How does divorce affect Social Security benefits?

Some people don’t realize that after a divorce, you can choose whether to claim retirement benefits based on your own earnings record or on your ex-spouse’s earnings record. Of course, that’s provided certain requirements are met.

What requirements must be met?

You could qualify to take benefits based on your ex-spouse’s record if you meet all these conditions:

• Your ex is currently entitled to receive Social Security retirement or disability benefits (meaning they were employed and accumulated enough credits over time);
• You and your ex were married for at least 10 years before the divorce became final;
• You are not currently married;
• You are age 62 or older, and
• You aren’t entitled to collect benefits based on your own earnings record that is more than half of your ex-spouse’s benefits.

If you are age 62 or older and you’ve been divorced for at least two years, you can receive Social Security benefits based on your former spouse’s earnings regardless of whether they have started taking benefits. This assumes that the four requirements listed have been satisfied.

How much can you receive?

If you begin receiving benefits at your full retirement age (66 to 67, depending on your year of birth), your spousal benefit is equal to 50% of your ex-spouse’s full retirement benefit (or disability benefit). For example, if your ex-spouse’s benefit at full retirement age is $1,500, then your spousal benefit would be $750. However, there are several factors that may affect how much you ultimately receive.

For example, if you’re eligible for benefits based on your own earnings record then the Social Security Administration (SSA) will pay that amount first. But if you can receive a higher benefit based on your ex-spouse’s record, then you’ll receive a combination of benefits that equals the higher amount.

When you begin receiving benefits will also affect the amount you get. You can start benefits as early as age 62, but your monthly benefit will be reduced (reduction applies whether the benefit is based on your own earnings record or on your ex-spouse’s.) This reduction is permanent. In other words, if you choose to receive reduced benefits at age 62, you will not be entitled to collect full benefits when you reach your full retirement age. If you decide to receive benefits later than your full retirement age, your benefit will increase by 8% for each year you wait past your full retirement age, up until age 70 (increase applies only if benefit is based on your own earnings record).

In addition, if you work after you begin receiving benefits (before you reach your full retirement age) and your earnings exceed the annual earnings limit that applies, your Social Security benefit may be reduced. Receiving a pension based on work not covered by Social Security could also reduce your benefits.

If you decide not to collect retirement benefits until full retirement age, you may be able to maximize your Social Security income by claiming your spousal benefit first. The option to file a restricted application for spousal benefits may be available to you if you were born on January 1, 1954, or earlier. By opting to receive your spousal benefit at full retirement age, you can delay claiming benefits based on your own earnings record (up until age 70) so you can continue to earn delayed retirement credits. This can boost your benefit by as much as 32%. Talk to us before you decide when to begin receiving Social Security benefits because it’s a complicated decision.

Does remarriage affect Social Security benefits?

If your ex-spouse gets remarried and you don’t, your Social Security entitlement will be not be changed. But if you have remarried, you can’t collect benefits based on your ex-spouse’s record (unless your current marriage ends). Any spousal benefits you receive will instead be based on your current spouse’s earnings record.

What if your ex-spouse has died?

You may also qualify for Social Security survivors’ benefits based on your ex-spouse’s earnings record if your former spouse has died. You may qualify if:

• Your ex-spouse was entitled to Social Security benefits;
• You and your ex-spouse had been married to each other for at least 10 years before the divorce was finalized;
• You are age 60 or over (or are between ages 50 and 60 and are disabled);
• You aren’t currently married, and
• You aren’t entitled to a retirement benefit that is equal to or greater than 100 percent of your deceased spouse’s benefit

If you meet those conditions, you will be entitled to full survivors’ benefits; that is, you will collect an amount equal to 100% of your former spouse’s benefits, not just one-half. However, if you’re younger than full retirement age, your benefits will be reduced for each month that you took benefits early. So benefits at age 60 will be 71.5% of your former spouse’s. It’s also important to note that a divorced spouse may be entitled to a benefit if caring for the dependent child (under age 16 or disabled) of his or her deceased former spouse. Typically, the amount of a mother or father’s benefit is equal to 75% of the deceased spouse’s benefit. Unlike a spousal benefit, that benefit isn’t necessary for the marriage to have lasted 10 years.
 

