, the general operative principle is that an individual cannot pyramid benefits based on two or more eligibility statuses but can receive only a (combination of) benefits(s) equal to the largest of the eligible benefits.