Op-ed: What Gay Couples Must Know About Social Security

The money is just there for the taking. You turn 62 and the federal government will send you a check of the rest of your life, in the form of your Social Security benefits. Sounds great right? Why wait when you can grab a check from Uncle Sam every month until you die, guaranteed?

Before you rush off to start taking benefits, at least run the numbers and see how much more money you are leaving on the table by taking Social Security early. The full retirement age is currently in the 66-67-year-old range for most people reading this.

You want to maximize your benefits.
Whether you are married or single, there are a variety of strategies to increase you Social Security benefits dramatically over your lifetime. There are a few options that may not have been on some couples' radar back when same-sex marriage wasn't recognized by the Social Security Administration since they weren't available to everyone. Don't feel bad -- even many straight couples don't maximize their benefits either, and they've had years to prepare for the day they retire and/or start Social Security benefits (not always the same time).

Let's be realistic. Social Security is the closest most of people will have to a pension. While the average check isn't enough for most to fully live on, don't underestimate the value of this in the grand scheme of your overall retirement income plan. There really is no other type of retirement income that has no stock market risk, interest rate risk, or longevity risk. You can't outlive Social Security. You still run some inflation risk, as the cost-of-living adjustment is unlikely tokeep up with your increased cost of living over longer periods of time.

By coordinating benefits and strategizing to maximize these benefits, a married couple can potentially increase lifetime benefits by hundreds of thousands of dollars. By planning ahead and being strategic couples can each claim benefits and take maximum advantage of spousal and survivor benefits.

It may seem crazy, but delaying benefits may mean more money in your pocket over the long term. On average, Social Security benefits grow about 7 percent per year between 62 and 70, and this doesn't even include cost-of-living adjustments. This may mean you are essentially earning more by delaying Social Security than on your safest investments.

The Basics
Think about it this way: You could claim benefits at 62. If you choose this option your benefits will be reduced permanently for each month you claim benefits before your full retirement age. Claim at 62, and you will see you benefits drop 25 percent from what you would have received at full retirement age (we will assume 66 for this conversation).

Now, if you delay past 66, you get about and 8 percent credit for each year you wait to claim benefits until 70. That means your monthly benefit at 70 could be 76 percent more than benefit at 62. ($1,500 at age 66 becomes $1,980 at 70 but is just $1,125 at 62).

Spousal Benefits
Here are where the new benefits come in for same-sex couples. If you are married and your accrued benefit is less than your spouse's, you have the choice to either take your benefit or take the spousal benefit off your spouse's record. Essentially, your spousal benefit would be 50 percent of your spouse's benefit. Keep in mind, you can file for benefits on your spouse's record until he or she is at full retirement age.

One of the top goals of married couples is to boost the benefit for the surviving spouse. The surviving spouse will get 100 percent of the higher earner's benefit when they die, assuming they are past their full retirement age. The surviving spouse can claim a survivor benefit as early as age 60, but again, the benefit is reduced if taken before full retirement age.

Strategies to Maximize Your Benefits as a Couple
Have you heard of "file and suspend"? If not, don't worry; here is the short overview version.

Let's assume one spouse makes more than the other, and the higher earner doesn't want to take Social Security until they hit 70. Now, let's say the second spouse is a bit younger at 62. They could collect their individual benefits, but could they get more from money per month with a spousal benefit? If she can, that's great, but there is just one problem: Spouse number 2 can't collect their spousal benefit until Spouse 1 files for Social Security.

As long as Spouse 1 is at their full retirement age, they can file for their benefit, and the second spouse can apply for a spousal benefit. Spouse 1 then can ask Social Security to suspend their benefits. In the best of both worlds, Spouse Two 2 her higher spousal benefit, and Spouse 1 can continue to accrue a larger Social Security benefit. They simply reapply when they want to start coverage, presumably at age 70.

An added element would apply when it comes to increasing the future survivor benefit. If Spouse 1 dies first (in this example she is eight years older), Spouse 2 can take the larger benefit, or her deceased spouse's benefit.

Spousal Options Flip
Another valuable strategy that many people ignore, I like to call the Spousal Options Flip. If you are the higher earner, you may be able to pull in some extra money by applying for the spousal benefit at your full retirement age. This will allow you larger personal benefit to continue to increase again presumably until 70. At 70 you flip -- you switch on to your own benefit and your spouse can now claim his or her spousal benefit based on your new, improved higher benefit. (Just for your information, the second spouse will be entitled to a survivor benefit of 100 percent of the first spouse's benefit, in case she passes before switching back to their own benefit.)

Haven't filed for Social Security yet, or want to see how these newly available strategies may affect your financial plan? Talk to your trusted financial planner and see if some strategic planning can help you increase you take home from Social Security. Even if you are getting started late, it's never too late to get your financial house in order and improve your golden years. At the very least, avoid spending your golden years under the golden arches (bad enough eating there, even worse working there.)

DAVID RAE, CFP(r), is a retirement planning specialist with Trilogy Financial Services, specializing in the needs of the LGBT community. Follow him on Twitter @davidraecfp or via his website, www.davidraefp.com.

Securities and advisory services offered through National Planning Corporation, member FINRA, SIPC, a Registered Investment Advisor. Trilogy and NPC are separate and unrelated entities.