Government Announces Major Change in Social Security Benefits

In the past few days, the government has announced a major change in Social Security benefits that has caught beneficiaries’ attention, as it will change how benefits have worked until now. This is the first time a judge has ruled that Social Security funds can be used for alimony payments between divorcees. The Colorado Court of Appeals determined this month that payments between ex-spouses can be made with Social Security funds under federal law. Alimony is often awarded to an ex-spouse following a divorce if one partner earns much less than the other.

Generally speaking, Social Security benefits are not assignable or transferable under one of the federal statutes at issue in this case. Another law, however, says that monthly benefits must be counted as income in determining alimony. Judge David H. Yun states that in determining alimony or child support, judges may take into account Social Security retirement benefits and other non-assignable federal benefits, even in cases where the decision effectively results in an indirect assignment of such benefits.

Social Security benefits can be used as alimony between divorcing partners from now on

Alimony used to be limited to divorcing spouses with large income disparities, allowing the higher earner to continue to support the lower earner after the divorce. Unfortunately, this ended up with lower-earning people who often gave up their jobs to provide for their families and had enough money to cover their living expenses. For example, in the Colorado case, Riley McClure was paying $2,500 a month in alimony to his former spouse. To reduce his alimony obligations, McClure began collecting Social Security after he was forced to use it to pay his spousal support after he retired.

Although McClure argued that this violated federal law, the Court of Appeals ruled that it was permissible and that Social Security income could be considered in calculating a divorced spouse’s debt to the other spouse. According to Newsweek, Alex Beene, a financial education lecturer at the University of Tennessee at Martin, said, “Past court rulings have at least partly supported the idea of using Social Security as a means to pay child support, and this may surprise some. He also stresses that this is especially true when a judge decides that even if an ex-spouse is entitled to Social Security, they should still make payments, but the amount of those payments should be reduced. 

New alimony calculations will impact Social Security benefits for eligible beneficiaries

According to Kevin Thompson, the founder and CEO of 9i Capital Group and a financial expert, the majority of seniors do not worry about alimony. According to the Social Security Administration, your ex-spouse can be eligible for benefits on your record if you were married for at least ten years before your divorce. Furthermore, Thompson thinks that because the majority of older Americans have been married for longer than 10 years, any claim on their retirement benefits may be reduced by their spouse’s Social Security benefits.

Moreover, seniors may be affected because they may choose to file for separation rather than divorce to accumulate the number of years necessary to maintain their Social Security benefits. In addition, as Alex Beene clarified, the amount of alimony would likely be reduced even if there is a substantial disparity in the ex-spouses’ salaries and a significant shift in their monthly income (including Social Security benefits).

Couples should carefully analyze their alternatives and how alimony calculations may affect their Social Security benefits, as this new law undoubtedly has the potential to significantly affect divorce settlements across the country. Financial experts disagree about the potential harm to seniors, even though the rule allows Social Security to be used for alimony.