Among the most confusing and important Social Security issues are the differences between spousal and survivor’s benefits. Not knowing the differences can cost you or your spouse thousands of dollars in lifetime benefits.
The rules are so confusing that the Social Security Administration (SSA) often makes mistakes, as documented by its Inspector General.
Though survivor’s and spousal benefits seem to overlap and have similarities, they are separate benefits with different rules. Realizing that reduces confusion and improves planning.
A married person has three potential benefits during his or her life: retirement, spousal and survivor’s benefits.
Retirement benefits are based on your earnings history. Spousal and survivor’s benefits are based on your spouse’s earnings history. Spousal benefits are paid while your spouse is alive. Survivor’s benefits are paid after your spouse passes away.
If your lifetime earnings are higher than your spouse’s, your retirement benefits probably will be higher than the spousal and survivor’s benefits. But you might receive more from spousal or survivor’s benefits than retirement benefits when your spouse had higher earnings.
When you’re eligible for more than one benefit at the same time, most of the time you’re considered to have applied for all the benefits for which you’re eligible and will be paid only the higher of the benefits.
Those are the general rules. Now, we look at the details of spousal benefits.
You don’t need to qualify for a retirement benefit to be eligible for a spousal benefit. To qualify for a spousal benefit, you must have been married for at least one year, and your spouse must qualify for a retirement benefit, have claimed that benefit, and not have suspended the benefit.
Sometimes the lower-earning spouse can’t claim a spousal benefit because the other spouse hasn’t claimed his or her retirement benefits. When one spouse hasn’t claimed retirement benefits yet, the other spouse is eligible only for their retirement benefit, if one was earned.
After the other spouse claims retirement benefits, you can switch to the spousal benefit if it is higher than your retirement benefit. The switch is supposed to occur automatically when SSA receives your spouse’s benefit application, but it doesn’t always happen. Know the rules and monitor the situation so you can notify SSA if the benefit change doesn’t occur.
Both spouses can claim their own retirement benefits when those benefits are higher than either’s spousal benefits.
The spousal benefit is up to 50% of your spouse’s full retirement benefit (FRB). The FRB is the monthly benefit the spouse would receive by claiming at full retirement age.
If your spouse waits until after full retirement age to claim retirement benefits, he or she will receive more than the FRB. But you’ll receive only 50% of the FRB as the spousal benefit.
Spousal benefits can be claimed as early as age 62, just as retirement benefits can.
But if you claim either your retirement benefit or the spousal benefit before your full retirement age (not your spouse’s full retirement age), then the benefit will be reduced. For example, if you claim retirement benefits before your full retirement age, you’ll receive less than your FRB.
And if you later switch to spousal benefits, the spousal benefit will be reduced to less than 50% of your spouse’s FRB because you claimed retirement benefits early.
There’s no benefit to waiting to claim spousal benefits after your full retirement age. Unlike retirement benefits, spousal benefits don’t increase for each month you delay receiving them after full retirement age through 70.
Suppose the wife is the lower-earning spouse and claims retirement benefits at age 64. Her full retirement age is 66 and six months. The retirement benefit she receives will be less than her FRB, because she claimed early.
Her husband claims his retirement benefit at age 70, maximizing the benefit. The wife is past her full retirement age at this point and switches to a spousal benefit because it is higher than her retirement benefit.
The wife’s spousal benefit will be less than 50% of the husband’s FRB because she claimed retirement benefits before her full retirement age.
Now, let’s switch to survivor’s benefits, sometimes known as widow’s benefits.
Survivor’s benefits are paid based on the deceased spouse’s earnings record and can be claimed as early as age 60.
The amount paid as a survivor’s benefit can be complicated and depends on both when the deceased claimed his or her retirement benefits and the survivor’s age when claiming the benefits.
Only one Social Security benefit is paid to the household after a spouse passes away. The survivor receives the higher of his or her retirement benefit and the survivor’s benefit.
The general rule is the survivor’s benefit is the retirement benefit the deceased was receiving at the time of his or her demise. But there are exceptions.
If the deceased was not receiving retirement benefits on the date of death, then the survivor’s benefit is what the deceased would have been entitled to at full retirement age or at the time of death, if it is later than full retirement age.
For example, if the deceased hadn’t reached full retirement age, the base survivor’s benefit is the deceased’s FRB. But if the deceased lived past full retirement age, the base survivor’s benefit is the benefit he or she would have been entitled to if benefits were claimed on the date of death.
But the survivor’s benefit is reduced below the deceased’s FRB if the deceased claimed retirement benefits before his or her full retirement age.
That’s why in Retirement Watch, The Spotlight Series, and my books I emphasize that spouses should coordinate their benefit claiming decisions and look to the time when only one spouse is alive. They should want the survivor to receive the maximum possible benefit.
That’s usually done by having the higher-earning spouse delay receiving his or her retirement benefit until as close to age 70 as possible.
Survivor’s benefits have other unique rules.
Unlike spousal benefits, the survivor’s benefit is not reduced if the survivor claimed his or her retirement benefits before full retirement age.
Also, a survivor who is eligible for more than one type of benefit can file to claim only one benefit and later switch to the other benefit. Applying for only one benefit is particularly beneficial when the survivor is between ages 60 and 70 and definitely when the survivor is younger than full retirement age.
For example, the survivor might claim his or her retirement benefit at age 62. After reaching full retirement age, the survivor might switch to the survivor’s benefit, which would be maximized by that point. Or the reverse strategy might be best, claiming the survivor’s benefit first and delaying the retirement benefit until full retirement age or it is maximized at age 70.
Survivor’s benefits are maximized at the survivor’s full retirement age, and might be maximized at an earlier age, depending on when the deceased claimed retirement benefits.
Survivors also should know that claiming survivor’s benefits based on a deceased spouse’s earnings record might not be available if they remarry before age 60. But survivor’s benefits don’t change if the new marriage occurs after age 60.
A surviving spouse has more choices than other Social Security beneficiaries, and the decisions can alter lifetime benefits by tens of thousands of dollars.
The options are so tricky that SSA often makes mistakes involving surviving spouses. It is important to know all the options. It is best to either work with a financial professional who has some expertise in Social Security benefits or use one of the Social Security claiming software programs available.
Claiming either spousal or survivor’s benefits doesn’t affect the retirement benefits paid to the other spouse. Retirement benefits are based on the recipient’s earnings history.
While spouses and others also can claim benefits based on that earnings history, those claims don’t affect the retirement benefits paid to the primary earner.
Both spousal benefits and survivor’s benefits might be available to a divorced spouse. I’ll cover that in the future.