A custodian is a financial institution with regulatory responsibilities for an investor’s securities, a “house” where your investments live. Blue Spark Capital Advisors is changing custodians to Fidelity from TD, a move that we believe is better for our clients in several ways. You should have received the paperwork, call us with any questions.

Investments that you entrust to our firm are now placed in custody with Fidelity’s clearing firm, National Financial Services. A clearing firm is an organization that handles the execution, clearance, and settlement of transactions. Fidelity has 70 years of financial management experience and a reputation for integrity and service.

Fidelity also aligns with our philosophy and belief in privately owned firms. Privately owned firms are able to make decisions based on long-term benefits for its clients –rather the short-term needs of stockholders of a publicly traded company. For example, Fidelity reinvests a large portion of its profits in technology and customer services.

Safeguarding Assets

Fidelity protects customer assets held in custody through its relationship with National Financial Services (NFS). NFS is subject to the
rules and regulations of the Securities and Exchange Commission (SEC) and other regulatory organizations. These organizations have established a number of financial responsibility rules and regulations that NFS follows to help safeguard your assets, including keeping accurate records of your assets and maintaining net capital at required levels. In compliance with SEC rules, NFS has its financial information audited every year by an independent public accounting firm. Further, as a member of the New York Stock Exchange (NYSE) and the Financial Industry Regulatory Authority (FINRA) and registered with the SEC, NFS is subject to their regulatory oversight and examinations.

Excess Coverage

Fidelity has arranged for insurance protectionbeyond the coverage through the Securities Investor Protection Corporation (SIPC). While your assetsare covered by the SIPC up to $500,000, including cash claims limited to $250,000, Fidelity provides supplemental protection that covers your account over and above this SIPC coverage. NFS provides for brokerage accounts additional coverage from Lloyd’s of London together with other insurers.

The excess of SIPC coverage would be used when SIPC coverage is exhausted. Like SIPC protection, “excess of SIPC protection” does not cover investment losses in customer accounts due to market fluctuations or other claims for losses incurred while broker-dealers remain in business. Total aggregate excess of SIPC coverage available through NFS’s “excess of SIPC” policy is $1 billion. Within NFS’s excess of SIPC coverage, there is no per-customer dollar limit on coverage of securities, but there is a per-customer limit of $1.9 million on coverage of cash. This is the maximum excess of SIPC protection currently available in the brokerage industry.

By Matt Carey
Divorce is often traumatic, with a large emotional impact on all parties. And the financial ramifications of dissolving a marriage can be no less devastating. I’ve found that many put the financial considerations last on their list. It’s very easy to want to “get it over with” but many have regrets later. That’s why it is important to bring on professionals who specialize in financially equitable divorce settlements early in the process, to make divorce easier. It increases the probability of a settlement that truly addresses your long-term financial needs.

For many, an attorney is the first — and sometimes only — professional they contact. While the attorney is a specialist in divorce law and an invaluable source of legal counsel, they are typically not financial experts.

Why a CDFA?

I have chosen to help my clients through the CDFA (Certified Divorce Financial Analyst) course of study. A CDFA professional helps clients and their lawyers understand how the financial decisions made today will impact the future; for example, how to split a retirement plan and who gets to keep the house. I help clients make financial sense of proposals, providing data that shows the financial effect far into the future of any given divorce settlement. Many don’t fully understand the long-term tax implications of settlements, or a lawyer doesn’t have time to analyze pension payouts or future earnings capabilities. The question of who gets the house is fraught with emotion, and sometimes people can make a choice that is not right for them.

What’s a QDRO?

