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A 65-year-old woman is mulling divorce since her husband, who inherited millions from his father, doesn’t share the money with her. He forced the woman to withdraw Social Security benefits at 62, which locked her to a reduced monthly income for life compared to those taking benefits at 70. They own five rental properties, two of which were inherited. The rental income goes into a joint checking account, but the woman wonders if she is entitled to a part of the inheritance or the rental income in case of a divorce.
While the Texas resident told MarketWatch that her husband doesn’t share any details of his finances and wouldn’t deposit money in her account, she likely had access to the cash in the joint account. However, it might be her reluctance to access that money and her husband’s coercion that led to early Social Security withdrawals. Total control over a partner’s finances is a form of domestic abuse that often convinces people like the retired woman to settle for a modest lifestyle without seeking rights to community property despite her husband’s wealth, as controlling behaviour usually chips away at a person’s self-confidence over the years. Community properties are assets acquired after marriage whose rights are equally shared by the spouses. The wife’s longing for financial independence, probably for a long time, is also a potential factor that convinced her to accept reduced Social Security benefits, even if it meant losing hundreds of thousands of dollars in the long run.
According to a Social Security Administration estimate, the monthly payments reduce by 30% if you draw benefits at 62 compared to those opting in for the income at the full retirement age, which is 67 for individuals born on or after 1960. If your health and financial situation permits you to defer retirement until 70, the payouts are hiked by a certain percentage for every month you postpone withdrawals beyond full retirement age. The financial loss for the remainder of her life makes it imperative to enrol in Medicare while she is 65 since any delay could impact coverage and costs.
However, she isn’t entitled to her husband’s inheritance if they divorce unless the funds are in a joint bank account and the money was commingled. Commingled funds are separate marital assets mixed up throughout a marriage. Furthermore, rental income from properties the husband bought before marriage doesn’t make them commingled assets. Only money in a joint account is something she could talk about with an attorney.
A 2022 working paper jointly released by the Boston University and the Federal Reserve Bank of Atlanta revealed that over 90% of people should collect Social Security benefits once they turn 70, but only 10.2% do so. It estimated that collecting payments early lowers household lifetime discretionary spending by over $182,00 for the median worker nearing retirement. While taking a massive Social Security pay cut due to early withdrawal could be devastating, several experts believe the timing is irrelevant because it ultimately depends on how long you live and expect to live. The woman is among 47% of US workers who retire prematurely. However, her reasons for retirement are unique since most generally cite financial hardships, health issues, or changes in the company for retiring early.
