USA TODAY International Edition
With marriage, a $$ bonus
Heterosexual married couples have long been able to use Social Security claiming strategies — such as file and suspend and restricted claim — to maximize their household’s benefits.
But since Friday’s historic Supreme Court decision recognizing same- sex partners’ marriages as a constitutional right, those couples will be able to use the same benefit- boosting strategies, including benefits for spouses, exspouses and survivors of deceased workers, as straight married couples.
And the financial benefits could be immense, according to a report by Financial Engines, a Sunnyvale, Calif.- based 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, says Christopher Jones, chief investment officer at Financial Engines. Others agree.
From a Social Security- claiming perspective, “these unions ... will be no different than traditional marriages,” says Stephen Stellhorn, president and CEO of MSM Capital Management in Tampa. “Not understanding the basics of Social Security could cause you to leave thousands of dollars on the table over your lifetime.”
In a case study, Financial Engines examined how much in additional benefits one same- sex couple would be eligible for.
In one scenario, Financial Engines profiles a fictitious couple — Henry, age 64, ( current salary $ 80,000), and Logan, age 62 ( who has had a lower- paying job interrupted by taking several years off). 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. How would they do that? With the “file- and- suspend” claiming strategy. According to Jones, Henry, at age 68, would file for earned benefits and immediately suspend — not take — 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.