Retirement benefits in a divorce are especially critical for women who may have little savings of their own. Under federal law, work retirement plans generally can’t be assigned, but the important exception to this rule is for “qualified domestic relations orders,” commonly known as QDROs. In a divorce, you can get a state court order awarding you all or part of a spouse’s retirement plan, and it becomes your own retirement plan. The plan is required to follow the terms of any order that meets federal QDRO requirements.

For example, you could be awarded part of your spouse’s 401(k) plan benefit as of a certain date or part of your spouse’s pension. But there are several ways to actually divide those benefits, so it’s very important to analyze all options when your attorney is negotiating and drafting QDROs — especially for defined benefit plans. In defined benefit plans, a QDRO may need to address survivor benefits, benefits earned after the divorce, plan subsidies, COLAs, and other complex issues. For example, a QDRO may treat you as the surviving spouse even if your spouse subsequently remarries. The key takeaway here is that these rules exist for your benefit.

Divorce is never easy. But knowing your options from the beginning, before irrevocable decisions are made, can ease the burden.

Why are they facing financial challenges?

Social Security and Medicare are funded primarily through the collection of payroll taxes. Because of demographic and economic factors, fewer workers are paying into Social Security and Medicare than in the past, resulting in decreasing income from the payroll tax. The strain on the trust funds is also worsening as large numbers reach retirement age and live longer, and as health-care costs rise.

How to address these challenges?

Both urge Congress to address the financial challenges facing these programs soon, so that solutions will be less drastic and may be implemented gradually, lessening the impact on the public. Combining solutions may also lessen the impact of any one effort.
Some long-term Social Security proposals on the table are:

• Raising the current Social Security payroll tax rate. According to this year’s report, an immediate and permanent payroll tax increase of 2.76 percentage points would be necessary to address the long-range revenue shortfall (3.98 percentage points if the increase started in 2034).
• Raising the ceiling on wages subject to Social Security payroll taxes (which was $127,200 in 2017).
• Raising the full retirement age beyond the current 67 (for anyone born in 1960 or later).
• Reducing future benefits. Scheduled benefits would have to be reduced by about 17% for all current and future beneficiaries, or by about 20% if reductions were applied only to those who initially become eligible for benefits in 2017 or later, the report said.
• Changing the benefit formula to calculate benefits.
• Calculating the annual cost-of-living adjustment for benefits differently.

According to the Medicare Trustees Report, to keep the HI Trust Fund solvent for the long-term (75 years), the current 2.90% payroll tax would need to be increased immediately to 3.54% or expenditures reduced immediately by 14%. Alternatively, other tax or benefit changes could be implemented gradually and might be even more drastic.

What are the Social Security and Medicare Trust Funds?

Social Security: The Social Security program consists of two parts. Retired workers, their families, and survivors of workers receive monthly benefits under the Old-Age and Survivors Insurance (OASI) program; disabled workers and their families receive monthly benefits under the Disability Insurance (DI) program. The combined programs are referred to as OASDI. Each program has a trust fund that holds Social Security payroll taxes collected to pay benefits. Other income (reimbursements from the General Fund of the U.S. Treasury and income tax revenue from benefit taxation) is also deposited in these accounts. Money that is not needed in the current year to pay benefits and administrative costs is invested (by law) in special Treasury bonds that are guaranteed by the U.S. government and earn interest. As a result, the Social Security Trust Funds have reserves that could be used to cover benefit obligations if payroll tax income was insufficient to pay full benefits.
Medicare: There are two Medicare trust funds. The Hospital Insurance (HI) Trust Fund pays for inpatient and hospital care (Medicare Part A costs). The Supplementary Medical Insurance (SMI) Trust Fund has two separate accounts, one covering Medicare Part B (which helps pay for physician and outpatient costs) and one covering Medicare Part D (which helps cover the prescription drug benefit).

