Wednesday, May 27, 2015

Social Security and Remarriage

Many senior citizens are discovering that they have to do a lot of serious research before they decide whether or not they can afford to get remarried during their senior years.  With a record number of "gray divorces" added to the natural loss of spouses as we age, a large number of senior citizens are considering whether or not they should remarry, not just for companionship, but also to improve their financial security.

Some couples are learning that remarriage late in life can actually have a negative effect on their financial situation, especially when dealing with the complexities of Social Security.  Others are pleased to learn that remarriage can enhance their financial picture.  Every case is different.  This article will just give you an overview of some things to consider.  However, if you are planning to remarry late in life, I strongly suggest you consult with an attorney to draw up your new wills, set up trusts for adult children, give a new spouse a life estate in the communal home, etc.  An attorney can help you avoid many of the pitfalls that can arise, especially if either partner has adult children who may be counting on an inheritance!

In addition, you have to look at how remarriage will affect your Social Security benefits.  In some cases, both partners will be just as well off, especially if they are both receiving benefits based on their own earnings.  There are situations, however, when one of the spouses will receive higher or lower benefits because of their remarriage.

Remarriage When Benefits Are Based on the Income of a Former Spouse

Here's a typical scenario:  A woman is divorced from her first spouse after more than ten years of marriage and is able to collect Social Security benefits based on the income of her former spouse, once she is age 62.  If she waits until her full retirement age of 66, these benefits will amount to about one-half of what her former spouse receives.  If he is getting $2200 a month, she will be eligible to receive approximately $1100 a month at her full retirement age.  If she decides to collect earlier, she could receive as little as $750.  In either case, that is not very much money to live on.

What if she decides to remarry a man who only receives $1800 a month in Social Security?  Once she is married to someone new, she is no longer able to collect benefits based on the income of her former spouse.  Instead, she would now be eligible to collect about one-half of what her new husband earns, assuming she has reached her full retirement age.  This would drop her down to $900 a month.  Of course, the two of them together would be collecting $2700 a month, which might result in a more comfortable retirement than if the two of them continued to live separately.

On the other hand, what if they decide to live together, rather than marry?  Then, their combined income would be $2900 a month ... which would result in an even more comfortable retirement.  In this case, the woman is better off continuing to collect based on the earnings of the husband she divorced, while living with another man.  This may cause discomfort because of religious beliefs.  In addition, it could make it more complicated for the two of them in a medical emergency or in sharing their other assets.  None-the-less, many seniors make the decision to skip marriage and just live with each other, because they cannot risk the loss of income.  It is a matter of survival.

To ease the religious issue, I have heard of some couples who have had a religious ceremony, but did not file documents with the state.  They are not legally married, but may feel more acceptable in the eyes of their church.  You would have to discuss this with your minister to see if this is possible in your faith.

There is another issue with Social Security.   When a couple is married, if the spouse who is receiving the higher Social Security benefits dies, the surviving spouse will often see their benefits increase significantly.  However, if the couple did not marry, the surviving spouse will not see any change in their benefits, which could be a significant problem for the surviving spouse. 

To make the issue even more complicated, if the new boyfriend is eligible for additional income from a government pension, for example, he would not be able to pass a portion of this pension on to his new girlfriend, even if they are living together, because they are not married.  In addition, if he is already collecting his pension, it is possible that he would not be able to pass it on to her anyway, even if they do get married, depending on the particular state or federal agency and whether or not the terms and assignment of benefits can be changed once the principle party has begun to collect.

As you can see, a lot depends on the age you are when you begin to collect Social Security, the amount your receive, the amount your new spouse receives and whether or not there are other financial considerations that could affect your income.  This is a highly complicated decision and it is important to discuss it with your financial adviser and/or attorney before making a final decision.

Remarriage and Spousal Benefits for a Widow

The situation is a little different for a widow.  If she remarries after the age of 60 (age 50, if she is also disabled) and later begins collecting widow's Social Security benefits based on the earnings of her first husband, she should be able to continue to receive those benefits, whether or not she has remarried.  The amount of her benefits can vary depending on whether she began to collect in her early 60's or waited until her full retirement age.  Let's assume that she is receiving $1800 in widow's benefits.  Then, if she remarries someone who is also receiving $1800 in Social Security benefits, their combined income will be a generous $3600 a month.  However, what if her widow's benefits are extremely low because her first husband died fairly young without a lot of earnings? For example, assume that she would receive less than $900 a month in the above scenario; then she would be better off foregoing the benefits based on her first husband's income and collecting one-half of her new husband's benefits (assuming she is at her full retirement age).  She does have that option.  However, she should make an appointment with the Social Security office before she remarries and make sure there have been no rule changes that would affect this decision.

If a widow remarries before she turns 50, she cannot collect benefits based on the earnings of her first husband, unless her second marriage is also terminated through death or divorce.

Should You Remarry if Your Social Security is Based on the Income of a Former Spouse?

As you can see, there are no simple answers regarding whether or not a couple is better off getting remarried or living together late in life.

As mentioned above, before considering such a marriage, it would be wise for a couple to meet with a financial planner to consider all their options.  They might also wish to talk to a lawyer about the best way to set up their assets.  There may be some assets that they want to keep as separate property to make it easier to pass their property on to their own children from their former marriages.

The information in this post is not intended to give you legal advice.  Instead, it is hoped that it will inspire couples who are considering remarriage to discuss all the legal and financial repercussions of the decision with lawyers and their financial advisers.  It is not a simple decision, and what is right for one couple may be completely wrong for another couple.  While some people are much better off financially after a remarriage, others will find that they have decreased their income.

Read More About Remarriage and Social Security

You will also want to read these pages from the official handbook of questions and answers about Social Security, widowhood and divorce from the Social Security Administration.  You can find links to the information here:

http://www.socialsecurity.gov/OP_Home/handbook/handbook.04/handbook-0406.html

http://www.socialsecurity.gov/retire2/divspouse.htm

If you are interested in learning more about important retirement issues, check out the tabs or drop down menu at the top of this page.  They can link you to hundreds of additional articles containing important retirement information.

You are reading from the blog:  http://www.baby-boomer-retirement.com

Photo credit:  Photo of wedding venue taken by author, Deborah-Diane.  All rights reserved.

1 comment:

  1. Wow! There certainly is a lot to consider and you presented it beautifully. I know a couple who lived together and came up with a solution for getting around the emergency medical and insurance complications - one of them adopted the other!

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