Social Security Benefits When a Spouse Dies, Part III

Specific Examples and Important Lessons Learned

In the last two posts we covered the basics of Social Security (SS) including terminology, the SS timeline, and how benefits claimed early, on-time and delayed affect the amount of the benefit. If you didn’t read the first two posts, and you are inexperienced with SS, I highly recommend you read Part I and Part II before continuing this post. 

This post applies all those SS basics to many different scenarios including age differences and similar versus different benefit amounts. To gain insight into claiming strategies as they relate to your situation, find the example or examples below that are closest to your situation to gain a better understanding of your situation. Armed with this knowledge, you are better prepared to know what benefits you might be eligible for and what questions to ask of a SS representative when you meet with them.  

NOTE: The scenarios described in this Blog are educational in nature and may not represent your exact situation. Please do not use these educational scenarios as advice or guidance as to what decisions you should make regarding your SS benefits. It is always recommended that you consult with the Social Security Administration (SSA) to learn of all available claiming options and then consider these options carefully.

Both Spouses are Over Age 70

Generally, both spouses should be collecting SS benefits if they are age 70 or older. Both might be collecting their own benefit or one might be collecting a spousal benefit if it is higher than their own SS benefit. Every now and then an individual is over age 70 and hasn’t applied to collect an eligible SS benefit! The SSA does check for these situations but sometimes a person falls through the cracks. Let’s look at a few examples when both spouses are over age 70 and one of them passes away.

Jack and Kate are past age 70 and both are collecting SS benefits.  At Jack’s death, the surviving spouse, Kate, will receive an amount equal to the highest benefit received. If Jack was receiving his own monthly retirement benefit of $2,000 and Kate is receiving her own or a spousal monthly benefit of $1,000, upon Jack’s death, Kate will receive the higher amount ($2,000).

Reversing the amounts, if Kate is the one collecting $2,000 per month and Jack is collecting $1,000 per month, upon Jack’s death, Kate will not collect any more than $2,000 per month. Losing $1,000 a month in benefits can be an unwanted surprise to a surviving spouse, especially if savings or other sources of income are insufficient.  If both Jack and Kate were high wage earners and each is collecting $2,000 per month, that’s $4,000 per month. Losing $2,000 a month of the $4,000 is a 50% drop; a shock to the system for most people, especially if SS income is the major source of income for the couple. Most people realize that living expenses for a widow are not cut in half after the death of their spouse. Poverty, unfortunately, is a reality for many low-income widows.

If Kate was previously married for more than 10 years, and her ex-spouse is also deceased, Kate might be eligible for survivor benefits not only from her deceased spouse but also from her deceased ex-spouse. If the deceased ex-spouse’s own retirement benefit exceeded $2,000, which is more than Jack’s benefit, Kate might be able to claim that higher benefit from her ex-spouse’s SS earnings record. The lesson here is to check with the SSA regarding all eligible SS benefits, including those from ex-spouses.

One or Both Spouses Started Collecting SS Benefits Between FRA and Age 70

If you and/or your spouse started collecting SS benefits between FRA and age 70 and you are now older than 70, please read the section above titled Both Spouses are Over Age 70

In this situation, at least one spouse waited to start collecting their SS benefit between their own FRA and age 70. The second spouse is either collecting their own SS benefit or delaying their own benefit while possibly collecting a spousal benefit.

As you know, waiting until FRA to collect your own retirement benefit allows you to collect 100% of your full retirement age amount known as your Primary Insurance Amount (PIA). Delaying the start past FRA allows you to collect Delayed Retirement Credits (DRCs) at the rate of 8% per year, up to age 70. Certain exceptions such as the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO) may affect one’s ability to collect full benefits at FRA; both are covered in the next post.

