Getting married used to be about the fairy tale of the wedding, but it can feel more like a business decision as you get older. It can affect your Social Security benefits and medical care. It could result in the loss of other benefits as well. Who knew that timing your marriage around your retirement could have such financial implications?
- The timing of getting legally married can have a far-reaching financial impact if you're older and will be relying on certain government benefits.
- Social Security, Medicaid, other health insurance, and debts can all be affected when you combine households and finances with a new spouse.
- Weigh the pros and cons of getting married if you'll be affected by any of these issues. You might think about living together instead.
Effect on Social Security
You need only be married for one year for your spouse to be able to collect Social Security spousal benefits, but it might not be a good idea to file just yet, depending on your spouse’s age. You should both be at full retirement age before collecting benefits—age 66 or 67, depending on your birthdates.
Spousal benefit payments will be lower if your spouse applies before reaching full retirement age.
What if you’re collecting benefits based on your late spouse’s work record? You might lose those benefits if you remarry before you reach age 60, but your benefits won't be affected if you wait until after age 60.
Your spouse’s income and resources may also change your SSI benefits if you receive them.
Effect of Divorce
You might have received Social Security benefits based on your ex-spouse’s work record if your first marriage lasted more than 10 years, you’re 62 or older, and their benefits were higher than they would have been by using your own work record. Those benefits will most likely end if you remarry. You won’t be able to collect spousal benefits based on your new spouse’s record until one year after marriage. Couples have to plan for a potential drop in income in that case.
Dealing With Medical Issues
You may lose your eligibility for Medicaid after marriage if you're eligible, but your future spouse is not. Both your and your future spouse’s incomes are looked at together to assess eligibility. Neither of you will be eligible if your combined income is too high. But your incomes are assessed separately if you don't marry. If you need medical care that would be covered by Medicaid, it might be best to take care of it before you tie the knot.
You should also think about long-term care. The average stay in a long-term care facility is three years at a cost of $200,000 to $300,000. Medicare only pays about 2% of the bill. That burden may fall on you if your spouse doesn’t have long-term care insurance and doesn't have the funds to pay.
Make sure that your combined finances can support long-term care insurance for both of you before you marry if your combined income doesn’t allow for payment of these bills on your own.
Many people reach retirement with a shortfall in savings, along with hefty debt burdens. A surviving spouse often will not assume the other's debt when a person passes away, but some exceptions apply, such as if the spouse is a joint account holder on a credit card. The spouse also might be a co-signer on a loan, or the couple may live in a community property state.
These debt payments are owed by both spouses in community property states while both partners are living.
Couples are choosing to forgo marriage until each can pay down debt, which allows each to enter the marriage with a clean slate.
The Bottom Line
Financial issues can make retirement and wedding planning intertwine in many ways. More and more couples are choosing to live together rather than marry to avoid tax and Social Security pitfalls, but merely living together presents its own list of implications.
Complex money options are best handled with the help of a financial planner who can look at both spouses’ situations. They can then make recommendations as to when to get married.