Marriage is a joyous milestone at any stage of life, but for those who are already retired or receiving Social Security benefits, it may bring additional financial considerations. For older adults contemplating marriage, understanding how Social Security benefits might change is essential for maintaining financial stability. This article breaks down the potential impact of marriage on retirement benefits, how different types of benefits are affected, and what to consider in light of Social Security’s uncertain future.
Social Security and Late-Life Marriage: What’s at Stake?
This Article Includes
- 1 Social Security and Late-Life Marriage: What’s at Stake?
- 2 Types of Social Security Benefits and Marriage Implications
- 3 How Marriage Affects Your Spouse’s Benefit
- 4 Preparing for Social Security Changes Amidst Financial Uncertainty
- 5 Looking Ahead: Potential Changes to Social Security Funding
- 6 Final Thoughts: Navigating Social Security and Marriage Decisions
When you marry after retirement, there’s often a question of whether your Social Security benefit will be affected. Many people assume they’ll have to forfeit a portion of their benefits, or that one spouse’s benefits will reduce the other’s. The truth is that the impact of marriage on Social Security depends on the type of benefit each partner receives.
Types of Social Security Benefits and Marriage Implications
There are several types of Social Security benefits, each with different rules about marriage. Let’s explore how each one might be affected by saying “I do.”
1. Retirement Benefits Based on Personal Earnings
If your Social Security benefit is calculated based on your own lifetime earnings, marriage won’t reduce your monthly benefit. For example, if you have been working most of your life and collecting a personal retirement benefit based on your contributions, getting married won’t change the amount you receive.
2. Ex-Spousal Benefits
For those receiving an ex-spousal benefit—meaning they receive benefits based on the earnings record of an ex-spouse—marriage does impact their payments. Upon remarriage, ex-spousal benefits typically cease. For example, if you receive $2,255 based on an ex-spouse’s work record and remarry, you would lose access to that amount.
3. Survivor Benefits
Survivor benefits, paid based on the earnings record of a deceased spouse, work a bit differently. If you are over 60 when you remarry, you can continue receiving survivor benefits. However, if you remarry before age 60, these benefits would typically be discontinued. This can be crucial information for individuals who rely on survivor benefits and are considering marriage.
How Marriage Affects Your Spouse’s Benefit
In the case of a spouse who retired early, their benefit is likely to be lower than it would have been if they’d waited until full retirement age. The good news is that this amount generally remains unchanged by marriage. In some circumstances, if you pass away, your surviving spouse may become eligible for survivor benefits based on your record if your benefit amount was higher than theirs.
Preparing for Social Security Changes Amidst Financial Uncertainty
With Social Security facing potential funding issues, it’s important to plan ahead. Changes in the economy, political decisions, and evolving policies may lead to future benefit reductions. Here are several steps that can help you prepare for these uncertainties:
1. Prioritize Personal Savings
Financial advisors often recommend saving 10-15% of your income for retirement. If this seems daunting, starting with a small percentage and gradually increasing your contribution is a good strategy. Tax-advantaged accounts like IRAs and 401(k)s offer long-term growth and additional retirement security.
2. Extend Your Working Years
Working an extra couple of years may help you improve your retirement outlook. Not only does this strategy boost your savings, but it can also increase your Social Security benefit calculation and reduce the need to draw from your nest egg right away. Financial advisors often emphasize this as a significant benefit for late-life planning.
3. Consider Passive Income Streams
Adding a passive income stream, such as rental income or investment dividends, can provide extra security if Social Security benefits are cut. For those interested in real estate without the responsibility of direct ownership, crowd-funded real estate investment platforms are a low-barrier option. Even small contributions can offer long-term returns.
4. Develop a Debt Repayment Strategy
Entering retirement debt-free can help secure your financial health. Paying off high-interest debts first, such as credit cards, can save you significant money and help stretch your retirement income. Debt counseling services can provide additional support if you are overwhelmed by debt.
Looking Ahead: Potential Changes to Social Security Funding
Changes to Social Security could happen sooner than anticipated due to economic pressures and political choices. For example, proposals to eliminate taxes on Social Security benefits may decrease program funding. According to the Committee for a Responsible Federal Budget (CRFB), such measures could accelerate the depletion of the Social Security trust fund, potentially leading to reduced benefits for retirees as early as 2031. With that in mind, bolstering other income sources is key to navigating this uncertain future.
Marriage later in life involves unique financial considerations, especially if you’re collecting Social Security benefits. Understanding the specifics of how marriage affects each type of benefit allows couples to make more informed decisions. By proactively managing savings, income, and debt, you can better position yourself against possible cuts to Social Security and enjoy peace of mind as you embark on this next chapter.