Michael Callahan
Whether you’re currently married, divorced or widowed, your marital status may affect your Social Security planning in several ways. Marriage doesn’t change the amount of the retirement benefits you’ve earned; your benefit is based entirely on your earnings record and the age at which you claim Social Security. But you still may have a lot to discuss with your financial advisor, especially if you’re currently married. When you and you spouse are both eligible for benefits, deciding when to claim Social Security gets even more complicated.
Social Security If You’re Married
If one spouse earns benefits and the other doesn’t: In families where only one spouse works outside the home, the other spouse may still be eligible for retirement benefits based on the working spouse’s earning records. Let’s say you worked outside the home while your spouse was a full-time parent. You’ve qualified for a monthly retirement benefit of $2,500 at full retirement age. Your spouse may qualify for up to $1,250 a month, even if they never paid into Social Security. They qualify starting at age 62, or earlier if they have a child in their care who is under 16 or receives disability benefits. Spousal benefits are reduced when they’re claimed early, just like other retirement benefits are.
If both spouses earn their own benefits: You’re each entitled to your own retirement benefit or half your spouse’s benefit—whichever is higher. If your earnings record gives you a monthly benefit of $2,500 and your spouse has earned a $1,000 benefit, your spouse’s benefit will be bumped up to $1,250. If they’ve already earned a benefit that’s more than 50 percent of yours, no adjustment is made; they don’t receive any spousal benefit.
It used to be possible to file for spousal benefits and earned benefits separately. One person could apply for spousal benefits at 62 while delaying their own earned benefits to let the monthly amount grow. Now, the SSA’s deemed filing rule requires eligible individuals to apply for both benefits at the same time. You can’t receive spousal benefits now and wait to claim your earned benefits later, or vice versa.
Social Security Planning for Married Couples
Married couples have special considerations around Social Security benefits. For one thing, your filing status affects how much income tax you’re required to pay on any benefits you receive. Careful strategizing helps you maximize your retirement money when both spouses have earned Social Security.
Social Security If You’re Divorced
The spousal benefit is available to divorced spouses under certain conditions. One person may receive benefits based on their former spouse’s earnings record. To qualify for benefits based on your record, your ex-spouse must:
• Have been married to you for at least 10 years.
• Have been divorced from you for at least two continuous years.
• Be unmarried.
• Be at least 62.
• Have earned a benefit that’s no more than 50 percent of your earned benefit.
Your own Social Security benefit won’t be affected by your ex receiving a spousal benefit on your record, even if you are remarried.
Social Security If One Spouse is Widowed
The death of one spouse will naturally affect the surviving spouse’s Social Security benefits. A widow or widower may be entitled to survivors benefits starting at age 60, at age 50 if they’re disabled or at any age if they’re caring for the deceased spouse’s child who is under 16 or receives disability benefits. If you both earn benefits and one spouse dies, the surviving spouse may only collect one benefit—but it’ll be the higher of the two amounts.
All the potential complications around your marital status and your Social Security benefits means that advance financial planning is absolutely critical for married couples. Understanding how all the possible benefit scenarios might play out in the future should give you useful information about how to construct the strongest possible financial safety net for your family.
Sachetta, LLC’s advisors can help you evaluate how your specific family circumstances will affect your Social Security benefits, among other elements of financial and retirement planning. Don’t waste time worrying about whether you’re making the right decisions around Social Security—just call us. Contact us today.
Michael J Callahan, CPA, CFP®, MST
Michael is a Certified Financial Planner™ practitioner, Certified Public Accountant, and holds a Master’s Degree in Taxation from Bentley University. Mike has been involved in personal financial planning, as well as both business and individual taxation for more than 15 years. Our ideas about money are formed by our life experiences. Over the years, Mike has seen those close to him make common money mistakes from not having enough life insurance, to not doing the proper estate planning. When he received an inheritance in college and started looking into how he could use it to achieve his goals, he realized that he could use those experiences to help others. He changed his major to Finance, and the rest is history.