There is new information about Social Security benefits that all recipients should know. A court recently made a decision about earnings that could change your monthly payment. There was an unexpected event in the news about Social Security benefits that will change how benefits have been given in the past.
A court has said for the first time that people who are getting a divorce can use their Social Security payments as alimony. This month, the Colorado Court of Appeals said that under federal law, transfers from one ex-spouse to another can be made with Social Security money.
If one ex-spouse makes a lot less money than the other after the split, the ex-spouse will usually get alimony. One of the federal laws at issue in this case says that Social Security payments can’t be given to someone else or assigned to someone else. That being said, another rule says that Social Security benefits must be counted as income when figuring out alimony.
Judge David H. Yun says that when figuring out alimony or child support, judges can look at retirement benefits and other federal benefits that can’t be given to someone else, even if the ruling indirectly gives these benefits to someone else.
Why is alimony important for Social Security benefits and Americans?
Alimony used to only be given to divorcing couples with big differences in income, so the higher earner could keep helping the lower earner after the split. People who made less money often quit their jobs to take care of their families or find other ways to make ends meet that needed less money.
In the Colorado case, Riley McClure was giving his ex-wife $2,500 a month in alimony. McClure started getting Social Security after he had to use it to pay his spousal support after he retired so that he would have less responsibility to pay it.
McClure said this was against the law at the federal level, but the appeals court said it was okay and that Social Security income could be used to figure out how much a divorced spouse pays the other. Alex Beene, a teacher of financial literacy at the University of Tennessee Martin.
Martin, told Newsweek that “previous court rulings have at least partially supported the idea of using Social Security as a way to pay alimony, which may surprise some.” He also says that this is especially true when a judge says that payments should be made, even if the ex-spouse is eligible for Social Security. They should be made, but at a smaller rate.
The impact of the alimony decision on Social Security benefits
Kevin Thompson, founder and CEO of 9i Capital Group and a financial expert, says that most seniors don’t give divorce a second thought. Social Security says that if you were married for at least ten years before you got divorced, your ex-spouse may be able to get benefits based on your record.
Thompson also thinks that most older Americans have been married for more than ten years, which could make it less likely that someone will collect their Social Security spousal benefit, which could affect their retirement income.
Also, seniors who choose to file for split instead of divorce may be affected because they need to get enough years of service to keep getting Social Security payments.
Also, as Alex Beene said, the amount of alimony would probably go down even if the ex-spouses made very different amounts of money and their monthly income, including Social Security payments, changed a lot.
Because of the new alimony decision, couples should carefully consider their other options and how the new alimony calculations may affect their monthly payments. This is because the new law could have a big impact on divorce deals across the country.
Even though the rule lets Social Security be used for divorce, financial experts don’t agree on how bad this could be for seniors. As a result, there is still a lot of disagreement in the issue.