Changes the Government has made that will affect retirees’ Social Security income

After a state court ruled that Social Security benefits can be used to determine spousal support income, recipients may see changes in their alimony amounts and hence their Social Security income. Federal law indicates that Social Security can be used as income in determining the amount of alimony one ex-spouse pays to another, the Colorado Court of Appeals ruled earlier this month. If one spouse earned significantly less than the other, the court will often order the ex-spouse to pay alimony. If one partner gave up a job to care for the children or otherwise helped their spouse pursue their financial goals, this can protect the stay-at-home parent.

The new alimony rule that will affect retirees’ Social Security income

A specific provision of federal law, which states that Social Security benefits are not transferable or assignable, was the subject of the appeals court’s inquiry. Colorado retiree Riley McClure and his legal team contended that Social Security should not be counted as income in any way, including in alimony calculations for his ex-wife. In cases similar to McClure’s, Judge David H. Yun found that another provision of the law, which states that alimony payments are subject to Social Security benefits as income, was more significant. 

Additionally, in his article, David H. Yune stated that judges have the authority to “adjust alimony or child support, even in cases where the order essentially results in an indirect assignment of those benefits, as well as other nonassignable federal benefits. This meant that even after McClure reached retirement age and began relying on his Social Security income, his benefits would still be taken into account in determining his spousal support obligations. However, there could be significant implications for other seniors.

Retirees will need to consider alimony calculations in their Social Security income from now on

Retirees who receive Social Security benefits and are required to pay alimony, but whose benefits are not currently included in the alimony calculation, may have to pay much more each month to their former spouse. If an ex-spouse has been receiving alimony and has not been properly accounting for it as Social Security income, they may also have a legal basis to contest the amount of alimony they are paying and receive more from their former partner.

Furthermore, some seniors may not see any changes because many states and courts already use Social Security as income in alimony calculations. Considering Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, statement to Newsweek, it may surprise some to learn that past court decisions have supported the concept of using Social Security to pay alimony. He also emphasized that “this is particularly true in cases where a judge determines that an ex-spouse should continue to make payments, but the amount of those payments is reduced because they are eligible for Social Security.”

However, according to Kevin Thompson, president and CEO of 9i Capital Group and a finance expert, the majority of seniors are probably unaffected by the alimony decision. As he stated to Newsweek, spousal benefits can offset Social Security income pressures for the majority of seniors who are likely to have been married for more than ten years. Additionally, retirees may be impacted by this, perhaps in terms of separation as opposed to formal divorce. Seniors may be affected by this, and they may choose to file for separations rather than divorces to accrue the required number of years to keep their Social Security benefits unaffected.

Lastly, it is important to consider that Judge David H. Yune’s ruling on alimony could be challenged again as seniors who rely on Social Security face high inflation on housing, health care, and food. Naturally, many may feel they can’t stretch their dollar if alimony is taken out of their Social Security income, but Alex Beene predicts rulings like this are likely to be challenged as seniors face rising inflation costs.