Navigating the Social Security rules for survivor benefits can feel like solving a puzzle. Factors like your age, your late spouse’s age, and when benefits were claimed all play a role in determining what you’re entitled to receive.
Below, we break down the essentials of survivor benefits, explain common pitfalls, and share an example of how a strategic approach can result in significantly higher lifetime income.
Survivor Benefit Basics
To understand Social Security survivor benefits, you need to know two key terms: Full Retirement Age (FRA) and Restricted Applications.
Full Retirement Age (FRA):
- FRA is the age when you’re entitled to your full Social Security benefits without reduction.
- For survivors, FRA depends on your year of birth. If you were born on or after January 2, 1962, your survivor FRA is 67. If born earlier, it ranges from 66 to 67.
- You can claim survivor benefits as early as age 60, but your monthly amount will be permanently reduced.
- If you’re working and claim benefits before FRA, the earnings limit applies, and exceeding the limit could reduce your benefits.
Restricted Applications:
- Widows and widowers can file a restricted application to claim only one type of benefit (their own or the survivor benefit) and later switch to the other.
- This option is unique to survivor benefits and unavailable for spousal benefits. Even divorced individuals can use this strategy if their ex-spouse has passed away.
These rules apply if you were married for at least nine months before your spouse’s death. Let’s explore how they work in different scenarios.
When Your Spouse Passes Before FRA
If Benefits Had Started:
If your spouse began benefits before their FRA and passes away, you’re entitled to either:
- The benefit amount they were receiving, OR
- 82.5% of their FRA benefit amount (whichever is higher).
If you claim survivor benefits before your FRA, your monthly amount will be reduced.
Example 1:
John (FRA = 67) started benefits at age 62, receiving $700/month. He could have received $1,000 a month by waiting to start benefits until 67. When he passes, his wife Beth can claim the survivor benefit at her FRA and receive $825/month (82.5% of John’s FRA amount). If she claims earlier, the amount is reduced.
Example 2:
If John had started benefits at 66, Beth could receive $933/month at her FRA. If she also has her own benefit, she might file a restricted application to claim the widow benefit first and later switch to her own benefit at 70 for a higher amount.
If Benefits Had Not Started:
If your spouse passes before FRA without claiming benefits, the amount you can receive and when you receive it will depend on your age.
Example:
John passes at age 60 without starting benefits. His FRA amount was $1,000/month. If Beth claims at her survivor FRA, she’ll receive $1,000/month. If she claims at 60, she’ll get $715/month (71.5% of the FRA amount). If she is already receiving her own retirement benefits, she cannot receive both her own benefit and the survivor benefit simultaneously. She would receive only the higher of the two benefit amounts.
When Your Spouse Passes After FRA
If Benefits Had Started:
If your spouse began benefits at or after their FRA, you can receive the full amount they were receiving at the time of their death.
Example 1:
John starts benefits at his FRA, receiving $1,000/month. If he passes at 68, Beth will receive the monthly amount that John was receiving (with the inflation increases) at her survivor FRA, or a reduced amount if she claims earlier.
Example 2:
If John waited until 70 to claim benefits, his monthly benefit was $1,320 due to delayed retirement credits. At her survivor FRA, Beth can receive the full $1,320.
If Benefits Had Not Started:
If your spouse passes after their FRA without starting benefits, your survivor amount includes delayed retirement credits for each year they waited beyond FRA.
Example:
John, eligible for $1,000/month at FRA, delays benefits and passes at 69 before filing. With delayed credits, his benefit increases to $1,240/month, which Beth can claim at her survivor FRA.
What Happens if Both Spouses Were Receiving Benefits?
If both spouses were receiving Social Security benefits and one passes, the surviving spouse can continue the higher benefit amount but must forgo the smaller one.
Example:
John and Beth are in their 70s, each receiving benefits. John’s monthly benefit is $2,000, and Beth’s is $1,500. After John passes, Beth will receive $2,000/month, but her own benefit will stop.
Diane’s Experience: A Missed Opportunity
When Diane’s husband Paul passed at 57, she sought help from her local Social Security office. Here’s what happened:
- At age 60, she was told she could claim $1,767/month in survivor benefits but waited for a higher amount at 62.
- At 62, the office informed her she could claim $1,791/month (her own retirement benefit) or $2,025/month (her survivor benefit). They advised her to wait until 66 for the full $2,706/month survivor benefit.
While technically accurate, the guidance didn’t address restricted applications, which allow widows to maximize lifetime benefits.
The Better Strategy: Diane could have claimed her survivor benefit at 62 ($2,025/month) and switched to her retirement benefit at 70 ($3,674/month). Over her lifetime, this strategy would have provided an additional $200,000 in income.
This type of missed opportunity is all too common, costing widow and widowers thousands over their lifetimes.
How to Find the Best Claiming Option
Survivor benefit rules are complex, but the potential financial rewards for optimizing your strategy are significant. Follow these steps:
- Understand the Rules: Familiarize yourself with FRAs, restricted applications, and how claiming ages impact benefit amounts.
- Gather Your Information: Collect Social Security statements and calculate benefit amounts for both you and your late spouse.
- Get Expert Advice: Use software, consult a Social Security expert, or hire a retirement planner to evaluate your options.
Social Security agents can provide helpful information, but they aren’t equipped to recommend strategies that maximize your lifetime benefits. As retirement planners, we specialize in this phase of life, ensuring you receive every dollar you’re entitled to during retirement.
Final Thoughts
Don’t let the complexity of Social Security survivor benefits leave money on the table. By understanding the rules, exploring your options, and seeking expert guidance, you can make decisions that secure a higher lifetime income. As retirement planners, we focus on the cash flow phase, where you need income from your nest egg. A key factor in life long income is determining what Social Security benefits you are entitled to.