Trustees Report highlights: Social Security

• The combined trust fund reserves (OASDI) are still increasing, but are growing more slowly than costs. The U.S. Treasury will need to start withdrawing from reserves to help pay benefits in 2022, when annual program costs are projected to exceed total income. The Trustees project that the combined trust fund reserves will be depleted in 2034, the same year projected in last year’s report, unless Congress acts.
  Once the combined trust fund reserves are depleted, payroll tax revenue alone should still be sufficient to pay about 77% of scheduled benefits for 2034, with the percentage falling gradually to 73% by 2091.
• The OASI Trust Fund, considered separately, is projected to be depleted in 2035, the same year projected in last year’s report. Payroll tax revenue alone would then be sufficient to pay 75% of scheduled OASI benefits.
• The DI Trust Fund is expected to be depleted in 2028, five years later than projected in last year’s report. Both benefit applications and the total number of disabled workers currently receiving benefits have been declining. Once the DI Trust Fund is depleted, payroll tax revenue alone would be sufficient to pay 93% of scheduled benefits.
• Based on the assumptions in this year’s report, the Social Security Administration is projecting that beneficiaries will receive a cost-of-living adjustment (COLA) of 2.2% for 2018.

Trustees Report highlights: Medicare

• Annual costs for the Medicare program exceeded tax income annually from 2008 to 2015. The Trustees project surpluses in 2016 through 2022 and a return to deficits thereafter.
• The HI Trust Fund is projected to be depleted in 2029, one year later than projected last year. Once the HI Trust Fund is depleted, tax and premium income would still cover 88% of estimated program costs, declining to 81% by 2050, and then gradually increasing to 88% by 2091. The Trustees note that long-range projections of Medicare costs are highly uncertain.

You can read a combined summary of the 2017 Social Security and Medicare Trustees Reports and a full copy of the Social Security report at ssa.gov. You can find the full Medicare report at cms.gov.

Financial advisors recommend couples thinking about same-sex financial planning have a discussion about how the Supreme Court decision will affect their finances and consider the ramifications of all possible outcomes. “One size is not for all, so one broad answer wouldn’t address the factors involved. The financial choices are driven by individual goals and emotions,” said Maura Griffin, founder and CEO of Blue Spark Capital Advisors.

High financial stakes for 2M in same-sex couples

The Supreme Court heard arguments Tuesday about whether all US states must issue marriage licenses to same-sex couples under the Constitution, and whether they must recognize same-sex marriages performed in other states where they are now legal.

A decision is not expected until June. But whatever the ruling, the financial implications could be huge for same-sex couples.

“The Supreme Court decision will affect where same-sex couples live, where they travel and where they die,” said Scott Squillace, an estate planning attorney in Boston and author of “Whether to Wed: A Legal and Tax Guide for Gay and Lesbian Couples. “It’s going to be a really big deal for everyone.”

For starters, individuals in a same-sex couple will be able to gift unlimited assets to their spouse, free from federal taxes, either during life or at death, said Tim Bresnahan, a vice president at Northern Trust’s wealth planning advisory services group with a focus on planning for LGBT individuals. (Under current law, you may have to pay tax on gifts of more than $14,000 in a year to any person other than your spouse.)

Changes to same-sex financial planning as a result of decision

A Supreme Court decision against same-sex marriage would also dramatically change the financial plans for same-sex couples who were married before the court ruling.

“There are estate-planning issues and parental rights to consider in terms of holistic financial planning. And there are work-arounds for those who commit to living together,” said Maura Griffin, a certified financial planner and CEO of Blue Spark Capital Advisors in New York City.

For example, same-sex couples—whether married or not—can use a trust to protect their assets in the event of illness or death, which allows the assets held in trust to pass to beneficiaries outside of the often lengthy probate process, Bresnahan said.

Financial advisors recommend same-sex couples have a discussion about how the Supreme Court decision will affect their finances and consider the ramifications of all possible outcomes. “One size is not for all, so one broad answer wouldn’t address the factors involved. The financial choices are driven by individual goals and emotions,” Griffin said.

