Personal Finance

How gay couples can maximize their Social Security benefits

Key Points
  • A landmark Supreme Court decision that made it legal for same-sex couples to marry three years ago also expanded the Social Security strategies to which they are eligible.
  • Gay couples who are married can now put in for spousal and survivor benefits, provided they meet certain requirements, which can have a dramatic impact on their bottom line in retirement.
John Schneider and David Auten
Source: Kevin Zolitor

John Schneider III and David Auten's relationship has had a couple of financial "aha" moments.

The first came when they were 1½ years into their relationship and realized they had $51,000 in credit card debt.

The process of paying off those balances led them to want to share the financial lessons they learned with others. That led to their second "aha" moment last year.

While preparing a show for their "Queer Money" podcast, Schneider, 44, learned that they were giving up access to future Social Security spousal and survivor benefits by not getting married.

The conversation prompted him to tell Auten, 47, "We have to get married right now."

The couple's revelation comes as gay couples have had to adjust to a new world following the Supreme Court's landmark decision to make same-sex marriage a right nationwide three years ago this month.

Good and bad news

The decision changed the landscape for financial planning for gay couples, particularly with regard to sharing retirement assets including Social Security.

And many gay investors are still getting acquainted with what this really means for them.

"The Supreme Court legislation was really good news and bad news," said David Freitag, a financial planning consultant and Social Security expert at MassMutual. "The bad news is now no one knows how Social Security works, just like everybody else."

LGBT advocates in front of the U.S. Supreme Court
Joshua Roberts | Reuters

Almost half of adults age 50 and above failed a simple five-question quiz on Social Security that MassMutual recently sent out in an online survey.

For married couples who coordinate claiming strategies, those benefits can be worth more than $1 million over their lifetimes.

Long-term planning, including when it comes to money, has been a challenge for the gay community, which has had a "live for today, tomorrow we're going to die" mentality, Schneider and Auten admit.

"Mostly because of the AIDS crisis, I think, a lot of our community had this carpe diem attitude," Schneider said.

But as more members of the community live into their 80s and 90s and couples are able to gain access to all of the benefits of marriage, that is starting to change, the couple said. Now, gay couples are faced with the same reality all couples face: planning for income in retirement.

As newly married gay couples reach key wedding anniversaries, their eligibility for Social Security benefits is also changing.

Spousal benefits

Couples may qualify for Social Security spousal benefits once they have been married for one year.

Spousal benefits kick in if your spouse is receiving retirement or disability benefits and you are at least 62 years old.

Spousal benefits provide you with up to one-half of your spouse's full retirement benefit. If you claim these benefits before your full retirement age — generally 66 or 67 depending upon the year in which you were born — the amount you receive will be reduced for early claiming.

If you receive benefits based on your spouse's record, that will not reduce the benefit they receive.

You can collect spousal benefits even if you are not eligible to collect Social Security based on your own work record. If you are eligible for your own benefits, the check you receive may be increased once spousal benefits are taken into account.

If you have children who are under 18, full-time students grade 12 and below or who are 18 or older and disabled, they may qualify to receive Social Security benefits through a parent's record.

Be sure to note that if you are divorced, you must have been married for at least 10 years in order to qualify for benefits on your ex-spouse's record. Plus, other restrictions may apply depending on your current marital status.

Survivor benefits

Couples who have been married for at least nine months may be eligible for survivor benefits.

That is, if one spouse dies, the other spouse can collect Social Security benefits on their earnings record.

Survivors may receive the full benefits of their deceased spouse when they reach their full retirement age. But they can receive a reduced survivor benefit starting from age 60.

If you divorce, you may still qualify for survivor benefits, provided you were married for at least 10 years.

As with spousal benefits, children of the deceased are also eligible to receive survivor benefits, if they are unmarried, under 18, attending school or disabled.

A widow or widower who is caring for a child who is under age 16 or disabled may also receive survivor benefits.

Other advantages

Social Security is just one aspect of financial planning impacted by whether or not a couple is married.

The way you manage taxes, plan for your estate, title your assets and save money are all affected by whether or not you are married, according to Jennifer Hatch, president at Christopher Street Financial, a financial planning firm that focuses on the LGBT community.

Marriage can help give you tax protection and better define what you're eligible to upon divorce or death, Hatch said.

While Hatch sees many middle-aged clients, gay and straight, who start out opposed to traditional marriage, that typically changes once they see how it affects their finances.

"Once you present the benefits and the responsibilities … they typically end up getting married," Hatch said. "That resistance has dwindled."

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