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Social Security Benefits for Same-Sex Spouses

Will you need to fight for what’s rightfully yours?

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Over the past several years, the LGBTQ community has made some great strides when it comes to equality. And in May of this year, another historic win took place in Arizona for same-sex couples fighting to qualify for Social Security survivors benefits.

In the recent Ely v. Saul case, Michael Ely and James Taylor had been together for more than four decades, and they married in November 2014 as soon as their state of residence finally legalized same-sex unions. When Taylor passed away only six months later, the Social Security Administration denied Ely’s claim for survivors benefits.

The reason? Because the two had not been married for the requisite nine months, even though the couple was was barred from satisfying that time requirement due to the state’s unconstitutional gay-marriage ban.

But the LGBTQ advocacy group Lambda Legal stepped in and won their class-action lawsuit, with the U.S. District Court judge stating:

“Because same-sex marriage is a fundamental right, and the underpinnings of the duration-of-marriage requirement has relied on the unconstitutional ban on that right, it cannot be said to be rationally related to a legitimate interest to a surviving spouse such as Mr. Ely.”

This win could help prevent countless other same-sex couples and surviving spouses from becoming financially destitute in their later years—which is one of the reasons why the Social Security program was created back in 1935.

What Are Spousal Benefits?

Today, one of the primary sources of retirement income for many people is Social Security. Even though this program was never meant to provide 100 percent of a retiree’s income, the Social Security Administration estimates that for average wage earners, it will typically replace about 40 percent.

Social Security offers other benefits, too, such as retirement income for spouses and qualifying divorced ex-spouses, and income for a surviving spouse if the primary benefit recipient passes away.

Who Qualifies as a Surviving or Ex Spouse?

In June 2015, the United States Supreme Court’s marriage-equality decision made it possible for same-sex couples to take advantage of various benefits that had always been provided to legally married opposite-sex couples.

The Social Security Administration now recognizes same-sex marriages in all states (as well as non-marital legal relationships such as some civil unions and domestic partnerships) for the purpose of determining entitlement to Social Security benefits, as well as Medicare and Supplemental Security Income.

With that in mind, if you are the widow or widower of a person who had worked long enough to receive Social Security benefits, you may qualify for the following:

• Receipt of your deceased spouse’s full benefits at your full retirement age, or reduced benefits as early as age 60;

• Benefits as early as age 50 if you are disabled and your disability started before or within seven years of your spouse’s death;

• Receipt of Social Security survivor’s benefits at any age, if you have not remarried and you take care of your deceased spouse’s child who is under the age of 16 or is disabled and receives benefits on your deceased spouse’s record.

In addition, if you remarry after you have reached the age of 60 (or 50 if you are disabled), this will not impact your eligibility for Social Security survivor’s benefits.

If you and your spouse have divorced, it may be possible for you to receive Social Security benefits based on your ex’s work record, provided that you meet the following criteria:

• Your marriage lasted 10 years or longer,

• You are not currently married,

• You are age 62 or older,

• The benefit that your ex-spouse is entitled to receive based on his or her own work record is more than the benefit that you are eligible for, based on your work record,

• Your ex-spouse is entitled to Social Security retirement or disability benefits.

Maximizing Social Security Income

Many people believe that when they reach their “full retirement age” for Social Security, they should file for benefits. But the reality is that there are numerous Social Security filing strategies, and depending on which one you choose, you could increase the lifetime amount that you receive by tens of thousands of dollars.

Although qualified recipients can file for Social Security retirement income as early as age 62, the dollar amount of your benefit will be permanently reduced, even after you’ve reached your full retirement age. Alternatively, you could instead wait until after your full retirement age to file for Social Security. The longer you wait, the more your benefit can grow. For instance, the “delayed retirement credit” increases the dollar amount by approximately 8 percent per year, up to age 70. (You can still delay the receipt of Social Security benefits past the age of 70, but you won’t gain any additional delayed-retirement credits).

If you choose to receive Social Security before your full retirement age, you could be required to pay income taxes on up to 85 percent of your Social Security retirement benefits if you have other substantial income such as wages, dividends, and/or self-employment pay in addition to your Social Security benefits.

For example, in the year 2020, taxes could be incurred on your Social Security retirement benefits if you file your federal tax return as an individual and your “combined income” is:

• Between $25,000 and $34,000. In this case, you may have to pay income tax on up to 50 percent of your benefits;

• More than $34,000. If this is your situation, you may be required to pay income tax on up to 85 percent of your benefits.

If you file a joint federal income tax return and you and your spouse have combined income between $32,000 and $44,000, you may have to pay tax on up to 50 percent of your benefits. For combined income above $44,000, up to 85 percent of your Social Security benefits could be taxable.

(Combined income refers to your adjusted gross income plus non-taxable interest earned plus one-half of your Social Security benefits).

Finding the Right Claiming Strategy

Social Security has many “moving parts,” so it can oftentimes be difficult to distinguish between spousal, divorced spouse, and surviving spouse benefits. There are also hundreds of different Social Security retirement benefit claiming strategies, so there’s no single method that is best for everyone. Rather, your ideal strategy will depend on factors such as your other retirement-income sources, your marital status, your retirement time frame, and your anticipated life expectancy. You will also want to ensure that Social Security benefits coordinate with other financial strategies that you will have in place during retirement.

Because of that, it is recommended that you discuss your alternatives with a financial advisor who is well-versed in retirement-income planning. And by working with a professional who is also knowledgeable about the LGBTQ community, you can better ensure that they are up-to-date on what is and isn’t allowed in terms of the benefits you are eligible to receive. 

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Grace S. Yung

Grace S. Yung, CFP, is a certified financial planner practitioner with experience in helping domestic partners plan their finances since 1994. She is a principal at Midtown Financial LLC in Houston and was recognized as a “Five-Star Wealth Manager” in the September 2017 issue of Texas Monthly.

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