By: Robert Castillo, ADPA®
In working closely with the LGBT community as a Financial Advisor, I’ve noticed that many LGBT couples do not communicate openly about their finances, which can lead to unnecessary stress and problems down the line. Don’t be a statistic: plan early! Now that same sex marriage is legal, LGBT couples have a lot to consider, because those who decide to marry can now benefit from over 1100 federal benefits that were not available just two years ago. Social Security is one of the most common topics that my retiring clients want to know about, so I would like to discuss three talking points that can apply to all married couples. Remember: in order to truly create a thorough financial plan, the best course of action is to meet with a financial planner to discuss the most appropriate strategies for your situation.
1) Some Basics on Social Security
You can apply for Social Security benefits as early as age 62, but expect to get a reduced payment. Each year that you wait to receive benefits, they increase by 8% until age 70. Keep in mind though, Social Security is designed to pay you a specific amount of money over your lifetime, which is based on your reported income and the number of years you’ve been working and paying Social Security taxes. The optimal age to collect Social Security benefits is around 66 or 67 depending on when you were born, this is known as FRA or full retirement age. FRA is when you are supposed to collect Social Security benefits; collecting before or after FRA will result in a reduction or credit to your benefits. All of this matters to spouses even more because they can choose to collect benefits on each other’s work history, so it is important to do some planning when receiving Social Security.
2) Unmarried couples may be able to qualify for spousal Social Security benefits if they are state registered domestic partners
If you are in a relationship and are not married, you can register with your state as domestic partners and potentially qualify for spousal social security benefits, according to the IRS website.* That means that if one spouse has a much higher social security benefit than the other, then the other spouse could claim a spousal benefit of 50% of the higher benefit. In some cases, a 50% spousal benefit can lead to a higher benefit depending on an individual’s work history. It is important to note that not all couples may register as domestic partners; you must be in a same-sex relationship or be age 62 or greater.
3) You can claim spousal Social Security benefits even if you are no longer married
If you separate from your spouse, then you can still claim a spousal Social Security benefit if you were married for at least ten years. However, you must stay unmarried to be able to claim the benefit. There is an exception to this rule if your ex-spouse is deceased and you are age 60 or greater. This is one reason domestic partnerships are an option for people age 62 or greater, in case one partner in a relationship is currently receiving benefits based on an ex-spouse’s work history. Instead of getting married and losing social security benefits, two people aged 62 or greater can register as domestic partners and gain other state benefits and protections in the process.
**As of 10/27/2017
By Robert Castillo, ADPA
Robert Castillo, ADPA® is a Financial Advisor at Santa Monica, CA based Gerber Kawasaki, an independent investment advisory and wealth management firm with approximately $502 million in assets under advisement.** Robert is also an accredited domestic partnership advisor and has been specializing in financial planning for LGBT same-sex and unmarried couples since 2009. To contact Robert, please email him at Robert@GerberKawasaki.com Twitter: @RCastilloLA
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Gerber Kawasaki Inc, a registered investment advisor and separate entity from LPL Financial. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which course of action may be appropriate for you, consult your financial advisor. No strategy assures success or protects against loss.
Gerber Kawasaki, 2716 Ocean Park Blvd. #2022 Santa Monica, CA 90405. Contact us at (310) 441-9393.