Thursday, February 16, 2012
Primer on Social Security and pension survivor benefits for couples (when "marriage" matters)
In this time that same-sex marriage is a political issue for some candidates, it’s well to review, under federal law, just when “legal marriage” can improve benefits.
The main circumstance is when, in a couple, one largely supported the other and the dependent spouse did not have significant social-security-eligible earnings. In that case, the spouse gets a portion (usually 50%) of the other partner’s benefit (one half if waiting until full retirement age), link here. Even so, Social Security always computes the benefit the spouse earned on his or her own first to see if it is more. The rules are more generous if there are dependent children (which is admittedly more like a “welfare benefit” than annuity).
On the other hand, if both spouses had comparable income and both earned their own benefits, there is, in practice, neither a marriage benefit nor penalty while both are alive.
However, a surviving legal spouse (under federal rules) receives 100% of the partner’s benefit, a possibility not available to same-sex couples when one has passed away. Here’s another reference from 2010 at “Personal Finance by the Book” (link). I know this was the case with my mother.
Here’s another GLAD worksheet (from Rhode Island) on the effect of marriage on social security and private defined benefit pensions, link.
The Human Rights Campaign has a valuable worksheet on “Domestic Partner Benefits: Pension Survivor Annuties” here with discussion of the now unfavorable (for same-sex couples, because of DOMA) IRS rules for QJSA (Qualified Joint Survivor Annuity) and QPSA (Qualified pre-Retirement Survivor Annuity).
On another topic, the “spend-down” rule for Medicaid eligibility when entering a nursing home, I found this reference on how to use annuities to soften the blow, link. I had not heard of this financial planning "technique" and will return to it later.