By Steven C. Johnson, ChFC
The Social Security Administration uses many factors to calculate benefit amounts for beneficiaries, including marital status. For couples who have been married a long time, calculations for spousal and survivor benefits are fairly straightforward. However, widowed or divorced Social Security beneficiaries can run into complications if they decide to remarry later in life. For individuals who remarry in their 50s or 60s, you should be aware of the ways that your new marital status can affect your Social Security benefits.
Here are some things you should consider:
Widows Might Want to Wait Until After Age 60
If either you or your intended is widowed and receiving Social Security benefits based on the deceased spouse’s work record, age matters. A surviving spouse who remarries prior to age 60 becomes ineligible to receive benefits on their late spouse’s record. On the other hand, after your first anniversary with your new spouse, you become eligible for spousal benefits based on their work record. (For related reading, see: 10 Commonly Asked Questions About Social Security.)
Lovebirds in their late 50s with concerns about the Social Security implications of their union can crunch the numbers. With a financial advisor, they can decide whether to wait for marriage to in order to keep a widow’s benefit for longer, or if the spousal benefit from their new union will offer more financial security. Also keep in mind that as long as you are married a minimum of nine months prior to one spouse’s death, the surviving spouse is eligible for spousal benefits based on the second marriage.
Second Marriages After Divorce
If one or both members of the new couple is divorced, things get more complicated. That’s because the Social Security Administration does allow divorced spouses to collect spousal benefits based upon their exes’ work records - provided the divorced beneficiary meets the following standards:
- The original marriage lasted at least 10 years.
- The beneficiary applying for divorced spousal benefits has remained unmarried.
- The beneficiary applying for divorced spousal benefits has reached at least age 62.
If you are divorced from an ex who significantly out earned you and your new sweetheart, remarrying halts the ex-spousal benefits you would otherwise receive. While this can feel like a cynical reason to avoid marriage, it can make a big difference in your finances. Cohabitating without the ring might make more financial sense for some couples.
If You’re on Social Security Disability Insurance
Beneficiaries who are receiving Social Security Disability Insurance (SSDI) may have the most difficult calculations of all when considering a second marriage. That’s because SSDI beneficiaries are subject to a family maximum benefit (FMB) calculation that limits the amount of money available for auxiliary benefits, such as the dependent child benefit. (For more from this author, see: Often Missed Social Security Claiming Options.)
Calculate and compare these three amounts to determine FMB:
1. 85% of the worker’s average indexed monthly earnings (AIME).
2. The worker’s primary insurance amount (PIA) based on full retirement age.
3. 150% of the worker’s PIA.
If number three is the highest of these three calculations, then the FMB is the higher of number one or two. If number one is the highest of the three calculations, then the family maximum benefits is number three.
For example, if Vicky has an AIME of $4,000 and a PIA of $1,759, then her calculations look like this:
1. 85% of AIME is 85% of $4,000 = $3,400
2. PIA = $1,759
3. 150% of PIA is 150% of $1,759 = $2,638.50
In this case, Vicky’s FMB will equal $2,638.50, or 150% of her PIA. So what does this mean if Vicky decides to remarry? If her SSDI is paying out multiple auxiliary benefits - for instance, if she has dependent children - then marriage adds another auxiliary benefit without changing her family maximum benefit. That means everyone will receive smaller benefits that will total same amount that they are already taking home every month. There will be more people in the household, but not necessarily more money available to pay for them.
A Clear-Eyed Walk Down the Aisle
Becoming an encore bride or groom should be an exciting and joyful event. But it’s important that later-in-life lovers don’t forget that there can be some unanticipated consequences to their new unions. Be fully aware of the potential effects marriage can have on your Social Security benefits before saying “I do.” (For more from this author, see: Applying for Social Security Before Retirement Age.)
This article was originally published on Investopedia.