As a result of Friday’s history Supreme Court decision recognizing same-sex marriages, equality means these couples nationwide can be eligible for the same Social Security spousal and survivor benefits previously only available to heterosexual married couples. Although it is important to remember that you can only claim children and Social Security survivors benefits in the event of your partner passing away. And even then, you need to make sure that you’re eligible. But just knowing that same-sex couples can now receive the same benefits as heterosexual couples is a step in the right direction.
Heterosexual married couples have been able to use Social Security claiming strategies as they enter retirement – such as file and suspend, and restricted claim – to optimize household’s benefits.
Same-sex couples who now have a Constitutional right to marry can also use the same benefit-bolstering strategies – including benefits for spouses, ex-spouses and survivors of deceased workers – as male-female married couples.
The financial benefits could be immense, according to a report by Financial Engines, an investment advisory firm. In fact, the ruling could add anywhere from $20,000 to more than $250,000 in lifetime benefits to same-sex couples, Christopher Jones, chief investment officer at Financial Engines, told USA Today.
The Social Security Administration Friday wasted no time in posting an update on its website following the Supreme Court decision.
“As a result (of the decision), Social Security is no longer prevented from recognizing same-sex marriages in determining entitlement to Social Security benefits or eligibility for Supplemental Security Income (SSI) payments,” the U.S. agency said in a statement. “We can also recognize some non-marital legal same-sex relationships (such as civil unions and domestic partnerships) as marriages for purposes of determining entitlement to Social Security and Medicare benefits.”
The SSA also said that it is working closely with the Department of Justice to develop and implement additional policy and processing instructions.
In a case study, Financial Engines figured how much additional benefits one same-sex couple would be eligible for.
In one scenario, Financial Engines considers a fictitious couple – Henry, age 64, (with a current salary $80,000), and Logan, age 62 (with a lower-paying job during which he didn’t work for years at a time). If Henry dies at 84 and Logan dies at 90, they would receive total Social Security benefits of $797,280 as two single people if they start collecting benefits at ages 64 and 62.
But if Henry and Logan claim Social Security as a married couple, their lifetime benefits would grow to $938,112, an increase of $140,832. That’s because Logan can now receive spousal and survivor benefits based on Henry’s higher earnings history.
And if Henry and Logan optimize when they claim Social Security they would get more than $1.1 million, some $202,176 more than if they claimed at ages 64 and 62. This additional $202,176 would be possible via the “file-and-suspend” claiming strategy. This entails Henry, at age 68, filing for earned benefits and immediately suspending – not taking – them.
That would let Logan receive spousal benefits while Henry’s earned benefits continue to grow. At 66, Logan files for spousal benefits, but also files a restricted application to exclude earned benefits. At 70, Henry starts collecting earned benefits. And at 70, Logan switches to earned benefits.