Statistics show that the concept ‘marriage is forever’ is a fading one. It’s especially interesting to note the growing rate of divorce among older couples; the divorce rate for people over 50 has doubled since 1990. According to a study by the National Center for Family and Marriage Research at Bowling Green State University, divorce among people over the age of 50 make up 25% of all divorce cases.
Fee-only financial advisors can grow your business, and expertise, by being aware of this trend and preparing to help individuals navigate through the financial difficulties as a result of divorce. The rise in divorces for couples over 50 creates a niche market for those financial advisors who wish to specialize in providing value to this growing segment particularly when it comes to Social Security planning.
Older Divorcees and Social Security
I have advised a soon-to-be divorcee over the course of the last several months. This individual has worked infrequently for most of her life. Because of her role as a stay-at-home mother, she has little personal savings. And now, as a soon-to-be divorcee, she does not yet know what her annual income will be as she will rely on her former husband’s alimony.
In a few years, when she reaches age 62, she may be entitled to a spike in income. Why? Because 62 (note: this age will be higher for younger individuals in the future) is the age that individuals can file for Social Security and receive spousal benefits. The Social Security Administration requires that couples are married for 10 years and have been divorced at least two years to receive these benefits. My client qualifies.
In many states, spousal support, or alimony, is designed to act as a bridge to becoming self-efficient. If the spouse receiving spousal benefits returns to work, her benefits may be capped due to earnings limitations set forth by the Social Security Administration.
In addition to the alimony an individual receives, one may also qualify for the Social Security spousal benefit of her divorced spouse. Individuals can collect the Social Security spousal benefit as long as they do not remarry. Even if the supporting spouse remarries, the collecting individual is still eligible for the spousal benefit. In the case of my client, she will likely collect the spousal benefit, unless she remarries while she’s receiving these benefits.
Timing Is Key
In addition to Social Security spousal benefits, there is another benefit out there that fee-only financial advisors should understand to better advise the post-50 divorcee segment. It is important to remember that divorcees will also be collecting individual Social Security benefits. If the client in my case files for her spousal benefit when she is 62 and waits to collect her Social Security benefit at the latest possible time (age 70), she will maximize her total benefits. The correct timing of these collections is essential to providing the greatest value to older divorced clients.
With the magnitude of financial routes to take, maximizing Social Security benefits can be difficult, especially for divorcees dealing with an array of other changes and hardships. While it can be frustrating for an older divorcee to navigate any decisions, let alone financial decisions, it is an opportunity for fee-only financial advisors to help provide value and support.
Check out the recording of our webinar on maximizing Social Security benefits and learn more about how you can expand your fee-only financial advising business by understanding this important topic.