Survivor’s benefits are one of the most valuable features of the Social Security system.
Their downside is that the rules and options can be so complicated that people fail to maximize the benefits.
Married couples should know that after one spouse passes away, one Social Security benefit will end; the surviving spouse will receive only one check. That’s why it’s important to consider survivor’s benefits when deciding at which age to begin Social Security retirement benefits. You probably want to ensure survivor’s benefits are maximized.
To qualify for survivor’s benefits, you must be a widow or widower who was married to the deceased for at least the nine months just before the deceased passed away. The nine-month requirement is waived if the death was accidental. In addition, the deceased spouse must have been fully insured under Social Security.
When you’re a qualified surviving spouse of a fully insured worker, you can claim survivor’s benefits as early as age 60, or age 50 if you’re disabled and the disability started before or within seven years of the other spouse’s death.
While you can begin survivor’s benefits as early as age 60, you’ll receive lower benefits than if you waited until you’re older.
The amount of survivor’s benefits you’re eligible for depends on your age, the deceased’s spouse’s age and benefit status at the time of their passing and the amount of benefits the deceased spouse earned. That’s why the options available can become interesting and complicated.
Instead of listing a bunch of rules, below are common situations that apply the rules. Because about 80% of survivor’s benefits are paid to women, I’m going to assume the husband died first and the wife is the surviving spouse.
Situation 1: The husband died after becoming eligible to begin retirement benefits and began receiving his benefits before his full retirement age (FRA).
Also, the widow will take her survivor’s benefits before her FRA. In this case, the survivor’s benefit will be less than what the husband was receiving. How much less depends on how early the widow takes the survivor’s benefits.
If the widow begins benefits at age 60, she’ll receive 71.5% of her husband’s FRA benefit. When the widow begins benefits after age 60 and before her FRA, she’ll receive the higher of 82.5% of the spouse’s FRA benefit and whatever he was receiving at the time of his death.
Situation 2: The husband died after becoming eligible to receive retirement benefits and began collecting them before his FRA. But the widow waits until her FRA to receive her survivor’s benefit. The widow will receive the higher of 82.5% of the husband’s FRA benefit and the amount the husband was receiving at death.
The trick in this case is it is likely the widow won’t have to wait until her FRA to receive the highest benefit.
The amount of time the widow has to wait to receive the maximum amount depends on the age the husband began claiming benefits and how far the widow is from her FRA. The earlier the husband began claiming benefits, the less time the widow has to wait to receive 82.5% of the husband’s FRA.
Situation 3: The husband began his retirement benefit at his FRA, and the widow plans to begin the survivor’s benefit before reaching her FRA.
The base survivor’s benefit will be the amount the husband was receiving at the time of his death, but it will be reduced for each month the widow begins the survivor’s benefits before her FRA.
If she begins survivor’s benefits when first eligible at age 60, the survivor’s benefit will be reduced the maximum of 28.5%.
Situation 4: The husband began his benefits after his FRA and the widow plans to begin survivor’s benefits at or after her own FRA. The survivor’s benefits will be the amount the husband was receiving at his death, including increases for the delayed retirement credits that boost the benefit after FRA.
Once the widow reaches her FRA, there’s no benefit to wait longer to receive the survivor’s benefits. They won’t be increased above what the husband was receiving at the time of his death.
Situation 5: The husband was older than his FRA but younger than 70 and hadn’t begun retirement benefits. The widow plans to begin survivor’s benefits at or after her own FRA.
The survivor’s benefits will be whatever amount the husband would have received had he applied to begin benefits on the day he died. The benefit will include delayed retirement credits for beginning the benefit after FRA. There won’t be any reduction, because the widow is claiming at her FRA or later.
Situation 6: The husband passed away after age 62 but had not claimed Social Security retirement benefits.
If the husband died before his FRA, the widow will receive the benefit he would have received at his FRA. If the husband died after his FRA, the widow will receive what he would have received had he applied for retirement benefits on the day he died, including delayed retirement credits.
If the widow hasn’t reached her FRA before claiming the survivor’s benefits, the benefits will be reduced based on the number of months she claims the benefits before her FRA.
Those are the basic rules. Now things get really interesting. The widow always has the option of receiving either her own earned retirement benefits or the survivor’s benefits. In addition, later she can switch from one to the other.
In many cases, the widow will find the strategy to maximize lifetime benefits is to receive the lower benefit first and switch to the other benefit at the age at which it is maximized and is greater than the first benefit.
Here’s an extreme example where the survivor has a number of options. Rosie Profits is nearing age 62 and recently was widowed. She was the lower-earning spouse. Her husband, Max, didn’t claim Social Security benefits during his lifetime.
Rosie’s survivor’s benefit today would be $2,000. Her retirement benefit would be $1,800. Either benefit is reduced from maximum levels because she’s taking them before her FRA.
If Rosie claims the survivor’s benefit now, she’ll receive $200 more per month. In addition, it won’t make sense for Rosie to switch to her own retirement benefit at FRA, because her full retirement benefit will be less than the survivor’s benefit.
A better strategy for Rosie is to start by claiming her own retirement benefit at age 62. This will be lower than her benefit at FRA, but she’ll be receiving $1,800 per month, indexed for inflation.
Then, when she reaches FRA at age 66, Rosie can switch to the survivor’s benefits. Rosie’s now at her FRA. She receives the full survivor’s benefit.
There’s no reduction in the survivor’s benefit when she took her retirement benefits before FRA. The survivor’s benefits now are 23 percent higher than at age 62, $2,469. The survivor’s benefit doesn’t increase any more by waiting past FRA. So, this is the maximum beginning survivor’s benefit Rosie can receive.
Under this strategy, Rosie received $1,800 monthly for four years. Then she switched to the higher survivor’s benefit. She’ll receive that benefit, indexed for inflation, each month for the rest of her life no matter how long she lives.
There’s a third option that might be even better for Rosie.
Rosie can start receiving the $2,000 survivor’s benefit at age 62. She receives that, indexed for inflation, for eight years until she reaches age 70. At that point, Rosie’s earned retirement benefits will be at their maximum level, $3,168 per month and will be higher than the survivor’s benefits. Again, that amount will be indexed for inflation after that and guaranteed for life, no matter how long Rosie lives.
The third option probably is the best for Rosie. She receives $2,000 per month beginning at age 62. Then, at age 70 she locks in for the rest of her life the maximum monthly amount available to her.