When it comes to preparing for the inevitable, it’s quite possible that couples might not contemplate the Social Security benefit a surviving spouse might receive. But they should. And they should do so far in advance of claiming benefits based on their own record.
What married couples should know about survivor benefits – while both are still alive – is that the surviving spouse’s income will depend on when the higher-earning spouse claims their benefit, says Elaine Floyd, the director of retirement and life planning at Horsesmouth, a provider of educational material to financial advisers.
If they claim at 62, the survivor benefit will be 82.5% of that higher earner’s primary insurance amount, she says. And, if they claim at 70, it will include delayed credits and could be as much as 124% of the primary insurance amount.
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The primary insurance amount, according to Social Security, is the benefit a person would receive if he/she elects to begin receiving retirement benefits at his/her normal retirement age. This amount is not reduced if you retire early or increased if you delay retirement.
Floyd gives this example: If the higher earner’s PIA is $3,000, for example, the survivor benefit could range from $2,475 to $3,720 depending on when that spouse claims.
Delay claiming Social Security until 70
Ultimately, what survivors should know is that their survivors benefit will depend on when they claim it, says Floyd. Taking it before full retirement age will reduce their benefit.
They can maximize their survivors benefit by starting it at their full retirement age, or later. In fact, Floyd’s “number-one advice for married couples is for the higher-earning spouse to claim their own retirement benefit at 70.”
Will you get more by taking your benefit – or spouse's – first?
Though it’s often overlooked, there’s another way to maximize the benefits of the surviving spouse according to Heather Schreiber, the president of HLS Retirement Consulting, “If the survivor is entitled to both a retirement benefit and a survivor benefit, he/she may elect to claim the lower benefit first and switch to the higher benefit later,” she explains.
Schreiber gives this example: Suppose Jane, age 62 and retired, recently lost her spouse who was collecting $2,000 monthly at the time of his death. Jane's estimated monthly retirement benefit at her full retirement age of 67 is $1,800.
She could elect to claim the survivor benefit now (generally the earliest age at which a surviving spouse can claim a survivor benefit is 60, unless disabled). She would collect 71.5% of the survivors benefit, or $1,430.
By not including her retirement benefit within the scope of her initial application, she could then switch to her own retirement benefit at age 70. Including the delayed retirement credits earned, her retirement benefit at age 70 would be $2,232 ($1,800 x 124%) per month.
Mike Piper, author of "Social Security Made Simple," also recommends using this strategy: For people who have already lost their spouse, it generally makes sense to either 1) file for your retirement benefit as early as possible, while allowing your survivor benefit to grow until it maxes out at your survivor FRA (full retirement age), or file for your survivor benefit as early as possible (age 60), while allowing your retirement benefit to grow until it maxes out at age 70.
You might be subject to the retirement earnings test
Surviving spouses who claim their survivors benefit before full retirement age and continue working should also know that their benefit will be subject to the something called the retirement earnings test.
In essence, for 2021, Social Security withhold $1 in benefits for every $2 of earnings in excess of $18,960 before you reach full retirement age. Of note, benefits withheld while you continue to work are not lost; they are added to your monthly benefit once you reach FRA.
Ex-spouses can claim benefits
Even former spouses who were married for 10-plus years may claim a survivors benefit provided they are either single or remarried at age 60 or older, says Schreiber. Remarriage at age 60 or later also entitles a widow of a deceased spouse to claim benefits under the first spouse's record.
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This article originally appeared on USA TODAY: Social Security: 4 things you need to know about survivors benefits