How Second Marriages Affect Your Retirement
Discuss the retirement planning aspects of your marriage before you say "I do"
Getting married is a time to celebrate – and also a time to plan. Marriage can bring about financial opportunities that aren’t available to singles, such as Social Security claiming strategies, and the ability to piggy back off each other’s company benefits, but it also brings the need for you to do additional planning when it comes to property rights and estate planning. Below is an overview of four things to review as you plan for a second marriage.
Social Security Strategies
As a couple you will have a wide variety of ways to claim your Social Security benefits. Marriage will affect the following aspects of Social Security:
Survivor benefits - The good news is the higher Social Security amount that either of you receives is the amount that becomes a survivor benefit after one spouse passes.
Spousal benefits - As a spouse at your full retirement age you can claim a spousal benefit on your partner’s earnings record, then switch over to your own benefit amount at age 70. There are all kinds of nuances, so read up on the rules before you begin benefits.
Benefits on an ex-spouses earnings record - if one or both of you have previous marriages, you cannot collect Social Security on an ex’s benefit once you have remarried.
Benefit on a deceased ex-spouses earning record – if one of you has a deceased ex-spouse that you were married to at least ten years, if you remarry before 60 you cannot claim a survivor benefit on your ex’s record. In this situation if you are close to age 60 it may be to wait until after 60 to remarry.
If you live in one of the nine community property states, you ought to know that once married all assets purchased during the marriage are considered owned equally. Don’t naively commingle assets and income or make large joint purchases without understanding how this may change your rights or ownership in the case things don’t work out. Evaluating consequences before making changes is not being pessimistic – it is called being smart.
Even better, meet with an attorney and draw up a prenuptial agreement. If you haven’t had conversations about these things or feel nervous about talking finances, then perhaps you shouldn’t be getting married yet. Before you get married you’ll want to be sure you can have positive conversations around these topics.
If you don’t have a will or properly titled accounts then state law determines who gets your assets when you are gone. If you don’t have living named beneficiaries on your retirement accounts, annuities and life insurance policies then the law reverts to the financial institution’s default provisions which will designates who gets these assets.
When you get married it is important to review and update all of these items. If you have children from a previous marriage this is even more important. Too many children have been inadvertently cut off from an inheritance because their parent remarried and didn’t properly structure their estate. Something bad happens and voila –all assets can go to the new spouse.
If one or both of you are working, find out what benefits may be available to your spouse and how benefits are coordinated between health plans. Many companies offer reasonably priced life and health insurance benefits for spouses. Coordinate between the two of you and you can often find opportunities for savings.
Bottom line – do things right. Evaluating all the financial aspects will help you get this marriage off to a great start.