When Anne’s husband passed, her social security benefit was the last of her concerns. Finding the right cemetery, breaking the news to friends and family, and grief dominated her thoughts. Who can blame her? The man that she had been married to for 33 years was no longer there for their morning coffee. This wasn’t the time to think about her social security strategies as a widow. Then, something happened that made her face her finances head-on. She noticed a major change to her checking account. The $3,500 social security benefit that she had been collecting while married, was reduced to $2,000. Had this been a mistake? Was this just a one-time thing? To make things worse her financial advisor, her husband, was now gone. This article was written to help widows and widowers understand their social security options here in Michigan.
Who is eligible to receive a widow or surviving spouse social security benefit?
If you are over the age of 60, a widow, and your deceased spouse was eligible for social security, you are probably eligible for a widow’s social security benefit. Even if you are under the age of 60, you will eventually be eligible once you do reach age 60. However, if you are younger than 60 and have children under the age of 19, you may also qualify for a widow’s social security benefit. From www.ssa.gov, here are the people that are eligible for a widow’s social security benefit:
- A widow or widower age 60 or older (age 50 or older if disabled);
- A surviving divorced spouse, under certain circumstances;
- A widow or widower at any age who is caring for the deceased’s child who is under age 16 or disabled and receiving benefits on their record;
- An unmarried child of the deceased who is:
- Younger than age 18 (or up to age 19 if he or she is a full-time student in an elementary or secondary school); or
- Age 18 or older with a disability that began before age 22.
There is one large difference between your own social security benefit and a widow’s benefit. You are able to start drawing a widow’s benefit as early as age 60. I recently had a client whose husband, unfortunately, passed when she was 57. He was actually 62 and already drawing his benefit when he passed. However, she had to wait until she was age 60 to turn on her widow’s social security benefit. This meant that she completely lost any social security benefit for 3 years. However, this is much better than her having to wait until age 62 to start drawing social security. Age 62 is the earliest age a non widow (if not disabled) can receive a benefit. Once, you determine if you are eligible for a widow’s benefit, then you have to determine how much you will receive.
How much is my widow’s social security benefit?
The common misconception is that the surviving spouse will receive 50% of the deceased spouse’s benefit. If it were only that easy. The truth is that the survivor’s social security benefit is based on three things:
- Age of surviving spouse
- Surviving spouse’s social security benefit
- Deceased spouse’s social security benefit
Let’s discuss the amount of your benefit based on the age you are when your spouse passes.
Surviving Spouse Under Age 62
If you are under age 62 when your spouse passes away, you are eligible to receive a benefit as early as age 60 (age 50 if you are disabled). However, this assumes that you don’t remarry prior to age 60. If you remarry prior to age 60, you would no longer be eligible for a survivor’s benefit at age 60. Remarrying after age 60 does not impact your survivors benefits.
The amount of your survivor social security benefit is based on your spouse’s earned benefit and your age. The benefit will be between 71.5% and 100% of your spouse’s benefit, depending on the age you begin survivor benefits. The early you start, the smaller the benefit you would receive.
A strategy to maximize your survivor and own social security benefit
I have a client who just retired at age 65. Unfortunately, his wife passed 7 years ago from an aggressive form of cancer. He has not remarried. Although he could remarry and not impact his widower’s social security benefit now because he is over age 60. He is going to turn on his widower’s benefit now and at age 70, he will turn on his own larger benefit. This is a fantastic way for him to maximize his long-term social security benefit, while not sacrificing income in the short term. Social security has eliminated many of these types of strategies over the past few years, but this “loophole” still exists. You should take full advantage of this strategy if it makes sense in your situation.
Obviously, if you are eligible to draw a survivor benefit at age 60, you would not have turned on your own benefit yet. If you have not turned on your own benefit yet, you have a decision to make. Either, turn on your own social security benefit or your survivor benefit. One strategy to consider is turning on your survivor benefit first, and wait to draw your own benefit later. The benefit is that your own benefit will continue to grow as you delay. In the meantime, you can supplement your income by turning on your survivor social security benefit.
Surviving spouse between age 62 and 70
The amount of benefit that you will receive and the best strategy depends on your age and if you have started drawing social security or not.
If you have not reached full retirement age, you are eligible for a reduced survivor benefit. This can range between 71.5% and 99% depending on your age. The closer to your FRA, the higher percentage of your spouse’s benefit that you will receive. If you are older than FRA, you are eligible to receive 100% of your spouse’s social security benefit with no reduction.
Now, let’s talk about your options depending if you have started social security or not.
Have not started social security
If you have not started social security yet, you have a similar strategy available to you as the scenario above. When your spouse dies you are eligible for either his survivor benefit or your own benefit. For example, you can start your survivor benefit immediately and wait to draw your own benefit later. This is a great scenario assuming that your own benefit eventually grows larger than your survivor benefit. If not, you may just start drawing your survivor benefit immediately, and never switch. Of course in this scenario, you will never draw your own benefit.
Have started social security
If you have already started social security, you can choose to keep your own benefit, or switch to your survivor benefit. Ultimately, you should choose whichever is higher. The smaller social security benefit will go away, and you will continue to collect the larger benefit for the rest of your life.
There is just one strategy you could employ in this situation. If you started drawing your own benefit in the past 12 months, you can stop your social security benefit. However, you would need to return the payments that you have already received. So, why would you do this? You could stop your own benefit, then turn on your survivor benefit and allow your benefit to grow. This would only make sense if your own benefit will eventually grow higher than the survivor benefit. I haven’t seen this strategy implemented much before, but it is an option.
Surviving Spouse over Age 70
If the surviving spouse is over age 70, she will have already started her own social security benefit. In this case the surviving spouse will receive the greater of her own earned benefit or her deceased spouse’s benefit. I mentioned in the intro that Anne’s social security benefit had been reduced from $3,500 per month to $2,000 per month. Anne was 71 when her husband passed. He was collecting $2,000 per month and her social security benefit was $1,500. She was over age 70, which meant that she now collects the higher of the two benefits. In this case her husband had a higher benefit, so she started collecting his $2,000 monthly benefit. Unfortunately, her $1,500 month benefit is gone forever. This is how her overall benefit was reduced from $3,500 to $2,000 per month.
The reduction in social security when a spouse’s passes can cause major financial implications for the remaining spouse. For many people social security is a significant amount of retirement income. The loss of a portion of this income can be very difficult. It is important to consider this situation while deciding on when to initially start your social security strategy.
Social security is complex and confusion. Dealing with social security strategies when a loved one has passed makes it this much more difficult. However, it is important to know that you have choices. Unfortunately, choosing the wrong strategy can be hazardous to your long term financial plan. I strongly suggest working with a financial planner during this very difficult time to determine your options and implement a strategy that maximizes your long-term benefit.
Need more help?
Bryan Haggard CFP®, CFA is a fee-only financial planner that specializes in helping families live a stress-free retirement. We can help you navigate the very stressful period after losing a spouse. Schedule a complimentary meeting below so that we can help develop your retirement plan.