Jack is age 68 and started collecting his own SS retirement benefit of $1,800 per month at age 66 (his FRA). Kate is 67 (her FRA is 66) and is delaying her own retirement benefit (PIA = $1,200) until her age 70 to collect $1,584 per month. Her own benefit, even with Delayed Retirement Credits (DRCs), will not grow bigger than Jack’s $1,800 benefit, so upon Jack’s death, Kate will file for and collect $1,800 per month. Because Kate is past her FRA, there is no advantage to her waiting to claim her survivor benefit. If Kate was between 60 and 66 when Jack died, there might be an advantage for her to wait until her FRA to collect a survivor benefit (see example further down this post).

Tweaking it a bit, let’s assume Jack waited to start his SS retirement benefit until age 68, thereby accumulating two years of DRCs at 8% per year for a total benefit of $2,088 ($1,800 x 116%). At Jack’s death, Kate, age 67, will collect $2,088 per month in survivor benefits. If Kate waits two years, until Jack would have reached age 70, she would not collect any more in survivor benefits, just the $2,088 (plus inflation). 

Let’s reverse the initial scenario with Kate collecting $1,800 per month in retirement benefit and Jack delaying his benefit (PIA=$1,200). At Jack’s passing, Kate would continue receiving her $1,800 per month. The survivor benefit, if delayed any amount of time, does not grow larger than her $1,800, so survivor benefits would not exceed Kate’s current benefit.

One or Both Spouses Started Collecting SS Benefits Between Age 62 and FRA

If you and/or your spouse started collecting SS benefits between age 62 and FRA and you are now older than 70, please read the earlier section titled Both Spouses are Over Age 70.

When one or both spouses start collecting a retirement benefit prior to their FRA, their retirement benefit is reduced below their PIA and stays reduced for the rest of their lives, except for inflation adjustments. They do not accumulate any DRCs once they pass their FRA up to age 70, because they’ve already started their own benefit early.

If their FRA is age 66 and they start collecting their own retirement benefit at age 62 (four years early), they receive 75% of their Full Retirement Age (FRA) benefit. If their FRA is age 67 and they start collecting at age 62 (five years early), they receive 70% of their FRA benefit.

Let’s assume Jack is 64 and Kate is 62, FRA is 66 for both and each started collecting their own retirement benefit at their respective age 62; Jack received $1,350 (75% x $1,800) and Kate $750 (75% x $1,000) per month. Since each started collecting four years early, their retirement benefits were reduced 25%. Jack dies at age 64 and Kate is still 62. If Kate continues her own retirement benefit of $750 until she reaches her FRA, she can collect the higher of two amounts: 82.5% of Jack’s PIA (82.5% x $1,800 = $1,485) or the $1,350 he was receiving. The higher amount is $1,485 and because it is also higher than her $750, she will collect $1,485 per month.  Notice that this survivor benefit ($1,485) is higher than what either of them was collecting individually ($1,350 and $750).

A note of interest is that Kate’s survivor benefit does not get reduced because she started her own retirement benefit early (prior to her FRA). The SSA site statesIn many cases, a widow or widower can begin receiving one benefit at a reduced rate and then, at full retirement age, switch to the other benefit at an unreduced rate.”   

If Kate decides to file for survivor benefits prior to her FRA, three specific amounts are calculated, arranged from low to high and compared to a table in the POMS. The name sequence matching the table indicates which of the three amounts Kate will receive. In this example let’s assume Kate applies for survivor benefits at age 62, the three amounts are 82.5% of Jack’s PIA (82.5% x $1,800 = $1,485), the amount Jack received ($1,350), and an amount proportional to when Kate starts the benefit between age 60 and 66 (in this case, for an age 62 start date it would be $1,800 x [28.5% x 24 / 72 + 71.5%] = $1,800 x 81.0% = $1,458). The three amounts are then ranked low to high: $1,350 (Reduced Insurance Benefit), $1,458 (Reduced Widow’s Insurance Benefit) and $1,485 (82.5% of PIA). This sequence matches the 5th sequence in the table which means this widow will receive the underlined amount (the middle amount), $1,458. This is a case, again, where Kate receives more than the amount she was collecting, and more than the amount Jack was collecting. It may benefit Kate to delay collecting her survivor benefit until later, but in this case, the increase might be negligible.  Analysis is recommended to determine the best starting date to maximize her survivor benefit over her lifetime.