Currently, 36 states and the District of Columbia allow same-sex couples to marry. The status of same-sex marriages in Alabama is in dispute by conflicting state and federal rulings. Any ruling for gay challengers in the four appeals before the Supreme Court consolidated under the title “Obergefell v. Hodges” would make same-sex marriage legal nationwide, adding 14 states to those that already permit it.

There are about 390,000 married same-sex couples in the country, according to the latest Gallup survey data. But an additional estimated 1.2 million adults are living in same-sex domestic partnerships.
“If the court rules in favor of marriage equality, the impact on those married LGBT couples living in states that do not recognize their marriage will be tremendous,” said Ryan Svatora, a financial advisor with Zinn-Ray-Svatora Wealth Management Group in New York City. “With their marriage finally recognized, the patchwork of federal and state benefits will end, full equality will be realized, and numerous financial benefits will finally be at the couples’ disposal.”

CNBC News: Blue Spark’s Maura Griffin on Same-Sex Financial Planning – READ THE ARTICLE

By Tom Anderson Personal Finance Writer, CNBC

Valeria Surkovaite ’14 visited Maura Griffin at Blue Spark Capital Advisors offices while she was in New York City and had a meeting with Founder, CEO & fellow Wilbraham Monson Academy* alumna Maura Griffin. Valeria told WMA alumni magazine, “It was extremely nice to meet a fellow alumna and although our graduation years are far apart, we were able to relate to each other by sharing similar experiences. Her story inspired and encouraged me to continue working hard and committing to my dreams.”Valeria interned later at Blue Spark Capital Advisors, blogging and researching with Maura Griffin.

An Internship with Maura Griffin at Blue Spark

Valeria, an International Maritime Business major at the Massachusetts Maritime Academy, was one of more than 1,000 students from Massachusetts public colleges and universities, and only the second MMA cadet, to present a paper at the UMASS Undergraduate Research Conference. “The Repeal of Crude Oil Ban: Its Necessity and Possible Outcomes” earned special praise from the Chair of the conference’s oral presentation session. We at Blue Spark Financial wish Valeria the best for the rest of her college journey and beyond.

* Known as The Global School, Wilbraham & Monson Academy has a mission to develop global citizens and leaders. To prepare each student for the challenges of higher education and for success as a global citizen, they promote intellectual development, physical health, personal accountability, mutual respect and commitment to service. They are a small, local, nurturing, traditional school and part cutting-edge, forward-thinking preparation for college and the world beyond. What sets WMA apart from other schools is our combination of community, academics, distinctive programs and opportunities. As one of the country’s oldest boarding schools, Wilbraham & Monson Academy has been educating global citizens and world leaders since 1804. In Wilbraham, Massachusetts, it draws students from around the world.

Retirement Milestones to Look Forward To

by Emily Brandon

Mon, March 2, 2015 at 6:34 AM PST

Retirement is a transition into a new stage of life. Retirees get the freedom to choose how to spend their time, but they also walk away from the comfort of a steady paycheck and need to make important financial decisions. Here are some retirement rites of passage.

Reaching financial freedom. You have achieved financial freedom when you no longer need to work to pay your bills for the rest of your life. “Once you reach that inflection point, you can leave this job or negotiate part-time work, and you know things are going to be OK,” says Maura Griffin, CEO and principal for Blue Spark Capital Advisors in New York. Griffin recommends doing an analysis of your finances, using conservative investment returns and factoring in inflation and taxes, to reassure yourself that you have enough money to retire.

Having the retirement conversation with your boss. There’s a certain satisfaction that comes from being able to tell your boss that you’re simply not going to come into work anymore. “Some people just want to get away from a job that is killing them, and they want to get out of the rat race,” Griffin says. But other people find they miss some aspects of the job, especially the social life they had in the office. The transition is often easier if you have hobbies or travel plans to look forward to.

Shutting down your work computer. There will come a moment after your stuff is packed when you walk out of your office for the last time. You get to escape from boring meetings and tight deadlines, but you also won’t get another invite to a business lunch or holiday party.

