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Does Social Security Incentivize Divorce?

Curtis W. Harrison | June 23, 2014

The original concept behind the Social Security program was to blunt the increasing risks of poverty to the average American worker by providing a modest form of “social insurance” after reaching the age of 65. By 1934, America was in the throes of the longest and most severe economic depression in its history and millions of Americans could not find work. As President Franklin D. Roosevelt stated at the time, “We can never insure 100% of the population against 100% of the hazards and vicissitudes of life, but we have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty.”[1]

Over time, the law was expanded to include, among other things, spouses of retired workers. Under current law, once a married couple has been married 10 years then upon divorce the higher wage-earning spouse receives full benefits upon retirement, while the lower wage-earning (or non-working) spouse is given a choice to collect the greater value of his or her own benefits or 50% of the higher-wage earning spouse’s benefits.[2] Put another way, in cases of divorce, the SSA will pay out up to 150% of the benefits actually paid into the system.

The purpose of the policy represents a well-intended effort to prevent a situation in which a divorcee – usually the wife — is left with no benefits following the disintegration of a long-term marriage. But in so doing, has the Social Security Administration inadvertently incentivized spouses to divorce?

An intrepid, if not cynical, couple could conceivably divorce after 10 years of marriage, continue to cohabit, and collect a return on their “investment” that easily outstrips the performance of most traditional investment vehicles available in today’s market. The result is even more startling if the parties subsequently marry other individuals and then divorce again after another 10 years.

While divorcing simply to collect extra Social Security seems absurd, there would seem to be no denying the fact that the current policy runs counter to President Roosevelt’s stated intention of protecting families. Perhaps a solution that comes closer to mirroring the original intention would be to give the lower employed spouse the option of keeping 100% of his or her own benefits or dividing the higher wage-earner’s benefits. Who knows? This might also have the effect of disincentivizing divorce.

If you have questions regarding how a divorce could impact your benefits under Social Security laws or if you have other questions relating to family law issues contact the Plano Family Attorneys at Goranson Bain Ausley.

[1] http://www.ssa.gov/history/briefhistory3.html.

[2] http://www.ssa.gov/retire2/divspouse.htm.

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