Allworth Co-CEO Scott Hanson reminds you about some key Social Security considerations you need to make before filing - specifically if you're married (or have ever been married).
Information about Social Security? Some people just can’t seem to get enough of it.
How so?
Of all the hundreds of retirement planning workshops we’ve hosted over the last 27 years, our workshops that focus on Social Security are among the most highly attended.
And in meetings with clients? Social Security is (rightfully so) a recurring topic.
That’s because, almost until the very day you file, your specific payment amount (and even the solvency of the program) remain moving targets.
When I work with a client to build their retirement plan based on things like their other assets, income, and life expectancy, we map out numerous Social Security strategies to calculate the optimum time to file.
Important factors such as whether you have a spouse, ex-spouse, deceased spouse, or dependents only make those calculations more detailed and the decision-making process that much more important.
Understandably, folks can get so caught up in wanting to calculate the maximum benefit amount that many never learn about some of the lesser-known Social Security eligibility requirements that could impact not only them, but also the people they love.
While I couldn’t possibly do a comprehensive analysis of all the variables (that you could read in a lifetime), here are some key-but-often-overlooked eligibility facets of Social Security that, if any might possibly apply to you, should be explored with your advisor.
How long do you need to be married to someone to collect Social Security off of their work history?
This is important because, frankly, more than at any time in history, people marry and divorce and then remarry later in life.
So, when are you eligible to receive Social Security based on your new spouse’s work history?
This standard is surprisingly easy to meet.
Typically, you need to be married to someone for about a year to be eligible to collect benefits from their work record. (You can put the application in prior to a full year so long as the one-year mark comes before the Social Security Administration processes the application.)
And for those younger readers, Social Security will usually waive the one-year requirement if you’re both the biological parents of a child.
Which brings me to benefits eligibility for the survivors of a Social Security recipient.
Social Security payment amounts are typically calculated based on a person’s work history (i.e. duration, career income).
Most people know that.
And while a great safety net, survivor’s benefits are only paid out when certain criteria are met.
While Social Security (created in 1935) is understandably thought of as a retirement program, survivor’s benefits were later added in 1939 as a form of life insurance to support spouses and dependents in the event of the worker’s death. (Survivor’s benefits can cover spouses, ex-spouses (potentially), children and even dependent parents.)
So, who specifically is eligible?
- Survivor’s benefits for spouses. If you are the widow (or widower) of a deceased worker, you might be eligible for a full benefit amount when you reach your full retirement age. As a survivor, you can potentially receive benefits as early as age 60 (age 50, if you are disabled), but the amount will be reduced.
- Survivor’s benefits for children. Unmarried children under the age of 18 (or 19 years of age if they are in school full time) are also potentially eligible.
- Survivor’s benefits for dependent parents. While all these eligible parties are deserving, this is one of the lesser known potential beneficiary groups - and it always makes me think just a bit more highly of the Social Security system. Dependent parents who are at least 62-years old and who relied on the worker for at least 50% of their life support are eligible.
- Survivor’s benefits for divorced spouses. Another potential Social Security survivor’s benefits recipient is ex-spouses. If you are age 60 or older, you are typically eligible if you were married to the worker for at least 10 years.
Can getting married a second (or third) time "mess up" your Social Security payout?
This is a big YES.
If you are divorced, and you were married to someone for 10 years or more, you can usually collect Social Security on your ex’s record.
And your ex never even has to know. (Not that they should care, as it doesn’t impact them in the least.)
However, it’s when you remarry that the sanctity of your Social Security payout comes into question.
That’s because (typically) if you remarry you are no longer eligible to collect benefits on your ex-spouse’s record, potentially placing you in a gray-area that could drastically reduce your future retirement income if your new spouse has a different work history.
With the divorce rate for people over the age of 50 having doubled in the last quarter century, this represents just one more reason why having a plan is important. 1
If you were married for at least 10 years, and you are 62 (or older), you almost certainly qualify for a Social Security payment that equates to 50% of your ex’s payment amount.
That is why, purely from a financial perspective, depending on your other income and asset factors, it can pay to not get remarried. Although, if you do remarry, and you get divorced, or, unfortunately, your spouse dies, you can often still collect a payout based on your first spouse’s record.
So, I hate to be cynical, especially about marriage, but these considerations matter. That’s because having enough money during retirement is a big deal.
Simply, when it comes to Social Security and marriage, hitting that 10-year mark is key.
As a sidelight, isn’t it amazing to consider that someone you may have gotten divorced from over 30 years ago might still contribute tens of thousands of dollars to your retirement? (And you thought that marriage was a mistake!)
Social Security. It’s complex and ever-changing. I urge you to never make any decisions about it without first carefully reviewing them with your advisor.
1 https://www.cnbc.com/2018/01/26/how-getting-married-can-mess-up-your-social-security.html
