Personal Finance

What same-sex couples should know about their Social Security benefits

Key Points
  • On June 26, 2015, a Supreme Court decision that required states to grant and recognize same-sex marriages gave more access to spousal and survivor benefits to these couples.
  • Married same-sex couples have 81 options to claim Social Security benefits compared with nine choices for single people.
  • Use free online calculators to get a sense of what your claiming strategy should be.
Couple's guide to Social Security
Couple's guide to Social Security

Two years ago to the day, a 5-4 decision in the U.S. Supreme Court required all states to grant and recognize same-sex marriages.

This legal change made it possible for more married same-sex couples to take advantage of Social Security claiming strategies previously unavailable to them.

"One of the biggest challenges for same-sex couples when it comes to retirement planning is simply keeping current with ever-evolving laws and rules," said Mark Kemp, a certified financial planner and CEO of the Kemp Harvest Financial Group in Harleysville, Pennsylvania.

The Social Security Administration now recognizes same-sex couples' marriages in all states and some nonmarital legal relationships, such as some civil unions and domestic partnerships, to determine entitlement to Social Security and Medicare benefits.

Same-sex couple rides in the Pride Parade on June 25, 2017 in New York City.
Spencer Platt | Getty Images

A single person only has to consider nine different scenarios when claiming retirement benefits. For married couples, the available options for filing strategies grow to 81, said David Freitag, a financial planning consultant at the MassMutual Financial Group.

"It's time for married, same-sex couples to start replanning their future if they haven't done so already," Freitag said.

Here's what you should consider when developing your game plan:

Generally speaking, for singles, the longer you wait to claim benefits, the more you'll receive. Claiming before your full retirement age, which ranges between 66 and 67 depending on when you were born, permanently reduces your benefits. Each year you delay from your full retirement age until you turn 70 will boost your benefits by 8 percent.

Most people file before they can receive their maximum Social Security benefits. (See table below.)

Claiming strategies for married couples, or divorced people who were married to their ex-spouse for at least 10 years, can differ drastically from those employed by singles.

Spousal benefits

Here are the basics of spousal benefits: Those who were married for at least 10 consecutive years can claim either their own benefits based on their earnings or half of the spouse's (or former spouse's) benefits, whichever is higher, once they reach full retirement age.

That means that a higher earner in the couple may wait to file at 70 while the lower earner can claim at full retirement age to maximize their total benefits as a couple.

Even if you have never contributed to Social Security, you may be able to get spousal benefits if you are at least 62 years old and your spouse is receiving retirement benefits. However, claiming spousal benefits before your full retirement age will permanently reduce your Social Security payouts.

An ex-spouse may be entitled to benefits based on your earnings, but it doesn't affect your payouts. Half of older workers recently surveyed by Fidelity thought their benefits could be reduced if an ex made a claim. That's not true.

"These types of rules are important, particularly for same-sex, stay-at-home parents who may otherwise have very limited retirement income options," said Beth McClelland, a CFP and managing principal of Lamorinda Financial Planning in Berkeley, California.

Survivor benefits

Survivor benefits add to the complexity of your Social Security planning.

The amount of the survivor benefit is based on the earnings of the person who died. Your widow or widower can receive full benefits at their full retirement age or at any age if they take care of your children who are younger than age 16 or disabled. People can claim reduced survivor benefits at age 60.

That's not all. People who remarry at age 60 or later can collect survivor benefits from an ex, if that former spouse is deceased.

Neal Van Zutphen, a CFP and president of Intrinsic Wealth Counsel in Tempe, Arizona, tried to persuade one same-sex couple who are his clients to consider the merits of getting married based on the advantages of survivor benefits.

"If the higher wage earner pre-deceases, the survivor loses out on the higher wage earner's higher survivor benefits," Van Zutphen said.

Figure out your claiming strategy

No Social Security plan is bulletproof — because you don't know when you or your spouse will die.

The financial effects of your claiming strategy may be hard to figure out, but you don't have to go it alone. Free Social Security calculators can be a good place to start to craft your plan. If you need more help, consult a qualified financial advisor.

"In many cases, it is really an issue of education and awareness," Kemp said. "Same-sex couples should seek to not only stay current themselves, but seek an advisor who is doing the same."