Did you know that if you’re married when you retire, you’re going to enjoy more and perhaps even better retirement benefits? The Government Accountability Office, or GAO, has just completed an impressive study on how retirement affects married and single Americans from a financial stance.
When it comes to Social Security, married couples will have opportunities that single people are ineligible for. For instance, as a spouse, you’re able to claim Social Security benefits that equate to as much as one half of your spouse’s benefit, provided it’s more than you would receive on your own. Plus, you’re eligible to receive the entire benefit if your spouse dies. If your income varied over the years, you can choose your benefits and payments based on either of your work records; this is important to know if your spouse dies and you’re trying to determine whether to keep receiving your payments or opt for your spouse’s calculations, which could be significantly higher. These may seem as though they wouldn’t equate to much, but once you begin doing the math, the obvious benefits are many.
Even if you’re divorced, you can claim these benefits if you were married for ten years. Married for two years or nine years or 6 years and divorced? You’re not eligible to claim your former spouse’s benefits. What’s interesting is that you don’t hear a lot about this advantage. The reason is because both spouses are more likely to work these days and it may be a wife’s income provides better security for her in terms of monthly payments from Social Security.
In 1960, 62 percent of women claimed spousal payments; however, in 2011, that number slid to just 9 percent. Interestingly enough, the number of women who are over the age of 62 and receiving survivor’s benefits just on their husband’s work record was a bit slower in its decline rates. It went from 23 percent to 16 in those same years. Many say it’s because fewer people are married, according to the new report. “Specifically, the proportion of women who are not eligible to receive Social Security spousal benefits because they were either never married, or divorced after less than 10 years of marriage – the length of time required for eligibility for Social Security divorced spouse benefits – has increased over the last two decades,” explained the authors.
Wondering what the advantages are for married people with a more traditional pension? More than one third of American households that have these retirement tools chose to not take advantage of the spouse benefit offered via Social Security. They fared better in monthly payments when they didn’t include them. Note that written permission must be provided in order to decline these benefits.
That said, a greater number of people will instead opt for a lump sum cash payout instead of taking monthly withdrawals. Some pension plans also give workers the option to take lump-sum cash payments instead of lifetime payments, which allows them greater freedom to spend or invest the money, but also results in the loss of the security of guaranteed monthly payments in old age.
Don’t forget the 401(k) plans. There are definitive advantages for married couples when it comes to these retirement tools. Most obvious is the deferment of income tax on twice as much cash as your single counterparts. That’s applicable only if there are two incomes with 401(k) plans. Plus, you and your spouse have the option of determining which retirement is better versus employer contributions and then opt for that plan for your savings. Ideally, though, keeping both plans are more likely to do better for the long haul.
Want to learn more about making the most of your retirement efforts, whether you’re married or single? We’re here to help – give us a call today and we can explore your future needs and how it plays into your retirement and estate planning efforts.
Ellen LaPlante
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