Surviving Spouse is between age 60 and 62

Kate is 60 and not yet eligible for her own SS retirement benefit or a spousal SS benefit (her FRA is 66 and PIA is $800). Jack is 67 and started his own retirement benefit of $1,800 per month one year earlier at age 66 (his FRA). Upon his death at age 67, Kate’s friends convince her to apply for survivor benefits now, at age 60. As a widow she is eligible to collect survivor benefits as early as age 60 (50 if disabled). Kate applies for and collects a reduced widow’s benefit equal to 71.5% of Jack’s $1,800 ($1,287 per month). In two years Kate turns 62 and she is now eligible to switch to her own retirement benefit, but only if it exceeds her survivor benefit. It does not and she continues to collect the survivor benefit. In fact, Kate’s own retirement benefit never grows larger than her survivor benefit, so she sticks with the larger survivor benefit for the rest of her life. Living to age 90, she will have collected about $470,000 in SS benefits (no adjustment for inflation).  

Another strategy for Kate to consider is to take no survivor benefit at age 60 (she covers living expenses with retirement savings). When Kate turns 62 she starts collecting her own retirement benefit (75% of $800 = $600/month) and then at her FRA switches to a survivor benefit of $1,800 (Jack’s PIA). By age 90 she will have collected just over $540,000 (no inflation adjustment) in SS benefits which is about $70,000 more than the strategy recommended by her friends. If she lives five years longer to age 95, Kate will have collected nearly $100,000 more in lifetime SS benefits. Picking the optimal claiming strategy depends on a few factors including life expectancy. If Kate is in poor health, she may not expect to live to age 90, with age 95 being even more of a stretch, so starting benefits earlier may make more sense. Analysis is recommended.    

Lessons Learned

  • In most situations, once a couple is beyond age 70, the widow will collect the higher of the two SS benefits received. She does not collect both SS benefits.
  • When a surviving spouse contacts the SSA, not only should she inform them of the death of her current husband, but also of any previous marriage(s) that ended due to divorce or death. Research by the SSA may uncover a higher SS benefit due to the surviving spouse than the one she will receive from the deceased spouse of the current marriage.
  • If the opportunity exists to collect Delayed Retirement Credits (DRCs), always consider the pros and cons of waiting to collect DRCs versus collecting benefits on time or early.
  • If a survivor benefit is available prior to your FRA, consider the option of waiting to collect a higher survivor benefit at your FRA versus collecting a smaller survivor benefit prior to your FRA.
  • There is no advantage to waiting beyond your FRA to collect a survivor benefit. It does not earn Delayed Retirement Credits.
  • If your spouse started collecting their own retirement benefit early (prior to their FRA), passes away, and you start collecting your survivor benefit early (prior to your FRA), your survivor benefit amount might be the same, less than or more than the amount your spouse received.
  • Upon your spouse’s death, if your friends, family or anyone else recommends that you immediately go to the SSA office to file for and collect widow’s benefits, they might not understand how to optimize your lifetime SS benefits. Please get the proper analysis to make sure you know the best claiming strategy for your situation.

Next Post: We will consider scenarios that involve a spouse dying prior to 62 years of age, a deceased ex-spouse, how working at certain ages may reduce your survivor benefit, the effects of a government pension on SS benefits and survivor benefits for young children and the parent raising those children.

Jim Schwartz, CFP®, RICP®
[email protected]
Blogger, Widowed Community Financial Blog
Twitter, @WidComm, @JimSchwartzCFP

Jim Schwartz is a Scottsdale, AZ fee-only financial planner with an expertise and interest in financial planning and education for widows and widowers.  Years of working with and advising widows, widowers, and surviving partners has provided a wealth of experience and knowledge in this complicated financial arena.  He is particularly skilled in his ability to guide his clients through difficult decisions while ensuring the stability of their finances. 

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