We talk at length on our website about the strategies available to married persons, and it is implied that those strategies are not available to single persons. There are literally thousands of distinct paths that married persons can take with respect to their Social Security retirement benefits, whereas single persons have only one choice to make – when should I claim these benefits?
We do not, however, attempt to quantify the advantages that these strategies bestow on a married couple relative to a pair of single individuals. This topic is interesting in a general sense, but I was inspired to take a closer look at it after reading an article by Richard Thaler, an economist at the University of Chicago, that appeared in The New York Times on February 18. In his article, Dr. Thaler discusses the financial implications of the ongoing same-sex marriage debate. I will leave the debate over same-sex marriage for another blog, but seeing as Dr. Thaler alluded to “spouses get[ting] special treatment from Social Security,” this article is right up our alley.
The application to the same-sex marriage debate is clear – the Social Security Administration does not recognize same-sex marriages. Therefore, although a couple may be legally married in their state, they are treated as two single people with respect to Social Security. This designation denies them spousal benefits and survivor’s benefits, and precludes them from using the strategies available to married persons.
To examine the financial impact of being considered single rather than married, I used our custom Social Security reports and considered the two individuals in the table below.
|Person||Birth Year||Full Retirement Age (FRA) Benefit||Life Expectancy|
First, I ran these two individuals through our married persons calculator and found that by utilizing the “free spousal benefit” strategy, these individuals could claim a total of $550,000 in what we at SocialSecurityChoices.com call Social Security Wealth.
Next, I ran the same two individuals though our single persons calculator separately. By filing for retirement benefits at the optimal age given their life expectancies (82 is the median life expectancy for males), these two individuals could claim a total of $443,000 in Social Security Wealth. So, relative to being single, these two individuals would get an extra $107,000 in Social Security Wealth, almost a 25 percent increase, as a married couple. Obviously, the “married advantage” can be larger or smaller based on the individuals in question, but this case study makes clear that the advantages to being married in the eyes of Social Security can be quite significant.