Wells Fargo Advisors LGBT Insight: Social Security Spousal Benefits and Same-Gender Married Couples

Kyle Young, First Vice President Investment Officer and Accredited Domestic Partnership Advisor, Wells Fargo Advisors, LLC in Short Hills, N.J., addresses the unique financial challenges faced by same-gender partners.


Click here for a video Q&A with Kyle Young.

More than a year after the Supreme Court’s decision to knock down a key section of the Defense of Marriage Act, which opened the doors for same-gender couples to receive federal recognition of their marriages, complications and confusion remain with regards to a key retirement income source: Social Security.

As you and your same-gender spouse begin to navigate through the new planning landscape that exists as a married couple, I highly encourage you to take some time to review your Social Security retirement-income strategy.

A few key statistics from the Social Security Administration to highlight why this discussion is so important:

    In 2014, more than 59 million Americans will receive an average monthly benefit of $1,294.

    Nearly nine out of 10 individuals age 65 and older receive Social Security benefits.

    Social Security benefits represent about 38 percent of the income of the elderly.

    Among elderly Social Security beneficiaries, 52 percent of married couples and 74 percent of unmarried persons receive 50 percent or more of their income from Social Security.

    Among elderly Social Security beneficiaries, 22 percent of married couples and about 47 percent of unmarried persons rely on Social Security for 90 percent or more of their income.

The majority of current Social Security recipients consist of workers who personally met the 40-quarter requirement to draw a monthly retirement benefit. The remaining recipients consist of individuals drawing a dependent benefit, spousal benefit or survivor benefit. I’d like to take some time and hone in on the spousal retirement benefits offered through SSA.

Based on the Social Security Act, benefit eligibility has long been based on your state of residence and its applicable laws, including whether your state recognizes same-gender marriages. For couples residing in a state that fully recognizes same-gender marriages, the SSA will now fully recognize your marriage, and spousal retirement and survivor benefits may apply.

For couples residing in a state that does not recognize same-gender marriages, the answers are not as clear-cut. Until recently, it was presumed that if you reside in a non-recognition state at the time of applying, you and your spouse would not be eligible for spousal retirement and/or survivor benefits.

But in recent weeks, the SSA announced that it is currently working to expand eligibility forsome married same-gender couples who either: 1) reside in a non-recognition state, and/or 2) have entered into another legal form of relationship recognition, presumably to support those couples residing in states with civil unions or domestic partnerships.

Unfortunately, the guidance provided for those residing in non-recognition states lacks much detail. If you and your same-gender spouse reside in a non-recognition state and feel you may be eligible for spousal retirement benefits, you should consider meeting with your local SSA office immediately. If it is determined that you are eligible for a spousal benefit, you may receive back payments from the time of your original application.

To be clear, for couples with two working spouses who independently meet the eligibility requirement for retirement benefits, it may be more beneficial to simply draw on your own benefit (and to disregard the spousal benefit). For those couples where one spouse either does not work (i.e., has never paid into the SS system) or where one spouse works but earns substantially less than the other spouse, the spousal benefit may increase the total amount of monthly retirement benefits received.

To give you an idea of how the SS spousal benefit is calculated, see the following information from the SSA website. This is meant to be used as general information and not as specific guidance or advice.

If your spouse is under full retirement age (varies based on year of birth) and qualifies on his or her own record, we will pay that amount first. But if he or she also qualifies for a higher amount as a spouse, they’ll get a combination of benefits that equals that higher amount.

If he or she begins receiving benefits:

1) Between age 62 and their full retirement age, the amount will be permanently reduced by a percentage based on the number of months up to his or her full retirement age.

2) At his or her full retirement age, their benefit can be equal to one-half of your full retirement amount.

Generally speaking, a maximum 50 percent spousal retirement benefit may be available, based on the higher earning spouse. For instance, if your spouse is eligible for a $1,500 retirement benefit and you are not eligible for any retirement benefit, you may be eligible for a maximum $750 monthly spousal retirement benefit. Certain age restrictions and offsets for current earnings or pensions from work not covered by SS (usually governmental workers) may apply.

Although we didn’t spend time on the survivor benefits offered through Social Security, same-gender spouses may now be fully eligible to receive additional benefits upon the death of their spouse. As with the retirement benefits, certain restrictions apply and it’s critically important that you meet with your local SSA office to determine eligibility requirements and benefit amounts.

Whether you are still in your earning years or you have been drawing retirement benefits for many years, I suggest a thorough review of the options available to you and your spouse. See below for a couple of useful contacts to get the discussion started.

Social Security website: www.SSA.gov

Social Security telephone: 800-772-1213

Wells Fargo Advisors is not a tax or legal advisor. Wells Fargo Advisors did not assist in the preparation of this article, and its accuracy and completeness are not guaranteed. The opinions expressed in this article are those of the author and are not necessarily those of Wells Fargo Advisors. Wells Fargo is No. 17 in the 2014 DiversityInc Top 50.

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