David Helverson, who holds the Accredited Domestic Partnership Advisor designation and is a Vice President Investment Officer with Wells Fargo Advisors in Chicago, addresses the unique financial challenges faced by domestic partners. This is the sixth article in a continuing series.
For most of us, the Social Security system provides a bedrock source of retirement income. According to a U.S. News & World Report article from 2011, Social Security makes up 38 percent of the total income of people age 65 and older and is the largest source of any type of retirement income. For nearly two-thirds of Americans age 65 and older, Social Security comprises more than 50 percent of their retirement income. Because Social Security is a federal program, the 1996 Defense of Marriage Act (DOMA) limits Social Security’s spousal benefits to legally married couples composed of one man and one woman. This limitation may require same-gender couples and unmarried domestic partners to consider income-replacement strategies for the surviving partner of a deceased Social Security recipient.
If both partners in a same-gender partnership worked and generated the qualifying 40 quarters of coverage, then each is considered “fully insured” and entitled to his or her own individual benefit. However, in 2010, 26 percent of women age 62 or older received a spousal benefit on the basis of her husband’s earning record. A nonworking spouse of full retirement age in a legally recognized marriage can qualify for a spousal retirement benefit equal to one half of the working spouse’s full retirement amount. However, under DOMA, this spousal benefit would not be available to a same-gender partner who chooses to remain out of the workforce to raise children or tend to housekeeping and home maintenance. Income-replacement strategies such as life or disability insurance might be considered to reduce or eliminate the potential loss of income.
