Social Security for Same-Sex Couples

If someone asked you what your largest asset is, you might reply that it is your home or the balance in your retirement savings account. But for many people, their most valuable “asset” is their Social Security retirement-income benefits. I say this because when we look at the income that Social Security will generate, it’s important to realize what the equivalent asset base would have to be in order to generate the same kind of income that Social Security would pay.

Additionally, marital status is important when it comes to collecting Social Security benefits. One reason for this is because a married couple can strategize to possibly get more total income.

With that in mind, knowing what you are eligible for—as well as how to maximize these benefits from Social Security—can be a crucial component of your overall retirement-income planning. 

How Much Will You Receive?

According to the Social Security Administration, an average wage earner replaces approximately 40 percent of their pre-retirement earnings with Social Security retirement income. So it is important to understand what you’re eligible for, and how it may coordinate with other future income sources that you and/or your spouse or partner may have.

As an example, if you generate an average of $2,000 per month from Social Security, and you collect these benefits for 20 years, the total received would equal $480,000! If your spouse or partner also generates that much, this “asset” alone could be worth just shy of $1 million in lifetime income. That is why Social Security is usually your largest asset.

When you compare this to using a strategy of drawing income from an investment portfolio, there are no guarantees and stock-market volatility adds additional risk. 

When Should I Start Receiving Benefits?

If you’re qualified to receive Social Security retirement benefits, you can file for them as early as age 62. But if you start to collect before your “full retirement age” of 65, 66, or 67 (depending on when you were born), the dollar amount of your monthly benefit will be reduced for the remainder of your life. 

While it may make sense to file for Social Security early, it is important to first do the math so that you know just how much it could “cost” you. In this case, if your full retirement age is 66 and you file for Social Security at age 62, your benefit would be reduced by 25 percent.

Conversely, if you wait to file for Social Security until after your full retirement age, you can increase the dollar amount of your monthly benefit. In this case, the “delayed retirement credit” raises benefits by approximately 8 percent for every year that you hold off filing until age 70.

For instance, if your full retirement age is 66, and claiming benefits at that time would bring you $2,000 per month, you could wait until age 67 to file, and the amount would be raised by 8 percent to $2,160. And this doesn’t even include the annual cost-of-living adjustment from Social Security that you receive each year to help this income keep pace with inflation.

Spousal, Ex-Spouse, and Widow(er) Benefits

Spouses of eligible Social Security recipients may also be eligible for benefits even if they have never worked. So if you and your partner are married, it may be possible for you both to generate income from this source. This is an avenue that was not possible for same-sex couples until the overturning of the Defense of Marriage Act in 2015.

Depending on your particular situation, it may be possible to collect Social Security benefits based on an ex-spouse’s work record and/or as a “surviving spouse.” For instance, if your marriage lasted 10 years or longer and you are divorced, you could receive Social Security benefits—even if your ex is remarried—if you are age 62 or older, not currently married, your ex is eligible for Social Security benefits (even if they have not yet filed for them), and their benefit is larger than your own would be.

Survivor’s benefits are another component of Social Security. These are paid to widows, widowers, and dependents of eligible Social Security recipients. Continued income for a surviving spouse is an extremely important part of your overall retirement plan, as some (or possibly even all) income sources may stop when one spouse or partner passes away. This could leave the survivor in a difficult financial situation.

As a surviving spouse, you may be eligible for these benefits if:

You were married for at least 9 months and living together at the time of death;

You are age 60 or older (or age 50 or older and disabled);

You are any age and caring for your deceased spouse’s child who is under age 16 or has a disability and is receiving benefits;

You are divorced from your deceased spouse (under certain circumstances).

Yet, even though Social Security now recognizes same-sex married couples in all US states for benefits-qualification purposes—as well as some civil unions and domestic partnerships—those benefits could disappear if marriage equality is repealed in the future.

For this reason, it is a good idea to have other retirement income sources in place. Working with a financial-planning professional can be helpful in determining additional income generators, as well as how much you may receive from them.

Maximizing Social Security Income

There are several potential strategies that allow you to maximize your Social Security retirement benefits. In addition to taking advantage of the 8 percent yearly benefits increase when you delay receiving Social Security, married couples could start receiving one spouse’s Social Security while delaying the other’s benefit to capture the 8 percent delayed-income credit. Given today’s interest-rate environment and the potential for losses in the market, a guaranteed 8 percent annual increase can be very attractive.

Will Your Future Income Be Enough?

When making decisions about retirement income, it is necessary to consider the current facts. And because everyone’s objectives, time frame, risk tolerance, and family situation will differ, there is no such thing as a one-size-fits-all strategy. There are also many items that are out of your control, such as the possibility of same-sex spousal benefits from Social Security being repealed in the future.

This is why it is recommended that you work with a financial-planning professional before making any type of commitment to a retirement-income plan. Planning professionals who are well-versed in the issues of the LGBTQ community can be even more beneficial, as they are more familiar with specific financial issues that you may face both now and in the future.   

This article appears in the July 2022 edition of OutSmart magazine.