Q: I am 66 and my partner is 63. We are thinking of getting married. How long must we be married for her to be eligible for spousal benefits based on my earnings? Neither of us have filed for Social Security yet. – Mark Sander, Indianapolis, IN
A: It’s wonderful to find love at any age. But for older couples, the decision to marry can have a big impact on your retirement finances, particularly when it comes to Social Security. Some experts say that may be one reason why co-habitation among older people is on the rise. According to the U.S. Census, nearly three million people age 50 and older live together, up from 1.2 million in 2000. “Many seniors live together instead of getting married because of money issues,” says Steve Vernon, author of Recession-Proof Your Retirement Years.
The good news is that if you do tie the knot, you only need to be married for one year for your wife to collect Social Security spousal benefits.
Still, it may not be a good idea for your wife to apply for benefits right away, says Vernon. At age 66 you are what Social Security deems full retirement age. But for your wife to collect full spousal benefits (50% of your full Social Security monthly payment) she will need to be full retirement age too.
If your wife files for Social Security before she reaches 66, she will get less than she would receive than if she waited till full retirement age. How much less? If your wife files for spousal benefits at 63, she will get 37.5% of your Social Security. At 64, that rises to 42% and at 65, 46%.
Waiting to collect benefits also means a higher payout for you. You can boost your Social Security paycheck by 8% each year you wait until age 70. A method called file and suspend allows you to file for your Social Security benefits so your wife can start collecting spousal benefits but you suspend receiving your benefits till you are 70.
Also be aware that if either of you has been married before, remarrying could mean losing alimony or the survivor benefits of a pension. “You really need to think strategically about how to maximize your Social Security benefits,” says Vernon.
There are a number of calculators and advice services that can help you figure the claiming strategy that’s best for your situation. Earlier this year, 401(k) advice provider Financial Engines released a Social Security income calculator that’s free and easy to use. The calculator sifts through thousands of claiming strategies to come up with a recommended option. For $40, you can use the Maximize My Social Security online software to evaluate more detailed scenarios. You may also want to consult a financial planner who’s familiar with Social Security rules.
Marriage can have a hazardous effect on other parts of your financial life, says Vernon. You will legally be on the hook for your spouse’s medical bills, and there may be sticky issues when it comes to inheritance. In some cases, married couples also face higher taxes, depending on your income and tax bracket.
Whether you get married is a personal decision, but by choosing the right financial plan, you’re more likely to enjoy a happy retirement together.
Do you have a personal finance question for our experts? Write to [email protected].
More from Money’s Ultimate Retirement Guide: