Same-Sex Marriage and Social Security Benefits
Now that the U.S. Supreme Court has legalized same-sex marriage across the country, LGBT Americans stand to benefit in the area of retirement security. This is especially true in regards to Social Security, which offers a variety of benefits to married individuals.
By recognizing same-sex marriage, the Supreme Court has guaranteed that same-sex couples can access the spousal and survivor benefits which are provided by Social Security. These benefits can be worth hundreds of thousands of dollars in lifetime benefits, depending on circumstances.
Survivor’s benefits are valuable because spouses often have different income histories, leading to different levels of Social Security benefits. Because of this, many married couples apply the rule allowing a spouse to get up to 50% of the benefit received by a living spouse if that benefit is greater than the one he or she would receive as an individual. Survivorship rules allow a surviving spouse to claim 100% of the benefit of a deceased spouse or his or her individual benefit, depending on which is larger.
Timing benefit claims allows for bigger payoffs if done right. A person can claim Social Security once they turn 62, but this reduces the lifetime value of your benefits substantially (by 25%). If you wait until the full retirement age, 66 as of now, you get a delayed retirement credit of 8% for every 12 month period that you defer taking benefits up to age 70. For more information on this contact us in order to take advantage of our Social Security Maximization software. If you file later it provides you with greater income annually from the time you file, helping to hedge against longevity risk – the risk of running out of money over time. However, it can provide a lower amount of total benefits over the years, depending on your lifespan.
A less well-known strategy called file-and-suspend can be used to try and maximize the value of benefits. In this strategy, the spouse with higher earnings will file for benefits at the full retirement age, and immediately after that file a notice requesting suspension of the payment of benefits. This allows the spouse with lower earnings to file for spousal benefits amounting to half of the benefit the higher-earning spouse would get.
As a result, a certain amount of benefits are paid to the household right away while the spouse with higher lifetime earnings delays receiving benefits so as to earn a higher lifetime payout. The higher earner then starts receiving benefits at some point in the future and the lower-earner converts to receiving a full benefit. Please note that the spouse is able to convert to a full benefit only after waiting until he or she has reached full retirement age and then filing for spousal benefits.
Circumstances will differ with each couple, but filing for Social Security as a couple instead of individually can provide substantial extra benefits over time, and using the file-and-suspend strategy can provide even greater benefits, potentially adding as much as $100,000 or greater in extra benefits over combined spousal lifetimes. Samuel Rad and his office have extensive experience with gay and lesbian couples looking for financial planning advice. Contact him in his Los Angeles office in order to see how you can maximize your financial benefits.
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Samuel Rad is an award winning fee-based Financial Planner with Affluencer Financial Advisors in Los Angeles, California. Mr. Rad has multiple licenses in the investments, real estate, and insurance fields. He has spent a considerable amount of his career lecturing at universities and companies, on financial topics such as financial planning, retirement planning, and estate planning.
He currently lectures at UCLA and West Los Angeles College.