Divorce and Retirement: Social Security Administration vs. California Family Law

According to the Social Security Administration’s website, the 1983 Social Security Amendments included a provision for raising the full retirement age beginning with people born in 1938 or later. The Congress cited improvements in the health of older people and increases in average life expectancy as primary reasons for increasing the normal retirement age.   Full retirement age (also called “normal retirement age”) had been 65 for many years. However, beginning with people born in 1938 or later, that age gradually increases until it reaches 67 for people born after 1959.  This largely targets Baby Boomers – our largest generation, which is also the largest growing demographic group for so-called “Grey Divorce” after age 50.

I think it is safe to assume that people nearing the age of 60 have become familiar with their Social Security rights and therefore it is probably safe to assume that Baby Boomers (and those younger) know their ”normal retirement age” to receive 100% of their Social Security benefits is at age 67  (reduced benefits can be sought as early as age 62).  I also think it is safe to assume that when getting divorced, most people do not realize the California family courts consider the age of retirement to be at age 65, not age 67.

An Unexpected Trap for the Supported Spouse

Given that the California family courts have a different definition of the retirement age, it is critical that the spouse who receives spousal or child support be cautious.  Such a person may think their former spouse cannot or will not retire until the age of 67, the age Social Security defines as “normal retirement age,” but the fact is the family law courts say the former spouse can retire at age 65.  He or she has every right to do so, and thereby to accept reduced Social Security benefits.  This reduction will likely reduce or terminate spousal/child support.  It makes no difference if the spouse receiving support assumed (and planned accordingly) that reduced support would not occur until their former spouse retired at 67; that support reduction could occur two years earlier than expected.

Can’t Stop Until Age 65

The family law courts are not going to let the worker (supporting) spouse off the hook for support prior to the age of 65, even though Social Security will provide a reduced benefit at age 62.   The worker spouse who retires at age 62 could face a difficult financial situation because, even though Social Security allows for an early retirement by providing a reduced benefit  by retiring before the “normal” age of 67, the family court could still hold the worker spouse responsible for earnings which may no longer in reality exist (i.e., imputed income).  This “double whammy” to the worker/retiring/supporting spouse means a damaged financial position until reaching the age of 65, when the family court will accept the retirement and thereby reduce or terminate the support obligation.

The Lesson

For most people, every penny matters and the decisions made in connection with a late-in-life (i.e., grey) divorce are critically important to each person’s financial future.