LGBT Social Security Advice

LGBT married couples now have a few more options on how to take their Social Security benefits.  Gay Financial Planner David Rae walks you through what you must know Now about Social Security for LGBT Couples.  Keep reading for tips to maximize gay spousal benefits for Social Security.  Not to mention Social Security basics for gay couples.

Social Security planning is complicated, and the process is a bit new for LGBTQ+ couples. Same-sex couples that are married and nearing retirement now have many more options than they had just a few years ago. Thankfully, federally-recognized marriage equality brings with it equality of Social Security benefits for gay couples as well.

I recently helped a gay couple take the leap and retire. They really had no idea what their Social Security options were. For most of their working lives, they expected that they would have to file their taxes individually. In some cases, that may be fine; in their case, it would have cost them more than $12,000 each and every year for the rest of their lives.  Over a 30-year retirement, this would mean $360,000 in lost Social Security benefits. Not to mention any interest or gains they could have earned on this money over time.

Currently, about 175 million people are working and paying Social Security taxes. On the flip side, about 64 million people are receiving monthly Social Security benefits. Gay people have always been part of those numbers, but until recently, the Social Security Administration did not recognize the validity of all marriages.

On June 26, 2015, the U.S. Supreme Court issued a decision in Obergefell v. Hodges, holding that all couples have a constitutional right to marry in all states and have their marriage recognized by other states, regardless of sexual orientation. That landmark decision made it possible for more same-sex couples and their families to benefit from all Social Security programs.

The money is just there for the taking.

You turn 62 and the federal government will send you a check for the rest of your life, in the form of your Social Security benefits. Sounds great right? Why wait when you can grab a check from Uncle Sam every month until you die, guaranteed?

Before you rush off to start taking benefits, at least run the numbers and see how much more money you are leaving on the table by taking Social Security early. The full retirement age is currently in the 66-67-year-old range for most people reading this.  To get the maximum Social Security benefit you will need to wait until age 70 to begin taking retirement income from Social Security.

Social Security for LGBT Couples, you now have more options to maximize your benefits.

Whether you are married or single, there are a variety of strategies to increase your Social Security benefits dramatically over your lifetime. There are a few options that may not have been on some couples’ radar back when same-sex marriage wasn’t recognized by the Social Security Administration since they weren’t available to everyone. Don’t feel bad — even many straight couples don’t maximize their benefits either, and they’ve had years to prepare for the day they retire and/or start Social Security benefits (not always at the same time).

Let’s be realistic. Social Security is the closest most people will have to a pension. While the average check isn’t enough for most to live on, don’t underestimate the value of this benefit in the grand scheme of your overall retirement income plan. There really is no other type of retirement income that has no stock market risk, interest rate risk, or longevity risk. You can’t outlive Social Security. You still run some inflation risk, as the cost-of-living adjustment is unlikely to keep up with your increased cost of living over longer periods of time.

Social Security for LGBT Couples- Strategize to Maximize

By coordinating benefits and strategizing to maximize these benefits, an LGBT married couple can potentially increase lifetime benefits by hundreds of thousands of dollars. By planning ahead and being strategic couples can each claim benefits and take maximum advantage of spousal and survivor benefits.

It may seem crazy, but delaying benefits may mean more money in your pocket over the long term. On average, Social Security benefits grow about 7 percent per year between 62 and 70, and this doesn’t even include cost-of-living adjustments. This may mean you are essentially earning more by delaying Social Security than on your safest investments.

The Basics of Social Security for LGBT Couples

Think about it this way: You could claim benefits at 62. If you choose this option your benefits will be reduced permanently for each month you claim benefits before your full retirement age. Claim at 62, and you will see your benefits drop 25 percent from what you would have received at full retirement age (we will assume 66 for this conversation).

Now, if you delay past 66, you get about an 8 percent credit for each year you wait to claim benefits until 70. That means your monthly benefit at age 70 could be 76 percent more than the Social Security benefit at age 62. ($1,500 at age 66 becomes $1,980 at 70 but is just $1,125 at 62).

How big a Social Security check do you want?

-$1125 per month at 62?

-$1500 per month at 66?

-$1980 per month at 70

Spousal Benefits for LGBT Couples Social Security

Here are where the new benefits come in for same-sex couples. If you are married and your accrued benefit is less than your spouse’s, you have the choice to either take your benefit or take the spousal benefit off your spouse’s record. Essentially, your spousal benefit would be 50 percent of your spouse’s benefit. Keep in mind, that you can’t file for benefits on your spouse’s record until he or she is at full retirement age.

One of the top goals of married couples is to boost the benefit for the surviving spouse. The surviving spouse will get 100 percent of the higher earner’s benefit when they die, assuming they are past their full retirement age. The surviving spouse can claim a survivor benefit as early as age 60, but again, the benefit is reduced if taken before the full retirement age.

Social Security LGBT Couples Spousal Options Flip

Another valuable strategy that many people ignore, I like to call the Spousal Options Flip. If you are the higher earner, you may be able to pull in some extra money by applying for the spousal benefit at your full retirement age. This will allow your larger personal benefit to continue to increase again presumably until 70. At 70 you flip — you switch on to your own benefit and your spouse can now claim his or her spousal benefit based on your new, improved higher benefit. (Just for your information, the second spouse will be entitled to a survivor benefit of 100 percent of the first spouse’s benefit, in case she passes before switching back to their own benefit.)

Haven’t filed for Social Security yet, or want to see how these newly available strategies may affect your financial plan? Talk to your trusted financial planner and see if some strategic planning can help you increase your take-home from Social Security. Even if you are getting started late, it’s never too late to get your financial house in order and improve your golden years. At the very least, avoid spending your golden years under the golden arches (bad enough eating there, even worse working there.)

Live for Today, Plan For Tomorrow.  Gay Money Matter.

Contact Gay Financial Advisor David Rae to learn more about how these new options for LGBT Couples Social Security might change your plans for retirement. Until next time, and as always Be Fiscally Fabulous.

DAVID RAE, CFP®, is a retirement planning specialist with DRM Wealth Management, specializing in the needs of the LGBT community. He lives in Los Angeles and Palm Springs with his husband and two chihuahuas. He is a regular contributor to the Huffington Post and Advocate Magazine. For more information visit www.davidraefp.com

If you like Social Security LGBT Couples you also like:

How the LGBT Community Can Retire Early and Fabulously