One of the tenets of this blog is that in a no-fault world divorce is a financial transaction heavily imbued with human emotion. The effective divorce lawyer tries to guide clients through this emotional process in a way that produces a meaningful and realistic financial plan.

            A big piece of any American’s financial future is social security. It is a very complex system and if you have been reading the news recently there are indications that in the next decade it may become financially unsound because so many Americans are drawing on it, we have relatively few incoming participants and these have been strange times financially.

            There are books which try to explain social security and in a world where the lifetime benefit can exceed $1,000,000, some of them may be worth investigating. Here’s a menu for that: For many Americans it will be their primary if not their exclusive source for retirement income.

            What is your benefit? You can log on to the system and review what data and estimates the government has for you.

            If that’s too much time or effort Fidelity Investments offers an on line calculator that seems fairly accurate;

                So, here are some things you need to know in a legal sense. Social security is not marital property in Pennsylvania so it is not an asset divided in divorce. But in dividing the assets that are marital a major factor under the Divorce Code is what future entitlements each spouse has and as we just observed, a person making maximum contributions to the system could receive a million or more dollars in benefits over his/her lifetime. If you have been married for 10 or more years you can also choose between claiming benefits on your own income history or the history of the spouse with whom you spent that time. If you are planning to claim what is called a derivative benefit based on the income of your former spouse, you need to be certain you don’t corrupt your own plan by re-marrying. Again, there is a lot of money and your financial future at stake here.

            Circling back to an earlier subject, let’s say that you were not working in the past decade but married to someone who was making maximum contributions. Suppose things turn out that your divorce will come down before you have a decade attributable to that marriage. So, the derivative benefit is off the table. In your negotiations both you and your lawyer need to make clear to the world that during the eight years that you were married, your spouse paid into Social Security roughly $115,000. Technically, your spouse paid in half and the employer paid the other half but no matter how you size it up, $115,000 was diverted from coming into the marital pot because Social Security grabbed it to pay to your ex in the future. Had you made it to the 10-year mark, you would be eligible for as much as half of that spouse’s benefit without reducing your former spouse’s benefit. One suspects that part of the problem with the system is that if a wage earner married once every decade and stayed married for 10 years each time, there could be up to five spouses’ eligible for a derivative benefit. The system was largely designed for a day when people got social security at age 65, died at age 70 and lived at a time when divorce was rare.

            Another thing that has really changed in recent years is the growth in social security maximum contributions. In 2000, the maximum was based on earnings of $76,200. The maximum in 2023 is now 160,200. So, while the tax rate of 6.2% has never changed the raw amount contributed has more than doubled. It means that in 2023 if you have wages of $160,200 you and your employer will be contributing almost $20,000 to the system; $1,666 a month. By almost any standard, that’s real money.