The first time someone asks, “What do you do?” Most people answer this question with their profession, but retirees need to think of a new answer. You may want to talk about your volunteer position or an important hobby, or have a quip ready about how you finally get to do whatever you want every day.

Taking withdrawals from your retirement accounts. After decades of saving for retirement, retirees finally get to spend some of that money. But you also need to worry about making your savings last for the rest of your life. Once you turn 59½, there’s no longer a 10 percent early withdrawal penalty to take money out of your retirement accounts, but you will need to pay income tax on each withdrawal from traditional 401(k)s and individual retirement accounts. After you reach 70½, you will be required to take withdrawals from your retirement accounts each year. The penalty for missing a required minimum distribution is 50 percent of the amount that should have been withdrawn. “When you retire, you are going to be using up those savings, sometimes very rapidly,” says Stan Hinden, a retiree and author of “How to Retire Happy: The 12 Most Important Decisions You Must Make Before You Retire.” “My wife and I had not had the time to travel very much while we were working, and that was a lot of fun and we enjoyed it, but it made a big dent in our savings. Having fun costs money, and unless you have got a lot of money in retirement, you have to have some discipline.”

Collecting Social Security payments. Workers pay into Social Security throughout their entire career, and many retirees are eager to collect. However, the age you sign up for benefits drastically changes the monthly payment you receive. Although you can begin collecting benefits as early as age 62, monthly payments are reduced if you claim benefits before your full retirement age, which is 66 for most baby boomers and 67 for people born in 1960 or later. Monthly payments will increase for each additional year you delay claiming payments up until age 70. “The decision about when to take Social Security is a bet on longevity,” Griffin says. “If you have longevity in your family, waiting until 70 gives you the most that you can have for your life, but if you have health issues, then maybe you want to go ahead and take it early.”

Signing up for Medicare. Beginning three months before you turn 65, you can sign up for Medicare. It’s important to sign up for benefits in the seven-month window around your 65 ^th birthday, because premiums are sometimes increased for beneficiaries who sign up later. Medicare is likely to have different coverage and cost-sharing requirements than your previous health insurance plan, so it’s a good idea to examine how your benefits and medical bills will change. “The expenses for our medical bills after we retried were considerably higher than before we retired. Those benefits paid for things like dental work, but Medicare doesn’t pay for those things,” Hinden says. “And even if you have a Medicare supplement, which you certainly need, you are going to wind up somewhat surprised by the expenses for health care after you retire.”

Realizing you don’t have to be anywhere. Retirees don’t have to get up early or report anywhere at a specific time. You’re free to linger over a second cup of coffee and take your time running errands. But you may find that you want to make an effort to get out of the house and be with other people. “There are three needs that a job provides to most people: structure, purpose and sense of community,” says Ernie Zelinski, a life coach and author of “How to Retire Happy, Wild, and Free: Retirement Wisdom That You Won’t Get from Your Financial Advisor.” “Retirees have to put those three things back in their life.”

Forbes features Maura Griffin, describing her “softer, gentler” style of wealth management, as she helps clients identify emotions that can often cloud good financial decision-making. “I try to peel away the layers, to show that money is a neutral tool to help them live the life they want,” she says in the article.

Forbes writes: “Griffin’s investment philosophy is simple, yet effective. She describes it as a mix of low-cost smart alpha and active management. ‘Our investing is broadly diversified so it captures the full market, yet is able to exclude certain areas that may not do as well,’ she explains. ‘We don’t chase trends or try to time the market, we focus on the long term.’ “

“As a fiduciary. Griffin is bound by law to put clients’ interests first. After talking to her for a short while, you sense she would do this even if she didn’t have to: She’s that friendly, that open, that interested in what you have to say. “Our recommendations are independent and objective and based on what we believe is the right thing. We truly sit on the same side of the table as our clients.” As fee-only advisors. Griffin and her team do not receive commissions. “We are paid for our knowledge and expertise, not for selling products,” she says.